December
26, 2013 -- After years of preaching the convenience and reliability of online
shopping — shop in your pajamas, with fast, free delivery — retailers may have
been too successful at spreading the message this year, contributing to the
volume of holiday orders that overwhelmed delivery services like U.P.S. and
FedEx.
As
the companies scrambled to deliver gifts the day after Christmas, they also
struggled to explain how it all happened. Some analysts wondered aloud whether
it was not just logistics, but industry and customer expectations that needed
to be re-examined, while one suggested the companies might have to reconsider
their pricing system.
“We
have this perception that anything can be delivered at any time, and that it
will be super cheap and really fast — but this is not Santa Claus,” said
Sucharita Mulpuru, an analyst at Forrester, the research firm. “It is an
operation in which there are constraints, and there are costs associated with
getting more packages than were expected to be somewhere on time.”
The
volume even surprised the United States Postal Service. Officials said on
Thursday that they had expected a 12 percent increase in packages during the
holiday season, but package shipments jumped 19 percent, and it added Sunday
deliveries to accommodate them. A spokeswoman for FedEx said this season was
the busiest the company had ever seen.
But
it was United Parcel Service, the world’s largest package delivery company,
that was perhaps the most unprepared for the crush. The company hired 55,000
seasonal workers this year, but that number was roughly the same as last year
and the year before that — not enough to keep up with rising demand.
“It
hasn’t fluctuated that much over the past couple of years,” Natalie Black, a
spokeswoman for the company, said of its holiday staffing. “Whether that was
part of the problem, I can’t say. Right now, we don’t know what the linchpin
was for the network breakdown.
“You
can only fit so much in planes,” she added.
It
was unclear how many customers were affected, but complaints poured in from
across the country and retailers large and small were caught up in the
maelstrom.
While
bad weather and a short holiday shopping season were cited as possible causes
by U.P.S. officials, they also said the volume generated by growth in online
shopping was a likely factor. Online sales have been growing for years, and
this season, the rise during the weekend before Christmas was extremely steep,
up 37 percent, according to IBM Digital Analytics Benchmark. FedEx said that it
had predicted it would deliver 22 million packages on its busiest day this year
— double the volume in 2007. The actual number is not yet known. One way to
address future demand, Ms. Mulpuru, the analyst, suggested, would be to
approach the surge the same way that the airlines do: by charging more for the
service.
“An
airline doesn’t just buy additional aircraft so they can accommodate everyone
who wants to fly the day before Thanksgiving for $300,” she said. “They just
raise the price of your ticket and force people to go earlier.”
Shipping
is often subsidized for shoppers, Ms. Mulpuru said, and it is retailers that
have contracts with companies like U.P.S. If rates stay relatively static for
retailers they have no incentive not to encourage people to buy as much as
possible until the last possible moment, she added.
This
year, for example, if customers ordered from Nordstrom by 3 p.m. Eastern on
Dec. 23, they were eligible for arrival on Dec. 24. Amazon’s one-day shipping
deadline was also Dec. 23, and it even offered same-day delivery on Dec. 24 in
some locations.
Shipping
has been a crucial battleground for online retailing since the earliest days of
e-commerce, but it has become more important over time.
Krista
Clark, an analyst with the research firm eMarketer, said services like Amazon Prime,
the online retailer’s program that offers unlimited two-day shipping for $79 a
year, had conditioned consumers to expect faster delivery of everything.
At
the same time, customers aren’t willing to pay for it. “The thing people care
about more than fast shipping is free shipping,” Ms. Clark said.
She
cited a study by comScore that found that half of shoppers said free shipping
was the most valuable benefit an online retailer could offer.
Some
retailers have invested more in central warehouses and distribution systems to
better handle online orders. Others, such as Gap, Best Buy and Walmart, have
relied on their physical stores to fulfill online orders.
That
allows retailers to get the goods in the hands of customers more quickly.
“People have gotten crazy trying to compete with Amazon with faster delivery,”
Ms. Clark said.
In
the process, retailers often bypass the traditional shippers like U.P.S. or
FedEx in favor of more localized delivery options — or one day, Amazon has
suggested, maybe even drones.
EBay
has been promoting a fast delivery service called eBay Now, which works with
retailers like Macy’s, Target and Toys ‘R’ Us, to deliver orders in one hour
from a store to a customer using a network of human couriers.
Although
eBay typically charges a $5 fee for the service, during the holidays, it
offered it free, including deliveries on Christmas Eve. (An eBay spokeswoman
declined to say how many people actually used the service.)
Although
eBay Now is available in only a few metropolitan areas, including New York, San
Francisco, Chicago and Dallas, the company plans to expand the service more
widely. Amazon and Google are also rolling out local delivery services that
could divert some of the shipping volume, and revenue, away from U.P.S. and
FedEx.
Though
explanations were in short supply on Thursday, U.P.S. took to social media to
offer abundant apologies, responding individually with direct messages to its
unhappy customers on Twitter. As it apologized, it had plenty of company from
retailers that were offering their own regrets, while placing most of the blame
on the package carriers.
“While
we are dependent on our shipping partners to hold up their end of the bargain
on getting your orders to you, we also realize that we are accountable for
meeting your expectations and take responsibility for what happened here,”
Jamie Nordstrom, president of Nordstrom Direct, said in an email to customers.
“We feel awful whenever we let a customer down, especially at this time of
year.”
A
spokeswoman for Kohl’s said the company was “deeply sorry.” Amazon issued gift
cards to affected customers. In San Diego, even a distributor of Glock guns and
parts took to Twitter to “apologize if any of your orders didn’t arrive in time
for Christmas due to the holiday overload.”
On
Thursday, those tardy packages began to trickle in.
Todd
Sawicki, an entrepreneur in Seattle, ordered several items from Amazon on Dec.
23 and paid extra to get guaranteed delivery on Christmas Eve. On the 24th, a
package arrived via U.P.S. from Amazon, and he figured it was the gifts — Legos
for his son, and a bracelet and headphones for his wife.
Far
from it. Inside was a toilet repair valve he had ordered earlier.
“It
was the Amazon equivalent of a lump of coal,” he said.
On
Christmas morning, without anything else to give his wife, he presented her
with the wrapped valve.
At
11 a.m. on Thursday, he said, the valve was finally swapped out for the
intended Christmas gifts.
Elizabeth A. Harris And Vindu Goel www.nytimes.com
