FedEx joins UPS hiring staff for e-commerce surge
Tens of thousands more workers will don UPS brown and FedEx purple this holiday season, a measure of precaution ahead of an anticipated jump in year-end e-commerce growth.
This year UPS is hiring as many as 95,000 seasonal workers and FedEx Corp. is taking on at least 50,000 more to ensure people get their iPhones and foot massagers on time even as consumers tempt fate by waiting later and later to buy online.
Retail e-commerce spending may rise almost 17 percent this holiday season, the fastest growth since 2011, to $72.4 billion, New York-based market research firm EMarketer estimates. Holiday e-commerce sales now account for 8.4 percent of all holiday retail sales, according to EMarketer, the highest percentage since they began collecting data in 2008.
"I think they're taking it seriously. I think they'll work very, very hard," said Glenn Gooding, a former UPS employee and now a partner at parcel consulting firm BirdDog Solutions. "There's no silver bullet but staffing definitely is a part of it."
The stakes are especially high for Atlanta-based United Parcel Service Inc., which was blamed by Amazon.com Inc. for the post-Christmas deliveries. UPS's contract with the Amazon Prime service guarantees delivery in two days, and orders were larger and came later than anticipated.
Shippers and online retailers will be challenged again by the throngs of people expected to surf the Internet in their pajamas at the midnight hour. Those habits last year combined with unseasonably harsh winter weather to foul up deliveries.
"There's always a little bit of risk when people are still doing their Christmas shopping on the 22nd of the month," said Gregory Grudzinski, director of insights and analytics for Catapult eCommerce in Westport, Connecticut. "Those folks are just inherently comfortable with flirting with that risk."
This time, UPS plans to be ready.
David Abney, who was promoted to chief executive officer in June, led a review of UPS's response to the tardy shipments, prompting a $175 million plan to expand its parcel facilities and accelerate use of technology to improve delivery operations.
UPS has long dominated the holiday shipping business in the U.S. with its ubiquitous fleet of about 100,000 brown trucks, vans, tractor-trailers and motorcycles. FedEx has more jets though its ground delivery fleet is less than one-third the size, at about 32,000 vehicles.
"FedEx and UPS have done more to help drive the e-commerce business by just being there," Grudzinski said. "Their brand names just suggest reliability."
Free shipping and an improved economy will lead to higher online sales this year, according to Satish Jindel, president of Sewickley, Pennsylvania-based SJ Consulting Group Inc.
The shipping companies should commit to carry retailers' best estimates of package volume during the holiday period, and anything above that amount should be charged a premium price, Jindel said. The extra cost for retailers could be passed on to consumers who order late.
"The part that is critical is what happens in the last week" before Christmas, he said.
UPS and FedEx have been meeting with big online retailers for months, encouraging them, for example, to give better deals for customers who order early in the holiday season, said Rob Martinez, CEO of parcel consulting firm Shipware LLC in San Diego, who has spoken with online retailers about the meetings.
Longer term, UPS and FedEx may need to increase shipping rates as the holiday season progresses, said Sucharita Mulpuru, an e-commerce analyst with Forrester Research. In July, UPS CEO Abney said the company would consider a seasonal surcharge if it was forced to spend heavily again next year preparing for the holidays. This year, its holiday preparations are running at $175 million.
"The issue with e-commerce is that there are too many companies offering free shipping too late into the season -- the demand is exceeding supply and we haven't priced shipping effectively to account for that," Mulpuru said.
To contact the reporters on this story: Michael Sasso in Atlanta at msasso9bloomberg.net; Mary Schlangenstein in Dallas at maryc.sbloomberg.net To contact the editors responsible for this story: Ed Dufner at edufnerbloomberg.net Molly Schuetz, Ben Livesey