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Online shopping has been steadily growing for years and the deluge of packages it generates during the holiday season has been a persistent challenge. But this year, with the coronavirus pandemic pushing many people to shop online rather than in-store, the burden on retailers and transportation companies is even heavier.
But companies insist they are ready, and experts largely agree that they are. Since the start of the pandemic, shippers have stepped up their operations, while retailers have rethought the way they process orders, all in anticipation of a holiday season like they’ve never seen before.
The shippers “have done an outstanding job, quite frankly, in preparing for this peak season,” said Bill Brooks, vice president of transportation at business consulting firm Capgemini. “The volumes are unprecedented. Even with all of this, they are able to handle it.
E-commerce spending for the quarter ended September increased 37% compared to last year, with similar growth expected during the holiday quarter. Another sign of the times: FedEx expects peak vacation package volume to be 22% higher than last year.
The magnitude of the effort required to meet the expected holiday crunch is astounding. FedEx hired 70,000 new workers while UPS added 139,000 seasonal and permanent employees, in addition to opening 20 new shipping warehouses. Meanwhile, Amazon said it would be hire 100,000 seasonal workers, after 175,000 workers hiring frenzy in March and April.
Jonathan Gold, vice president of supply chain at the National Retail Federation, said vacation hires by retailers themselves were unusually high as they added staff to provide curbside pickup and warehouse processing.
Part of the efforts of retailers has been in their planning, including the early storage of products. According to gold, 75% of holiday imports had reached the United States by the end of October, nearly a month earlier than normal.
With their high inventories, many retailers have also encouraged customers to buy early, including offering sales earlier in the season. This helped spread the holiday crunch more evenly, avoiding a bottleneck as Christmas approached.
Additionally, retailers have tried to speed up the “pick” and assembly of online orders, according to Keith Phillips, CEO of warehouse technology provider Voxware. This allows them to accept orders online later in the day and prepare them before daily shipper pickup deadlines, a boon to buyers that Phillips says increases revenue.
Curbside pickup by customers has also seen significant growth. Best buy, for example, has expanded its curbside program from 100 stores to 1200 at the start of the pandemic, helping to reduce the number of packages shipped.
However, the transformation has reached certain limits. Merchants Fleet, which operates delivery vans for shippers looking to increase their vacation capacity, had 6,000 vehicles on the road at the same time last year. This year it has 15,000. “And if we could have found 5,000 more vans, we could have had 20,000,” says CEO Brendan Keegan, who says freight vans in particular are almost impossible to find. buy now.
Rod Sides, Head of Retail Consulting for Deloitte, says retailers and shippers face labor shortages in some markets despite high unemployment levels overall. Another surprising constraint came from the sharp drop, due to the pandemic, in passenger flights, which carry large quantities of express freight.
“We have seen a massive shortage of air freight capacity”, DHL CEO Frank Appel said at the Web Summit conference earlier this month. “The prices have exploded.”
The good news for shoppers is that despite this veritable storm of challenges, the massive effort to increase shipping capacity and reshape retail appears to be succeeding. For the week of Nov. 15, the most recent data available, on-time deliveries for FedEx, UPS and USPS were all above 95%, according to tracking company ShipMatrix.
“Will the service prices be what we have seen in the past? Probably not. There will be some hiccups, ”says Sides of Deloitte. “But is the system going to implode? Probably not.”
Sides warns, however, that bad weather could still create major disruptions. And it is among the many warnings that sending items in the days leading up to Christmas is flirt with disaster.
For retailers who have pushed to adapt, there is good news: Growth in online shopping is expected to remain strong even after the pandemic has ended, experts say. Much of the growth, Sides says, has come from older shoppers and into new industries, like grocery. While these changes were driven by security concerns, Sides believes the convenience will keep shoppers online for the long term.
Keegan, CEO of Merchants Fleet, citing Geoffrey Moore’s nearly 30-year-old tech marketing classic, Cross the abyss, believes the coronavirus has finally pushed e-commerce to a tipping point.
“Once 16% or 17% of the population do something,” says Keegan, “that’s where it tends to accelerate. COVID has taken us from early adopters to early majority. It means he’s here to stay.
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