More consumers were expected to go online to make their holiday purchases this year, and they did not disappoint. Small parcel carriers, having learned their lesson from past years, prepared for the season with more staff, expanded delivery hours, and additional resources - and in some cases, new Peak Season Surcharges.
The Holiday Season
E-tailers were correct in expecting the highest holiday order volume to date. According to Adobe Analytics, Cyber Monday sales alone increased 17%, to $6.6 billion. This had a real impact on carriers. As one example, UPS was forced to add hours for some employees the following week and reorganize the workforce to help load trucks and deliver packages (e.g., from accounting).
The Carriers
While carriers do not give a complete holiday review until February, both UPS and FedEx got the majority of their packages delivered on-time during this holiday season, a good indication both had the delivery rush under control. Bloomberg reported a near-perfect delivery by ground on-time rate of 99.1% for UPS and 98.7% for FedEx for the period.
Getting it right this year was especially important for UPS. Many will remember the debacle from 2013 when the carrier failed to deliver a large number of packages by Christmas – many of those from key customers along with Amazon. The following year, UPS tried to remedy the problem with additional facilities and resources that went unused. With an estimated 750 million packages to deliver between Thanksgiving and New Year’s Eve, UPS had a lot to handle in 2017.
The two major carriers were not the only ones who prepared for the season. DHL was also projected to hire 6,000 additional employees to help with fulfillment, freight transportation, and express delivery.
By capitalizing on the eCommerce surge, especially during this peak season, the USPS was expected to deliver approximately 850 million packages. This would mean an increase of 13% from 2016; growth that exceeds both UPS and FedEx. The ability to deliver the ‘last mile’ in an economical way has put the USPS ahead of the competition in some areas and eaten away at their market share. It’s also made way for crowdsourced courier services, such as Uber and Deliv who’ve also crept into the market – delivering about 5% of holiday parcels this season.
2018 and Beyond – Mail on Sunday?!?
With no end of eCommerce growth in sight, many carriers are working with retailers to find ways to get goods to consumers faster. The desire to keep up with Amazon’s fast delivery windows, and everyone’s goal to provide same-day delivery, is prompting retailers to get creative.
Case in point: Walmart’s partnership with the USPS to provide Sunday service. The USPS is now offering expanded Sunday delivery in 20 major U.S. cities. With this arrangement, if a consumer purchases by a certain time on Saturday, the Postal Service will pick up the items from local stores and deliver it on Sunday. This program is part of an effort by the USPS to take advantage of the growing parcel delivery segment as the need for first-class mail is declining. For consumers, this means that weekend trips to a store could soon be a thing of the past.
Excellent delivery performance was a goal for all carriers during what should be a lucrative holiday season. But, the fast delivery that is expected by consumers during the holiday rush does not diminish during non-peak times. This will force carriers to continually be creative in how they meet fast-evolving customer expectations and demand. Look for carriers to learn from their success in 2017 to provide better service, as well as improve their margins, in 2018.