October 26, 2014
By David Koenig THE ASSOCIATED PRESS
DALLAS, Texas—Facing an even bigger mountain of packages this holiday season, FedEx and UPS are hiring more workers to avoid the delays that frustrated shoppers and gift-recipients a year ago.
Last December, the delivery giants were caught off-guard by bad weather and a surge in last-minute online shopping. An estimated two million packages were late at Christmas.
On Wednesday, FedEx Corp. said it expects deliveries between Thanksgiving and Christmas Eve to rise 8.8 percent over last year, to 290 million shipments. Volume is expected to surge on each of the first three Mondays in December, with FedEx predicting a peak of 22.6 million shipments on Monday, Dec. 15.
The delivery companies and Internet retailers are benefiting from a strengthening economy and optimism about consumer spending. At the same time, they’re dealing with consumers who increasingly enjoy the ease of shopping on computers and mobile devices but expect the goods to show up almost as quickly as if they had shopped at a store. That expectation is often fed by online retailers, who hold out the promise of free delivery until right before Christmas.
About 1.3 million express packages handled by UPS and 618,000 carried by FedEx failed to get delivered on time last Christmas Eve, according to ShipMatrix Inc., which makes software for shipment tracking. The firm’s president, Satish Jindel, said UPS and FedEx were at fault only 30 percent of the time.
In most cases, retailers promised guaranteed express delivery but tried to save money and didn’t pay the delivery companies for that speedier service, Jindel said.
The merchants face tough competition for consumers who base purchases first on price, and second on free shipping, and the faster the better.
“Every single year the percentage of retailers offering free shipping goes up,” said Vicki Cantrell, senior vice-president at the National Retail Federation. “The consumer expects it. The retailer may or may not be able to afford it.”
Target Corp. has started offering free holiday shipping for any item on its website, a first for the retailer as it tries to compete better against online rivals such as Amazon.com Inc. The timing of the offer was stunning—weeks before the unofficial kickoff of holiday shopping.
Cantrell said Target, Wal-Mart Stores Inc. and other retailers are getting better at the shipping game. They will ship items from stores instead of a central warehouse if that is faster, or tell online customers when the product they want can be picked up at a store near their home. Those strategies could relieve pressure on the delivery companies and satisfy the shopper more quickly.
The retail federation’s online division, Shop.org, predicts that online sales in November and December will rise 8 to 11 per cent over last year. To meet that demand, online retailers such as Amazon and the delivery companies are hiring more.
FedEx plans to hire 50,000 seasonal workers, up from 40,000 last year. United Parcel Service Inc. says it will add up to 95,000 people, up from 85,000. Last year, both companies wound up scrambling to hire more seasonal employees than they had planned, which increased costs and cut into profits.
FedEx also expects to invest $1.2 billion in its ground-shipping network in its current fiscal year, with most of that going to increase capacity and automation. The company said that the improvements have sped up ground delivery by a day or more in more than two-thirds of the U.S.
UPS has also invested to boost shipping capacity during the holidays, said the company’s chief commercial officer, Alan Gershenhorn. He said that UPS had improved it forecasting and package tracking. UPS has not issued a holiday forecast.
Shares of FedEx fell $1.41 to $158.47; UPS shares fell $1.69 to $99.06.