Holiday ‘Shipageddon’ Need Not Mean Doomsday for Retail

(Bloomberg Opinion) -- After months of extreme disruption and challenge, retailers badly need their holiday season to go right. Unfortunately, they might find themselves confounded by a thorny problem borne of pandemic-related safety concerns: A crush of e-commerce orders on a scale the industry has never seen, putting stress on their supply chains and those of their shipping partners. The result could be a multitude of late packages and frustrated customers, a potential mess that has been dubbed Shipageddon.

Package carriers FedEx Corp. and United Parcel Service Inc. say they’re prepared for the onslaught. They may not have envisioned the pandemic, but they’ve spent billions over the past few years preparing for a more e-commerce heavy world, including adding expanded weekend service and investing in automation tools. They’re also bulking up their staff: FedEx and UPS plan to hire a combined 170,000 seasonal workers this year. Even so, e-commerce growth is expected to be explosive this holiday season, and it will be especially difficult to predict purchasing rhythms this time around.

The surge in online demand may result in an extra 7 million packages flowing through delivery channels each day, predicts Satish Jindel, president of ShipMatrix. That extra load will pressure the system: ShipMatrix estimates that on-time performance during peak season will drop to 90% for FedEx and 92% for UPS. That is lower than their on-time performances in both September 2020 and last year’s peak season. So retailers must take pains to ensure they’re not left in a lurch if logistics networks become strained.

One way retailers are girding for this is by starting holiday deals earlier than usual, with some offering Black Friday-like sales in October. If they succeed at getting people to buy gifts early, it could have the dual benefit of spreading out orders over a longer stretch while allowing sellers to avoid some of the surcharges that carriers have put in place for the peak period. That will only take them so far because many consumers aren’t ready to get into Santa-mode just yet. But there are other things they can do.

Throughout the season, but especially in the final weeks before Christmas, retailers would do well to steer customers to their curbside and in-store pickup options, in which the shopper effectively does last-mile delivery themselves. That means highlighting it in their marketing, an especially important step for chains that have added curbside pickup only since the pandemic, such as Macy’s Inc. or Bed Bath & Beyond Inc. They should also nudge people to choose this format at checkout by emphasizing it is often the fastest option. Shoppers should be receptive: Deloitte’s survey found that the reasons consumers are opting for pickup have shifted somewhat since the early days of the Covid-19 outbreak, with the perceived speed and convenience becoming more of a factor.

Many retailers are fulfilling an increasing amount of online orders from stores amid the Covid-19-related drops in foot traffic. For these sellers, teaming up with a delivery partner — the way restaurants and grocery stores do — could be a good way to get purchases through that last mile. Sephora, for example, has started a partnership with Instacart for same-day delivery, while Uber Technologies Inc. has said it’s keen to expand Uber Eats beyond food to other local businesses. Such a setup might not be economical or practical for some chains year-round, but could make sense during the busy season.

There are also behind-the-scenes tactics retailers can employ to keep networks from getting strained while also potentially helping with their own profitability. Scot Wingo — who introduced the term Shipageddon to my lexicon and is a board member at ChannelAdvisor, a company that helps merchants with online sales — says retailers can plan their deals and promotions with an eye toward consolidating orders. For instance, a store could offer a $10 gift card to shoppers who spend $100, instead of a blanket “10% off” discount, because that format would incentivize building a bigger shopping cart and result in potentially fewer shipments. Retailers also can use inventory analytics and management systems to make sure orders go out in as few boxes as possible, including trying to bundle together multiple orders from the same household that have come in a short time window.

Smart retailers will prioritize communication. Customers will want to be kept informed about expected package arrival times from the time an order is placed through the delivery process, and they’re not going to be thrilled if they don’t get their items on time. But, at least if they have a reliable heads-up about a delivery date, they can make contingency plans — and maybe end up with a little less customer service animus toward either the store or the carrier.

Some retailers will have a harder time than others in adapting to the seasonal boom in e-commerce. It will be difficult for those situated inside enclosed malls to get customers to embrace pickup options when they don’t have their own entrances for easy retrieval. That stands in contrast to chains such as Old Navy or Dick’s Sporting Goods Inc., which tend to be in strip centers and can offer these services with relative ease.

The effort to get packages on doorsteps is going to be nothing short of Herculean this year. Retailers that use all the options at their disposal will be the ones that customers stick with when this is all over.

--With assistance from Brooke Sutherland.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

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