The 2015 holiday season winds down this week but one important trend is crystal clear at this point, more and more consumers have opted for online shopping and the dynamics related to customer fulfillment are going to change in the coming months.
That reality was evident after the Black Friday– Cyber Monday weekend, and it continued right up until the Christmas holiday. Forecasting firm ChannelAdvisor indicated that online sales in the period of November 26 thru December 20 rose nearly 12 percent from the year earlier period. So much for the majority of shoppers completed their holiday shopping early.
Despite the best efforts, technology and forecasting tools of both FedEx and UPS, both parcel carrier networks were strained at various points, the former being impacted just before the Christmas holiday by supposedly severe winter storms. Some FedEx employees volunteered to work the holiday in order to get packages to their holiday destinations, as last-minute shoppers swamped its network. The 2015 holiday surge brings forward the question of whether hub and spoke designed delivery networks can accommodate holiday-surge volumes. While UPS managed to make all of its required deliveries by 6pm Christmas eve, its network experienced visible slowdowns in the middle of December. The fact that FedEx blamed the majority of its disruption on bad weather impacts at its Memphis hub is a testimonial to the problem.
Two apparent stars of 2015 are Amazon and the U.S. Postal Service (USPS). Amazon took more control of its shipping network, chartering its own air freighters and implementing its larger network of customer fulfillment and package pre-sorting centers. The online retailer literally exposed the weaknesses of hub and spoke logistics and distribution and was able to promote holiday sales up until Monday of Christmas week. This author placed Amazon Prime orders on Monday for Wednesday delivery, and the parcels were received on-time, with the USPS handling the delivery. Readers should expect that Amazon will make a more visible presence in direct parcel delivery in 2016, and that is not just drones, but expanded logistics and transportation.
According to The Wall Street Journal, the USPS volume is up nearly 15 percent from a year ago and the agency is on-track to set a new record for holiday deliveries, expected to be more than 600 million packages between Black Friday and New Year’s Day. That volume number comes close to that of UPS. The agency reportedly hired an additional 30,000 temporary workers for handling this year’s surge. The agency has become the go-to carrier for Sunday deliveries along with bulk packages as-well. Profitability of the agency is however, a whole different story.
As the holiday surge winds down, it is clear that the industry dynamics of B2C / B2B online fulfillment landscape are about to change in the coming months.