Shoppers will want to purchase their holiday gifts earlier than usual this year, as a major jump in online holiday shopping could complicate the delivery system.
Target, Walmart and other retailers have started offering free two-day delivery with no minimum purchase amounts for the holidays, a move to compete with Amazon's Prime delivery options. Upping the ante, Amazon announced that Prime members would have access to free same-day delivery on some products and everyone else would receive free standard delivery this season.
"Where things will get interesting is the amount of congestion it causes in the network, especially when you compare the ground versus express networks," said Sri Sridhar, CEO of lateshipment.com, one of the largest independent trackers of companies' carrier packages.
While the service seems to all but guarantee timely delivery, experts say shoppers should still plan to purchase holiday gifts and send their packages early as an increase in online sales is likely to congest delivery networks.
That National Retail Federation expects consumers to spend about $720.89 billion this holiday season, up roughly 4.8 percent amid a healthy economy. That includes a 15 percent increase in e-commerce sales, as forecast by Adobe Analytics.
With the increased sales, United Parcel Service, FedEx and the United States Postal Service expect to handle a record number of packages this year.
While ground shipments typically have more volume, the major hike in free two-day shipments could lead to an increase in the number of delays among express shipments compared to the average holiday season, Sridhar said, reaching potentially 14 to 15 percent. Across all service types including standard shipping, about 15 to 23 percent of packages are usually delayed during the holidays.
“The easier technology makes it for consumers to shop; the sooner, the earlier, consumers really need to be willing to pick the gifts, order their gifts and be willing to accept the gifts. ... If they don’t do that, they just jeopardized being able to have the products they want delivered in time for Christmas,” said retail analyst Brittain Ladd.
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During the last several holiday seasons, delivery companies such as UPS, FedEx and the United States Postal Service have struggled to keep up with a growing number of online holiday sales. Consumers last year had major concerns as the second week of December 2017 rolled around and the delivery companies still had major delays after a record Cyber Monday.
And this year, they plan to have record years again, with UPS expecting to handle more than 800 million packages between Thanksgiving and New Years Day, up from 700 million last year and nearly double the peak of most normal delivery days, said spokeswoman Kim Krebs.
FedEx also plans to deliver a record number of packages this year, with the Mondays between Black Friday and Christmas expected to be the busiest in FedEx history, spokesman Jonathan Lyons said.
“The biggest challenge that shipping carriers face during the holiday season, they know the rush is coming and forecast that it’s going to be record volume again, but then it’s almost impossible for them to find temporary resources ... so there is going to be a crunch,” Sridhar said.
UPS plans to hire 100,000 seasonal employees to work at its facilities, some of which are new or expanded. FedEx also plans to hire 55,000 over the next several weeks while operating extended shifts and increasing hours for current employees.
“The technology has simply made it easier to engage with retailers, but the supply chain, the logistics, the last-mile delivery, it doesn’t have an ability to become that much more efficient in that short period of a time. There’s only so many trucks; there’s only so many fulfillment centers, there’s only so many drivers,” Ladd said.
Retailers are exploring ways around the congested package carriers during the peak holiday season, including early Black Friday-like sales in the first days of November. The deals attempt to persuade consumers to shop early as a way to spread out the delivery congestion following the Thanksgiving, Black Friday and Cyber Monday sales.
They’re also experimenting with in-house delivery options and third parties like Shipt, Deliv and Instacart that primarily deliver groceries but could also handle general merchandise used for gifts.
And in the future, consumers can expect to hear about Christmas in February and March as retailers look to use artificial intelligence and machine learning to determine what consumers want for the holidays by July, which could eliminate inventory issues slowing down delivery, Ladd said.
“This is really an evolution; every year there is a change in technology, an improvement in the supply chain,” he said.
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