By Lisa Baertlein
LOS ANGELES (Reuters) – The weak demand bedeviling package delivery companies like United Parcel Service (NYSE:UPS) and FedEx (NYSE:FDX) promises to be great news for online U.S. shoppers who want quick, on-time holiday gift delivery.
Barring an unexpected surge in online gift buying due to severe winter storms, major delivery firms are well-positioned for on-time delivery performance to approach 100%, said Satish Jindel, founder of shipping consultancy ShipMatrix.
“As long as the weather holds up and people are able to go to stores, the parcel carriers should have no trouble handling the volume,” said Jindel, who added that in-store shopping also reduces the likelihood of generating returns, another source of holiday package shipments.
UPS, FedEx and other delivery firms will handle nearly 2.2 billion deliveries and returns between Thanksgiving and New Year’s Eve, said Jindel, who helped found the delivery firm that became FedEx Ground.
Those delivery firms have been battling stubbornly soft demand since the early COVID-19 pandemic’s e-commerce bubble deflated in 2022. Their top customers include major retailers like Amazon.com (NASDAQ:AMZN), Walmart (NYSE:WMT), Target (NYSE:TGT) and Macy’s (NYSE:M).
The peak holiday season that typically stretches from Thanksgiving to Christmas is high-stakes for delivery companies that can see daily package volumes double, and for retailers that can reap more than half of their annual revenue during the period.
The package carriers have plenty of capacity to manage this year’s holiday rush. They are prepared to handle 120 million parcels per day during the peak holiday season, while demand is estimated to be just 106 million packages per day, according to ShipMatrix.
Expectations for overall holiday retail sales also are muted as higher prices for housing, food and other necessities strain personal budgets. Consulting and accounting firm Deloitte estimated that retailers could notch their slowest holiday sales growth since 2018. And, shoppers are returning to pre-pandemic in-store shopping habits.
There are fewer days for holiday shopping and delivery this year because Thanksgiving falls later in November than usual.
While that gives delivery firms less time to get gifts to doorsteps before Christmas, the time crunch also could mean that more people buy gifts in stores to be certain they have purchases safely in hand.
UPS CEO Carol Tome in October said the company’s retail customers have tempered forecasts for the number of holiday packages they’ll hand to the carrier for delivery because the shortened shopping season could translate into more in-store versus online purchasing this year.
Any major storms that hit in mid- to late December could delay gift deliveries and keep shoppers away from malls and other retail centers. That could spark a last-minute surge in demand for e-commerce deliveries, which could collide with flight delays, road closures and treacherous driving conditions that impede deliveries, experts said.