Like everything else in 2020, we can expect the holiday shopping season to come with unique challenges. Not only are pandemic shutdowns ongoing, but some parts of the U.S. are going back into increased lockdowns, leading to changes in demand and consumer behavior.
If eCommerce was already on the rise before COVID-19 struck, its popularity has since surged. According to TechCrunch, “e-commerce is projected to grow by nearly 20% in 2020.” This increase extends across product categories, from traditional goods to groceries and alcohol. IBM’s retail index reveals that the expansion of digital shopping habits has been accelerated. In their opinion, physical storefronts need to be reimagined as part of a multi-channel fulfillment network, not the prime location for shopping. Because of the ways consumer habits are changing, the supply chain is more critical than ever. The value proposition of online shopping doesn’t work without robust small parcel capabilities, particularly their ability to address the final mile.
Executives at all three of the major privately-owned delivery companies and the U.S. Postal Service have issued statements for anyone that will be dependent on their services for getting holiday purchases on time. These statements range from outright warnings to expressions of cautious optimism.
“We encourage everyone who’s planning to do their holiday shopping online to shop and ship early. The earlier, the better.” – Bonnie Voldeng, Vice President of FedEx Freight Direct
“We are working closely with our large and medium customers to steer volume to capacity and ensure the UPS network is reliable for all customers.” – UPS Spokesperson
One of the reasons for the warnings is that these carriers have been operating at peak since the spring without a break or a reprieve, conditions that have strained their facilities, equipment, labor pool, and finances. On top of that, they are now bracing for a holiday season on top of those pre-existing peak volumes “The spread of Covid-19 in the U.S. has triggered such an increase in e-commerce since March that shipping volumes have consistently been at Christmas peak or Cyber Monday levels every day,” said FedEx Chief Marketing Officer Brie Carere. “Now we’re headed into a peak on top of a peak. We expect there will be limits to capacity on certain days this season.”
Even traditional backup plans, such as working with smaller regional carriers, may not be available, as sustained high shipping volumes have already filled up their capacity. Many of these alternate carriers stopped taking on new customers long before consumers were even aware that there were likely to be capacity constraints. DHL has a division dedicated to eCommerce, and they stopped accepting new customers in August, a cutoff that does not normally take place until October.
Even Amazon, who has spent the last few years investing in its own delivery network to reduce dependence on third-party carriers, is warning consumers not to wait until the last minute, partly because they still only deliver half of their U.S. sales volume directly. According to Brian Olsavsky, Amazon’s CFO, “It’s going to be tight for everyone and we will all be stretched.” Wal-Mart, the largest retailer in the U.S., is also making its own plans, opening 42 regional distribution facilities in an effort to satisfy the expected surge in eCommerce holiday demand.
Capacity constraints will be a real concern this holiday shopping season. So, what can businesses and individual consumers expect to see?
- Delayed delivery timeframes, including less ship time predictability than they have grown accustomed to
- Holiday shipping surcharges will be more expensive per package and also apply for a longer window of time, as carriers try to cover their additional labor and PPE costs
- The need to be more aware of shipping deadlines, with FedEx, UPS, and the USPS all cutting off regular ground service with expected pre-Christmas delivery on December 15th
- Creative staffing allowances, such as UPS’ recent decisions to allow drivers to have beards and a relaxing of certain gender-based uniform guidelines
ChannelAdvisor board member and industry podcaster Scot Wingo introduced the term ‘shipageddon’ as a way of describing what the 2020 holiday season is going to be like for retailers, carriers, and consumers. Now that we’re reached late November, our best bet is to shop early, whether we are buying gifts for family and friends or looking to replenish safety stock.
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