E-commerce explodes into holiday shipping season – pandemic pushes U.S. online sales to predicted 2030 level

  • E-commerce explodes into holiday shipping season – pandemic pushes U.S. online sales to predicted 2030 level

    E-commerce explodes into holiday shipping season – pandemic pushes U.S. online sales to predicted 2030 level

    Peak season e-commerce sales, turbocharged by an accelerated shift to online buying as consumers shy away from crowded stores during a pandemic, are expected to hit all-time highs this year, putting additional pressure on express delivery networks.

    Retail and logistics analysts say the unprecedented level of digital commerce has pulled forward 10 years of expected growth in the span of six months.

    The flood of new orders, especially early in the coronavirus crisis when so many stores were closed, impacted express carriers’ delivery times, leading them to eliminate on-time guarantees, implement package surcharges and throttle volume available to some retailers.

    The current gap between demand and supply is about 2.6 million packages a day, for a seven-day week, which will rise to 7.2 million during the upcoming peak season, according to data from Pittsburgh-based ShipMatrix.

    “It doesn’t mean those packages won’t get moved, but they will be affected in terms of the number of days for transit. So, the on-time performance will be challenging for the carriers because they are operating way beyond their capacity,” said Satish Jindel, president of the parcel analytics and benchmarking company.

    “Even though the parcel delivery companies will add temporary drivers and warehouse personnel, the demand will increase in the meantime,” he said in an interview.

    On-time performance for ground services during the week of Oct. 4 -10 was 95.2% for FedEx (NYSE: FDX) and 98% for UPS (NYSE: UPS). He attributed the difference to the fact that FedEx Ground is also delivering its SmartPost packages, whereas UPS relies on the U.S. Postal Service for final delivery of about two-thirds of its SurePost economy ground service — freeing up resources for other deliveries.

    The ground performance figures for both express carriers, as well as Amazon (NASDQ: AMZN) and the Postal Service, have improved since earlier this year, when they were first hit by the surge in e-commerce demand.

    Jindel noted that express services, which have time-definite standards, have a lower on-time performance.

    Insatiable demand 

    On Monday, DHL Express said it expects e-commerce shipments to grow more than 50% from last year’s peak leading up to the holidays, with a similar spike in inbound volumes to the Americas — most of it in the U.S.

    Mexico is DHL’s second-largest growth market after the U.S., followed by Canada.

    The international parcel carrier, part of integrated logistics provider Deutsche Post DHL , said e-commerce volumes in its network are already up 35% this year over 2019 and predicted online sales will increase further with popular blowout shopping days such as Black Friday and Cyber Monday in November, and ongoing gift-buying for Christmas.

    The U.S. Department of Commerce reported that second-quarter domestic e-commerce sales grew by almost a third from the previous quarter and 44.5% from the same period a year ago.

    eMarketer forecasts U.S. e-commerce sales will jump 36% to $190.5 billion during the holiday season, while brick-and-mortar retail will decline 4.7% to $823 billion. The research firm estimates Cyber Monday sales will increase 38% to $12.9 billion. It expects e-tail to represent 18.8% of total retail sales, up from 15.9% in 2017.

    Prior to the pandemic, analysts projected holiday e-commerce sales to increase 13% to $155.5 billion, roughly on par with the compound annual growth of the past three holiday seasons. In a recent report, Berkeley Research Group said it believes digital sales could go even higher, to $200 billion.

    The coronavirus pandemic has created a number of conditions that are driving people to shop online, including a desire to avoid potential infection in stores, local laws and health guidelines limiting indoor capacity, and stay-at-home precautions that are leading to more purchases for home offices and recreation rather than spending on services that involve more person-to-person contact. The research groups said the relatively short calendar between Thanksgiving and Christmas and store closures stemming from bankruptcies will also affect holiday shopping dynamics.

    by American Shipper / Eric Kulisch


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