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Carriers Preparing to Exceed Shipping Capacity
2020 was record-breaking for holiday package deliveries. FedEx, UPS, USPS, Amazon and regional carriers collectively delivered more than 3 billion parcels during the 2020 holiday season.1 With not much time to plan for the extraordinary surge that began in October, the Carriers added holiday surcharges and set capacity limits. The surcharges instituted by the Carriers were as high as $5.00 per shipment, which were intended to discourage last-minute holiday shipments. While this deterrent proved not to hinder holiday shipments, FedEx and UPS set capacity limits on retailers such as Macy’s, GAP and Nike. Taking into consideration what was learned in 2020, as we approach this September, Carriers have begun preparing.
eMarketer has forecasted that the total 2021 holiday retail sales in the U.S will expand by 2.7%; this growth is expected to result in a $1.093 billion sales value, and obviously, online platforms will largely contribute to this growth.
The total sales through only online platforms for this season will rise by 11.3% which will result in a total value of $206.88 billion.2 Given these predictions, the Carriers are taking advantage of having more time to prepare for the upcoming peak season. Are you?
According to UPS CEO Carol Tomé, the company is expected to exceed capacity by approximately 5 million pieces per day during the upcoming holiday peak season. Hoping to learn from last years’ lessons, UPS is also closely communicating with its top 300 customers who make up its peak volume surge to understand what each of their demand projections is for the holidays. While FedEx hasn’t announced any specific details about expectations, like UPS, they have announced surcharge increases ahead of the peak, which are targeted toward high-volume shippers and those who experience demand spikes. Both Carriers are strengthening their workforces looking to hire tens of thousands of seasonal employees.
Amazon is also expected to make provisions in its typical big way. In the first two months of 2021, Amazon built 42 million square feet of industrial space and had a total of 346.6 million square feet of industrial development underway as of March.3 This growth is readying the e-commerce giant for holiday success.
Given the holiday predictions, and in an effort to avoid the pitfalls that were encountered in 2020, online retailers have started to put a game plan into place. To avoid shipping delays, they are looking to better manage inventory and emphasize last ship dates early on to customers. Another way online retailers can learn and prepare for a successful year-end is to reevaluate their Carrier contracts. Shippers who have had a steady flow of volume have negotiating power and an opportunity to attain better rates.
When faced with capacity limits, LJM Group can help explore other options such as a mix of major parcel Carriers or regional carriers to avoid reaching volume capacity with a single Carrier. With a simple free contract analysis from LJM Group, and the right guidance, 2021 can bring in the results businesses need to finish strong.