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Shippers grapple with online order surge

Online shoppers could face an anxious week waiting for packages to show up in time for Christmas.

The tide of online gift orders rises a little every year, and there are signs this year’s surge has strained both retailers and package delivery companies like Sandy Springs-based UPS.

Early barometers show an increase in delayed deliveries, though UPS says it has recovered from unexpectedly heavy ordering on Thanksgiving weekend and the following “Cyber Monday.”

This week will determine the success or failure of the online delivery pipeline. UPS and archrival FedEx are trying to avoid the late-shipping disaster of December 2013, when many customers took to social media to complain that gifts didn’t make it in time.

Last year, UPS overcompensated and ran up costs with excess staffing that cut into profits. This year, the company hoped to strike the right balance. It’s proving to be a delicate challenge in the fast-changing world of e-commerce.

Bizrate Insights said its data showed that on-time delivery rates fell to 89.9 percent on Dec. 15, down more than 3 points from the start of the month. A typical rate would be closer to 93 percent, the firm says.

Management consulting firm Kurt Salmon said early reports showed that 9 percent of Cyber Monday packages sent via UPS Ground encountered an unexpected delay.

The firm also found that the average order-to-delivery time was nearly 7 days across 62 retailers studied, 20 percent slower than last year. That may be due to slower shipping used for retailers’ free shipping offers, said Steve Osburn, a retail strategist at Kurt Salmon.

Preliminary numbers “are not as healthy as I was hoping for,” said Satish Jindel, president of shipment technology firm ShipMatrix Inc. He hopes to see improvements into this week.

“That’s all that matters,” Jindel said.

Keeping cyber-doors open

It’s a heavy issue for retailers as well, who want to keep the cyber-doors open as long as possible but don’t want to risk alienating customers by overpromising on delivery. Some, such as online kingpin Amazon, give shoppers “order-by” dates to assure delivery depending on the shipping option they choose.

Others tout alternatives such as in-store pickup to take delivery out of the equation where possible. A new option on the scene: “Uber-like” delivery services that allow ordinary citizens to play courier on the way home from work or school.

UPS planned for a 10 percent increase in holiday deliveries this year, driving it to hire about 95,000 temporary workers. FedEx said it expected a 12.4 percent increase.

UPS and other companies use rented vehicles to augment their regular fleets during the holidays, as well as driver helpers to dash to doorsteps and speed things up.

“I don’t really care what type of truck they deliver in, as long as I get the package,” said John Haber, CEO of Spend Management Experts, an Atlanta-based supply chain management consulting firm, who said he had a package delivered by a UPS driver in a Ryder rental truck.

Cyber Monday, on Nov. 30 following Thanksgiving, was the largest online sales day in history with a 12 percent increase in spending compared to 2014, according to Adobe Systems Inc., which tracks online shopping data.

Is surge ‘not manageable’?

“This spike is not manageable in any business,” said David Huckeba, managing partner at Intelligent Audit. “If everybody came into McDonald’s at 7 in the morning and wanted their breakfast sandwich and [hashbrowns] in 5 minutes, it’s just not going to happen.”

And during the week of Black Friday, almost a quarter of purchases were made online, a 12 percent increase over the prior year, data analysis firm Cardlytics said.

To grow revenue, retailers this year ditched many of the one-day “doorbuster” sales in favor of big discounts that last throughout the entire shopping season. That puts more pressure on delivery because consumers are tempted to shop later into the season.

“More than ever, consumers are taking advantage of guaranteed shipping offers and late season sales in the final days before Christmas,” said Dani Cushion, chief marketing officer of Cardlytics.

“With more shoppers spending their holiday budgets closer to Christmas, we advise online retailers to run steady marketing campaigns throughout the critical selling period – before, during and after Cyber Monday – so they are able to capture an audience that is more attentive than ever throughout the entire season.”

UPS saw unexpected high volumes of packages in some areas of Northern California and Texas that weekend and into the following week, and brought in “ready teams” of managers from other cities to handle the workload, a system the company has used for a few years.

“We put some contingencies in place,” UPS spokeswoman Susan Rosenberg said. “There’s no mistake that we’ve been busy…. [But] we really have recovered” from delays in early December.

Seasonal workers also get better and more efficient every day of the holiday season, said Huckeba.

Out of stock items

It was evident to some online shoppers around Thanksgiving that the system was overloaded on the front end as well.

Out-of-stock rates on Cyber Monday hit record highs, with 13 out of 100 product views showing an out-of-stock message, according to Adobe, which said that’s twice the normal rate. That included Star Wars figures, video game products and other items.

A National Retail Foundation survey found that online shopping surpassed shopping in stores over Thanksgiving weekend, with more than 103 million people shopping online and fewer than 102 million in stores.

As Christmas draws closer, another big variable is the weather. Snow in Nebraska, parts of Colorado and South Dakota last week caused some delays when UPS had to pull drivers off the roads, for example.

Haber, the Spend Management Experts CEO, called this week leading up to Christmas “the real test.”

If unexpectedly large volumes of online orders come in over the weekend, “we’re concerned that there could be some service issues,” Haber said.

An unexpected final rush of orders could overflow delivery networks, said Osburn, the retail strategist at Kurt Salmon.

Those ordering items online should give themselves a day or two of cushion, “just to make sure that you don’t run into any hiccups,” Osburn said.

“We’ve already seen some bumps,” he said. Now, “we’re getting into the crunch time.”

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