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By most measures, the 2017 holiday shopping season was a big success. After a difficult year for retail, sales jumped 5% between November 1 and December 24 compared to last year. This was the biggest percentage since 2011. And to the surprise of many, only about 11% of those purchases were from online sales. The rest went to physical stores.
But despite all of this good economic news, there was a problem. Even though the ratio of online to traditional retail purchases was about 1 in 10, major US shipping companies still couldn’t keep up.
Trouble Brewing
UPS, the world’s largest delivery company, prepared for the 2017 holiday shopping season all year.
In 2016, the company had only two cargo planes devoted solely to Amazon deliveries. In 2017, they upped the number to 12. The company also hired 95,000 seasonal workers to keep up with the surge in holiday deliveries.
But all of this preparation wasn’t enough. On December 5, the company announced that online orders had “overwhelmed expectations.” According to UPS spokesperson Steve Gaut, this caused a “bubble” to develop at certain package centers.
As a result, the company added 1-2 days of transit time to many of its deliveries. The company also told drivers at more than 100 package delivery centers that they might be asked to work longer hours – up to 70 hours over eight days. This made waves with the Teamsters union, which represents 250,000 UPS employees.
UPS wasn’t the only shipper that couldn’t keep up with holiday demand. Pilots at DHL and Amazon’s Prime Air said on December 12 that they were already experiencing delays, with more expected.
Causes Of The Shortfall
What made these big shipping companies, all of which had expected their holiday volume to surge, get caught flat-footed?
Part of the problem was that distribution companies underestimated just how big online shopping would be this year. Sales on November 27 (Cyber Monday) rose 17% over the previous year, making it the biggest online shopping day in U.S. history.
Another cause is a reported shortage of cargo pilots. According to Robert Kirchner, a pilot for Atlas Air Worldwide Holdings, and executive council chairman of Teamsters Local 1224, roughly 220 pilots quit this year. “When a pilot calls in sick this time of year, there are very few replacements available.”
Kirchner also claimed that morale among remaining pilots was low, with one-third of them actively looking for work elsewhere. (A spokesperson for Atlas Air disputed his claims.)
Retailers Stepping Up
When online purchases arrive late, it isn’t just the shipping company that feels the wrath of customers. Retailers do to, leading to complaints and demands for refunds.
That’s why retailers are looking for ways to make up for shortfalls caused by their delivery companies.
During the holidays, Walmart offered discounts to customers who agreed to order items online, but pick them up in-store. Sears encouraged shoppers to do the same by allowing them to pick up items curbside so they wouldn’t have to leave their cars.
E-commerce companies are also trying to cut down on delays in getting orders to shoppers’ doors.
Amazon is installing lockers in apartment buildings across the country, so shippers can still make secure deliveries even when residents aren’t home. Jet.com, which is owned by Walmart, is doing the same. The company has already installed “smart-lock technology” in 1,000 apartment buildings.
Sources: CNN Money, Fortune, Bloomberg
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