We recently touched on what to expect for Cyber Monday this year in one of our recent blogs. The article briefly discussed that further shipping delays should be expected for this holiday season. This piece will take a deeper dive into the topic as it is wildly impactful for shippers of all size. E-commerce volumes have already been at peak levels since May due to COVID-19 retail closures. The shift to online shopping has rapidly increased beyond what the carriers’ infrastructure and manpower were ready for. Now, take those same levels and add on the typical large increases seen in e-commerce packages in Q4 and you have a recipe for disaster.
One thing all of the carriers have done in recent months is announced their peak surcharges. These surcharges are relatively new for other carriers (UPS introduced in 2019). The purpose of these charges is to bring in additional revenue to offset the additional needed equipment and labor. They are also somewhat of a deterrent for shippers that are way over their previous volume commitments prior to the COVID-19 pandemic.
UPS – Between November 15th through January 16th expect extra surcharges ranging from $1-$4 per package. These fees mostly hit shippers that have over 25,000 packages per week and are above their February package averages.
FedEx – Between November 2nd through January 17th expect extra surcharges ranging from $1-$5 per package.
USPS – Usually, USPS sits out the charade of surcharge increases as they require special approval from the Postal Regulatory Commission (PRC). This year, however, they are rolling with increases ranging from $0.24 to $1.50 per package between October 17th through December 27th.
You can read a great deal more of detail on these charges here. Usually, UPS and FedEx are just opportunistic and take advantage when the market favors the carriers vs. the shippers. In this special year, however, these fees seem somewhat validated by the publicized service delays they have incurred due to the record e-commerce volumes.
Not every business has a seasonal bump for the holidays, but most do. There is a reason the carriers now start planning for peak literally in January of each year. It is all year planning event which was certainly not the case 10-15 years ago. 2020 is not going to be any different according to many experts. Some are actually saying the YOY increases will be even higher due to our current environment. Consulting firm Deloitte recently stated:
We are expecting holiday e-commerce sales to surge by 25% to 35%, amounting to between $182 billion and $196 billion. That’s compared with year-over-year growth online of 14.7% in 2019, with sales reaching $145 billion.
That is anywhere from a 21-26% true increase from last year. These numbers were probably expected by the carriers in their planning stages as every year e-commerce shopping takes a bigger piece of the holiday pie. The issue is they weren’t planning on the increased package levels they have seen the previous six months. Adding those two together creates the perfect recipe for a shipocalypse.
The inevitable is going to occur to a greater level than we saw earlier this summer when the carriers’ on-time percentages were failing. It is likely that packages that were seeing 1-3 day delays could now see up to a week. The Express services aren’t expected to be as over capacity as the Ground services, but it should be noted demand is also up for these priority services as so many Americans have been stuck at home ordering products for months. Simply put, there are just not enough resources on the Ground side for these carriers to match this demand.
There are a couple of things that could minimize the predicted holiday surge volumes:
- There are some experts out there that are talking about retailers running out of inventory and not being able to restock as quickly due to supply chain issues. If there is a big rush in online items and the retailers can’t restock, then there would be obvious sales suppression.
- A longer peak. This is the best thing that could happen. Instead of waiting for Black Friday or Cyber Monday retailers should start their sales now and try to ensure a longer delivery period for their customers. Waiting until this last minute (week) and running sales close to Christmas will absolutely be the worst strategy possible in 2020. The more the curve can be smoothed out the better — for you, for the carriers, for everyone.
There are definitely going to be further shipping delays during this holiday season. So what is your peak strategy? We would love to hear and also help where we can.