Package Firms Set Records for Peak Holiday Shipping

This story appears in the Dec. 23 & 30 print edition of Transport Topics.

Package delivery firms UPS Inc. and FedEx Corp. said they moved about 56 million packages combined Dec. 16, setting volume records during a compressed 2013 holiday season.

UPS pegged its peak shipping total at 34 million packages, spokesman Andy McGowan told Transport Topics.

FedEx’s total that day was more than 22 million packages, CEO Frederick Smith said, noting that the past three Mondays — Dec. 2, 9 and 16 — were record days for average daily volume.

The 2013 shipping season was condensed to 26 days from 32 because the Thanksgiving holiday fell six days later this year compared with last year.

For FedEx, the changing calendar pushed some of the busiest days of the season into its fiscal third quarter that began Dec. 1, a day before “Cyber Monday”. Last year, Cyber Monday fell on Nov. 26.

Cyber Monday is named for the first Monday after Thanksgiving, when the bulk of online purchases are made. This year, the day generated $2.27 billion in sales, according to Adobe Systems.

“This year’s peak is compressed into three weeks rather than four,” FedEx Ground CEO Henry Maier said during a recent conference call. “Over a four- to six-week period of time each year, our business typically more than doubles.”

“The entire team at UPS has planned all year to handle the annual increased shipping volume during the holidays,” said Alan Gershenhorn, chief marketing officer. “As consumers change the way they shop for holiday gifts, and shipping needs shift, customers rely even more on UPS for trusted and convenient solutions around the globe.”

UPS, which calls Dec. 16-20 “Peak Week,” hires 55,000 seasonal workers to handle the package surge, uses nearly 100,000 ground vehicles and boosts cargo flights nearly 25% to 2,388 daily departures.

Atlanta-based UPS expects the five days this year to exceed last year’s top single daily shipping volume of 28 million deliveries.

Memphis, Tenn.-based FedEx said that daily holiday shipment peaks have almost doubled since 2007, moving packages through 10 air hubs and 33 for ground shipments.

“This year, we had to do some unprecedented things to prepare,” Maier said. “Our network expansion costs increased to ensure we have capacity for the forecast volume.”

The $2.27 billion in Cyber Monday sales represents about 11% more than 2012. That growth continued past trends that have shown online sales growing much faster than retailers’ in-store holiday sales.

This year, the International Council of Shopping Centers’ chain-store sale index has been up just 2% during the abbreviated holiday season.

Its chief economist, Michael Niemira, told Bloomberg News on Dec. 17 that, as Christmas approaches, he expects retail sales to increase to a 3% to 4% pace over last year, stimulated by price cutting among retailers.

The U.S. Postal Service said that Dec. 16 also was the busiest day. It handled 607 million pieces of mail.

FedEx officials used a Dec. 18 earnings conference call to put e-commerce into perspective, noting that it still represents a small portion of all retail sales.

“It’s almost amusing some of the comments about delivering items by drones,” Smith said, referring to recent remarks by Amazon.com Inc. CEO Jeff Bezos, who envisions drones as a broad-based package shipping option.

Smith said a FedEx senior staff member “owns a drone, and he reported that it can operate about eight minutes and carry four Budweiser beers at his farm.”

“We’ve got a lot of studies under way in that area ourselves,” Smith said, “but at the end of the day, the intercity transportation networks of FedEx and UPS” will stay dominant.

Smith’s comments also acknowledged other recent developments in retail shipping, namely that Amazon.com has teamed with the U.S. Postal Service on Sunday deliveries in New York and Los Angeles. They are expected to expand to other major cities next year.

Last year, Amazon.com and Wal-Mart began same-day delivery in some urban markets.

In addition, the Postal Service set its own pilot programs to do same-day deliveries.

“Even though there’s a tremendous amount of talk about e-commerce, we’re still very much in early-stage development of this channel,” said Michael Glenn, an executive vice president at FedEx. “We sit right in the sweet spot of it.”