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Online shopping has been growing steadily 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 instead of in stores, the load on retailers and shipping companies is even heavier.
But the companies insist that they are ready, and experts largely agree that this is the case. Since the pandemic started, shippers have been beefing up their operations, while retailers have been remaking how they process orders, all in preparation for a holiday season like nothing they have ever seen before.
Shippers “have done a remarkable job, quite honestly, of preparing for this peak season,” says Bill Brooks, vice president for transportation at business consulting firm Capgemini. “The volumes are unprecedented. Even with all that, they’re able to handle it.”
E-commerce spending in the quarter ended in September was up 37% from last year, with similar growth expected during the holiday quarter. In another sign of the times: FedEx expects peak holiday package volume to be a whopping 22% higher than last year.
The scale of the effort required to meet the expected holiday crunch is staggering. FedEx has hired 70,000 new workers while UPS has added 139,000 seasonal and permanent staff, in addition to opening 20 new shipping warehouses. Meanwhile, Amazon said it would hire 100,000 seasonal shipping workers, following a 175,000 worker hiring spree in March and April.
Jonathan Gold, vice president of supply chain at the National Retail Federation, says holiday hiring by retailers themselves has been unusually high as they add staff to provide curbside pickup and warehouse fulfillment.
Part of the effort by retailers has been in their planning, including stocking up early on products. Gold says that 75% of holiday imports had reached the U.S. by late October, nearly a month earlier than normal.
With their inventories high, many retailers also encouraged customers to shop early, including by offering sales earlier in the season. That helped spread the holiday crunch more evenly, thus avoiding a bottleneck close to Christmas.
Additionally, retailers have tried to speed up the “picking” and assembly of online orders, according to Keith Phillips, CEO of warehouse technology provider Voxware. That lets them accept online orders later in the day and still have them ready before shippers’ daily pickup deadlines, a boon to shoppers that Phillips says increases revenues.
Curbside pickup by customers has also seen major growth. Best Buy, for example, expanded its curbside program from 100 stores to 1,200 early in the pandemic, helping reduce the number of packages it ships.
The transformation has hit some limits, however. Merchants Fleet, which manages delivery vans for shippers looking to increase holiday capacity, had 6,000 vehicles on the road this time last year. This year, it has 15,000. “And if we could have found 5,000 more cargo vans, we could have had 20,000 on,” explains CEO Brendan Keegan, who says cargo vans in particular are nearly impossible to buy right now.
Rod Sides, head of retail consulting for Deloitte, says retailers and shippers are facing labor shortages in some markets despite high unemployment levels overall. Another surprising constraint has come from the sharp, pandemic-driven decline in passenger flights, which carry significant amounts of express cargo.
“We have seen a massive shortage of air freight capacity,” DHL CEO Frank Appel said at the Web Summit conference earlier this month. “Prices went through the roof.”
The good news for shoppers is that, despite this perfect storm of challenges, the massive effort to grow shipping capacity and reshape retail seems to be succeeding. For the week of Nov. 15, the most recent available data, on-time deliveries for FedEx, UPS, and USPS were all above 95%, according to tracking firm ShipMatrix.
“Will the service rates be what we’ve seen in the past? Probably not. There will be some misses,” says Sides of Deloitte. “But is the system going to implode? Probably not.”
Sides warns, though, that bad weather could still create major disruptions. And he’s among many warning that mailing items in the few days before Christmas is flirting with disaster.
For retailers that have pushed to adapt, there’s some good news: Online shopping’s growth should stay strong even after the pandemic ends, experts say. Much of the growth, Sides says, has come from older shoppers and in new sectors, such as grocery. While those changes were driven by safety concerns, Sides believes that convenience will keep shoppers online long term.
Merchants Fleet CEO Keegan, citing Geoffrey Moore’s nearly 30-year-old tech-marketing classic, Crossing the Chasm, believes that the coronavirus has finally pushed e-commerce to a tipping point.
“Once 16% or 17% of a population are doing something,” says Keegan, “that’s where it tends to accelerate. COVID moved us from early adopters and into the early majority. That means it’s here to stay.”
More must-read tech coverage from Fortune:
- Commentary: The Facebook and Google antitrust suits are a warning shot for all corporate giants—not just Big Tech
- Why Intuit bought Credit Karma in one of the biggest fintech deals of 2020
- U.K. startup’s breakthrough could aid quantum computers in the hunt for exotic materials
- Tom Siebel, CEO of C3.ai, discusses failure and the future after his company’s soaring IPO
- Shopify is ready for the holiday season. Just don’t call it the “anti-Amazon”
