Category: Industry News

With the holiday season rapidly approaching, delivery services are bracing for what some are calling “shipageddon,” with a potential shortfall of as many as 7 million packages a day.

UPS and FedEx have told some of their shippers that they have already reached most of their capacity, according to The Wall Street Journal.

That shortage could mean up to 7 million packages a day between Thanksgiving and Christmas could face delays, Satish Jindel, president of ShipMatrix software and consulting provider, told NBC News.

One holiday item that is already sold out: shipping capacity.

Both FedEx Corp. and United Parcel Service Inc. have told some of their largest shippers that most of their capacity is already spoken for, and that any extra trailers with holiday orders will have to wait to be picked up, according to shipping consultants and retailers.

“There will be days within the holiday season where the industry will be over capacity,” FedEx Chief Marketing Officer Brie Carere said in an interview.

The outlook has sent retailers on the hunt for alternatives with little luck. Smaller carriers in the U.S. like LaserShip Inc. and DHL eCommerce Solutions said they booked up their capacity for the holidays months earlier than usual and aren’t taking new customers until next year.

The Grinch couldn’t steal Christmas, and neither could Covid-19. But it is moving more shopping online and that’s good news for shipping companies.

Despite an economic recession, experts still expect holiday shopping to climb between 1% and 1.5%. That’s smaller than recent years’ gains, but given that many consumers will opt to do their shopping online, e-commerce could increase between 25% and 35% year over year, according to consulting firm Deloitte. For context, online sales in 2019 increased 15%. All those packages must get delivered on time, and United Parcel Service and FedEx will be the ones to deliver Christmas cheer.

The still-raging Covid-19 pandemic, combined with cold and flu season, is already reworking the outlook for retailers’ most crucial season, with companies vowing to close on Thanksgiving.

Few places to hide as surcharges and other fees are imposed

For FedEx Corp. and UPS Inc., the demand iron has rarely been hotter. So it makes perfect sense to strike their shippers as often as possible.

With holiday demand, especially from e-commerce, expected to surge by as much as 50% over the 2019 peak, the companies are hitting their largest customers with big-time surcharges that take effect in November. But the purple and brown hammers aren’t stopping there. According to Rob Martinez, founder and co-CEO of parcel consultancy Shipware LLC, UPS is using fourth-quarter volumes as negotiating leverage even over moderate-volume shippers that are mostly being spared the pain of the surcharges.

Martinez said UPS’ negotiating message is a straightforward one: “‘Sign the proposed UPS pricing agreement NOW (his caps for emphasis) or get left out in the cold.’”