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Sales Boom; Will Carrier Capacity Limitations Doom?

Hanukkah gifts. December birthdays. Organized holiday shoppers. Plenty of scenarios exist in which customers become disgruntled due to unforeseen e-commerce delivery delays in early December, but what happens if it keeps getting worse due to carrier capacity limitations?

Yesterday’s Wall Street Journal feature, “UPS Slaps Shipping Limits on Gap, Nike to Manage E-Commerce Surge,” detailed what happened this week when UPS stopped picking up parcels for not just these two brands but at least six large retailers and characterized the development as “an early sign that the pandemic-fueled online shopping season is stretching delivery networks to their limits.” According to the article, the internal UPS message called for “No exceptions.”

Total Retail offered its own take on the development, including the likelihood that the situation, “only figures to intensify as we get further into the holiday shopping season.”

Sales are booming

According to Digital Commerce 360 and Adobe Analytics, “Ecommerce sales crossed a record $5 billion on Thanksgiving, surged 21.6% on Black Friday and increased 15.1% on Cyber Monday. All of this growth follows a much-busier-than-usual start to November, driven by retailers trying to proactively offset this Cyber 5 crunch by offering more aggressive deals much earlier in the season than usual to get customers shopping sooner.

Still, big retailers should not be surprised about this. Not only have analysts, media and a wide range of other retail and fulfillment experts been predicting this change in consumer behavior for most of the year. The carriers have also been proactive in alerting retailers this difficult reality was likely to take shape; many of Logistyx clients were notified months ago.

Will carrier capacity limitations be dooming?

It depends almost entirely on each retailer’s preparedness. Retailers only prepared to tap the services of one carrier could struggle mightily to satisfy customers quickly if they exceed daily carrier capacity for multiple consecutive days. Without any lull in parcel shipping volume, the backlogs will grow, and a growing volume of parcels could sit on the dock for increasingly long wait times as the month goes on.

Retailers who embraced multi-carrier parcel shipping and the benefits of real-time rate shopping, or those who prepared diligently to adopt this model in 2020 prior to peak season, find themselves in a much more manageable position. Given yesterday’s news, those retailers are positioned to consume whatever capacity UPS has to offer them, tap into other national carriers to effectively ship the rest, leave nothing on the dock, and start tomorrow with a clean slate. Retailers using Logistyx can even continue to rate shop to contain costs to the extent possible.

Fearing all national carriers would eventually limit capacity during the holiday season, many retailers went further, incorporating more local last-mile and regional carrier services into the mix, such as LaserShip, OnTrac, and Speedee Delivery. This provides more capacity inventory to rate shop, in addition to another failsafe should more carriers enact daily parcel limits.

Most of December and January still loom

With three weeks still remaining before Christmas, the situation looks grim for unprepared retailers, who likely know a growing volume of returns awaits them on the other side of the holidays.

Communicate clearly to limit customer losses

While much can be done to prepare for future peak seasons, shore up fulfillment capabilities, and better care for customers going forward, retailers should allocate some resources for damage control right now. When delivery delays cannot be avoided, clear communication will likely be their best client retention tool.

Refine delivery estimates. Avoid over-promising. Be realistic. Consider make goods and special offers that can turn disgruntled customers into long-term supporters. Commit to doing better for customers in the future.

2020 has truly been a year like no other, and unprepared retailers are pinning some of their December wishes on customers understanding the unprecedented difficulties in shipping products quickly this year. While other merchants worked hard to prepare in 2020 to maintain impressive fulfillment timelines throughout the holidays, consumers just might be swayed to forgiveness if retailers give it to them straight and commit to doing better in the future.