San Jose Mercury News
SAN JOSE, Calif. — The next week will be a 24/7, backbreaking, sleep-deprived haul for couriers such as FedEx, the United Parcel Service and the Postal Service, the last connections to deliver many much-anticipated Christmas gifts. And there is no room for mistakes.
Last year’s fiasco — when retailers over-promised on deliveries and bad weather snarled courier services, causing millions of gifts to arrive long after Santa’s visit — is still a painful memory, and everyone is working hard to avoid repeating the same mistakes.
“I think everybody is kind of on edge in making sure this holiday runs smoothly,” said Michael Mashintchian, director of logistics for ShopRunner, a San Mateo company that offers online shoppers expedited shipping for more than 100 retailers.
With e-commerce sales up 8 to 11 percent this holiday season, delivery services face record-high volumes of packages that must get from warehouses to beneath Christmas trees before next Thursday. And with more retailers promising Christmas delivery to last-minute shoppers — and some ill-prepared to make good on those promises — holiday shipping has become a massive and challenging undertaking. For everything to go smoothly, analysts say, retailers must accurately forecast how much inventory they will sell and when, and courier services must run their planes and trucks like clockwork.
For the final seven-day sprint up to Christmas, FedEx Express couriers at the hub in San Francisco are fueled by Diet Coke, strong cups of coffee and the knocking verses of rap tunes. FedEx Express picks up most of the last-minute orders, closing out a record season of an estimated 290 million packages between Black Friday and Christmas Eve.
“From here on out, it’s going to be our ballgame,” said Rafael Campos, a 34-year courier. “My ritual is just to get here earlier, get situated, and drink a Diet Coke. For us, we really don’t feel the Christmas spirit, because we are too busy trying to make everyone else’s Christmas perfect.”
In this carefully stacked house of cards, one strong gust could send the entire thing toppling.
That blow could be an actual storm — another wet whopper in the Bay Area that delays planes and slows deliveries — or a last-minute surge of online shoppers enticed by retailers’ 11th-hour offerings.
“You don’t know what you don’t know until you’re apologizing for it,” said Christoph Stehmann, president of e-commerce and shipping solutions for Pitney Bowes, a tech firm. “You can’t control the weather. You can’t control consumer buying behavior. The truth is any one of those things could be a variable this holiday season. I don’t think that anyone can give the consumer a guarantee that nothing bad is going to happen.”
And yet, lots of promises have been made. Wal-Mart said recently it would guarantee Christmas Eve delivery for packages sent by standard shipping and ordered by Dec. 19. Toys R Us and Neiman Marcus have both said that shoppers who order by Dec. 23 can get gifts delivered by the following day, for a fee. Target announced its last day to order is Dec. 20, and is also offering free shipping, which has prompted a surge of orders, a spokesman said.
“You want to make (the cutoff) as late as possible to benefit guests, but you also need to be comfortable that you can deliver on that promise,” said Target spokesman Eddie Baeb. “You want to be as good or better than your competitor.”
Although Target had a mostly smooth Christmas last year, dozens of other retailers that underestimated their sales and pushed out delivery deadlines disappointed their customers on Christmas morning. However, it was UPS and FedEx that bore the brunt of consumer blame when millions of packages were delivered late.
Hoping to avoid more bad press and millions of dollars in customer refunds, FedEx and UPS doubled down. Fed Ex has spent up to $2.5 billion on expanding its delivery network and hired 50,000 seasonal workers, and UPS this year invested $675 million in capital improvements and technology, and hired more than 90,000 seasonal employees. Beginning Dec. 26 of last year, FedEx said it was talking with retailers, plotting how to better predict their online sales for 2014 so drivers aren’t knocking on doors on Christmas morning — or later.
“Online shopping was a huge part of the holidays last year, and it’s a huge part of the holidays this year,” said Fred Laskovics, senior manager of FedEx Express in San Francisco. “We understand that the business has changed. People don’t shop in stores anymore. Retailers know that. For us, it’s the ideal situation.”
Although it has tested courier services, the growth of online shopping has also been a boon for shippers — FedEx said its shipping volume is up 8.8 percent this holiday season over last, and UPS’s is up 11 percent. In the pre-dawn chill earlier this week, workers at the FedEx Express hub in San Francisco were pushing nearly 5,500 packages every hour down a conveyor belt, where they were then sorted and loaded into a few hundred trucks.
But whether couriers can deliver on time largely depends on whether retailers have set realistic deadlines for their shoppers. Most, particularly the large national chains, have been more prudent this year in saying what they can deliver and by when, said Mashintchian. And stores such as Target and Toys R Us are pushing customers to do more online ordering and picking up in stores.
“There is more of an emphasis on delivering on time,” he said. “The industry as a whole got the message that consumers don’t take kindly to broken promises.”
For behemoth retailers with warehouses across the country, a last-minute shipping deadline is more feasible. But analysts say too many small, ill-equipped retailers are also offering late deadlines, trying to scrape in every last dollar from their most important season.
“Retailers are pushing it a little tighter this year than last, and what is driving that is less about their confidence in delivering and more about what their competitor might be doing,” said Steve Osburn, an analyst with Kurt Salmon.
And with the growth of same-day delivery services such as Google Shopping Express, and Amazon’s Prime service, customers have come to expect fast delivery from every retailer.
“Consumers want Amazon-style shipping no matter what size the retailer is,” said Jarrett Streebin, founder and CEO of EasyPost, a software company that connects businesses to shipping carriers.
But with high expectations, some customers are bound to be disappointed. Already, there are glimmers of problems with UPS. Shopper Nelson Estupin said an item he ordered from Nordstrom that was supposed to arrive last Wednesday was held at a UPS station for days.
“Lo and behold, it was finally delivered, five days late,” he said.
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