Online sales ease crunch for package giants
The U.S. economy is being threatened by everything from the housing credit crunch to high gasoline prices, but John Nikolich has yet to see it.
"With all the work I have you'd hardly think there was anything bad going on out there," said the 46-year-old driver for United Parcel Service Inc., the world's largest package delivery company.
Nikolich has been delivering packages for 23 of his 25 years at UPS in Naperville, which has seen its population more than double to some 140,000 in that time.
A week before "Black Friday" -- the day after Thanksgiving when America erupts in a torrent of shoppers beginning their holiday buying -- Nikolich's brown van cannot handle all the packages for delivery on his route. UPS must send a backup truck. Nikolich on average delivers some 350 packages a day to stores in the center of Naperville and homes in the area around downtown.
But while Nikolich's route keeps growing rapidly, the same cannot be said for UPS or its main rival, FedEx Corp. With oil nearing the $100-a-barrel mark, equity home loans drying up and retailers forecasting low fourth-quarter sales growth, analysts say a "weak peak" season looks inevitable for the shippers.
Officials at UPS said in October its growth this peak season would be slower than in the previous four years. FedEx last week cut its forecast for the company's current quarter that ended Nov. 30, citing fuel costs and weak freight volumes in its trucking unit.
But the saving grace for this year's peak season? While in-store retail sales will see slight growth, online sales are expected to rise at a far higher pace.
"While UPS and FedEx are not immune to an economic slowdown, they should continue to perform well thanks in part to online sales," said Jon Langenfeld, an analyst at R.W. Baird & Co.
Consulting firm TNS Retail Forward has projected online sales will jump 18.5 percent this year to nearly $42 billion.
In a press release on Oct. 29, FedEx CEO Fred Smith noted despite slowing overall U.S. economic growth "e-commerce will continue to drive holiday spending" this year.