The Tide is High

02/16/2021

Shopping online seems deceptively simple. All you need is one finger, applied to the computer that is already sitting in your lap or in your pocket. You can do it in your pajamas, you can do it in the middle of the night, and you can do it during a pandemic. A couple days later, someone rings your doorbell and hands you a package.

Then there’s the other side of the coin, the side you don’t see. There are massive warehouses and distribution centers, cargo planes and tractor trailers, box trucks and step vans by the thousands. It’s like our shoes are being mended by elves while we sleep.

This past December, though, there simply weren’t enough elves. UPS added 100,000 seasonal workers to the 100,000 permanent employees it had already hired during 2020. It built 20 new facilities, and bought 14 aircraft to bolster its fleet of 500.

FedEx hired more than 70,000 seasonal workers, and expanded to seven-day delivery. The U.S. Postal Service added 50,000 seasonal employees. In spite of all those people, and the fact that everyone in America knew that there was a tsunami of packages coming, the system was totally overwhelmed.

In a sense, it was the perfect storm. The first element of the storm was the underlying trend toward e-commerce, which has been going on for a decade. In recent years, it has been growing at 14 percent per year, pushing it above 10 percent of total retail for the first time just two years ago.

Second was the pandemic, which caused people to shop more from home, partly because that’s where more people were, and partly because it was simpler and safer than going out. Online retail grew last year by about 33 percent.

Third was also the pandemic, but in a slightly different way. Since fewer people gather for Christmas, and fewer traveled, the very act of presenting gifts in person was curtailed. All those delivery drivers became surrogate gift givers.

Fourth was, again, the pandemic. It may seem like stating the obvious but a lot of people were out sick. Due to the asymptomatic spread of COVID, a lot of people were also out because there was a possibility that they might get sick over the next 14 days, or seven or 10 or whatever.

The end result was that a lot of packages arrived late over the holidays, if they arrived at all. Everyone, including me, has horror stories about the week they were trapped in package delivery hell, arguing on the phone with customer service representatives who were probably sitting in their cubicles in Mumbai wondering what all the fuss was about.

My wife is the Christmas shopper at our house, and I don’t even want to know how many gifts she buys for how many people. I do know she spent many an evening trying to figure out where they all went.

Although I managed to avoid most of the stress caused by Christmas shopping, there is one small task that I accept. I generally take one annual trip to the mall to buy something for my wife, no matter how distasteful that shopping experience may be.

This year, though, the prospect of trudging through the mall had morphed from unpleasant to downright frightening. According to a pre-Christmas survey conducted by The Boston Globe, that sentiment was so widespread that fully three-quarters of all shoppers planned on doing the majority of their gift-buying online.

So I ordered a couple of things online, allowing a couple of weeks for delivery before Christmas. A day or two later I received the customary emails informing me that my orders had been shipped, both via UPS, but it got to December 23rd and I still hadn’t received anything.

I traced the two shipments, and got the same results for each. The UPS website stated that the U.S. Post Office, not UPS, had made an unsuccessful attempt to deliver the packages. They were currently sitting at our local USPS office, where they would be held for 10 days before being returned to the sender. Huh?

I’m sure you already knew this, but I did not. It turns out that UPS and FedEx engage in a practice called “last-mile shipping,” in which they transport packages as far as the nearest post office to their destination, then turn them over to the USPS for delivery.

In my case, I knew perfectly well that nobody had made any attempt to deliver the packages, successful or otherwise. They were addressed to my office, where there are always people during business hours and there is a designated drop-off area as well.

On Christmas Eve I went to the post office, which I thought would resemble Times Square on New Year’s, but it did not. In fact it was eerily quiet, with not a single customer waiting in line. I had a brief vision of my entire town wiped out by COVID.

That thought was dispelled by the cheerful presence of the counter workers, over whose shoulders I could see the overflowing profusion of boxes in the warehouse space that they call the package room. Remarkably, someone was able to pluck my two parcels from the heap very quickly.

Ultimately, then, both my packages arrived at my office before Christmas, thanks to a partnership among UPS, the post office, and me. Does that mean that the original carrier, UPS, gets credit for on-time delivery? I don’t know, but my guess is that they’ll claim it.

Delivery rates for UPS and FedEx were only down slightly in December to about 96 percent and 94 percent respectively. The Postal Service was down more sharply, to about 87 percent, but a lot of that decline was caused by the two private carriers. It wasn’t only the last-mile policy, but also the decision by those package services to refuse shipments from major internet merchants in mid-December. The USPS does not refuse service to anyone at any time, so all those shipments were added to the backlog.

Now that all those packages have been delivered (most of them anyway), the more significant question might not be who the shipper was, but rather who the seller was. If you guessed Amazon, you would be correct, sort of.

Amazon accounts for about 39 percent of online retail, and coincidentally its holiday sales were up about 39 percent. That’s a huge growth in dollars, but not biggest in percentage.

Number-two Walmart has an online share below 6 percent, but it grew by 65 percent. The next five merchants were as follows: Home Depot, up 71 percent; Best Buy, up 105 percent; Target, up 103 percent; Kroger, up 79 percent; and Costco, up 60 percent.

There are two things that stand out to me regarding this group. The first is quite obvious, that they are all brick-and-mortar retailers.

The second is less so but of equal importance. Each of these retailers has a very aggressive plan for growing their online business, and for making it an integral part of their overall business.

These plans vary widely. I won’t get into the details in this space, but I strongly advise you to do so in your own.

Now would be a good time.

 

You can e-mail Kevin at kfahy@fwpi.com.

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