How National Carriers’ Holiday Performance Impacted Retailers
The holiday season always brings far larger shipping volumes than any other time of the year. With this increase in volume comes an increase in the frequency of delays due to the immense strain carrier networks are under during this busiest time of the year. The 2017 holiday season was no different, with both UPS and FedEx setting volume records of 750 million and 400 million packages, respectively.
However, what stood out during this season was the considerable difference in performance between UPS and FedEx, with UPS performing far worse than FedEx. Nearly 15 percent of UPS ground shipments that LateShipment monitored faced delays, while only 4 percent of FedEx ground shipments were delayed. This difference is unlike what has been observed in previous years, when both companies have generally faced the same rate of delays.
Why FedEx Outperformed UPS
UPS is indeed the largest carrier and handles about twice as much volume as FedEx; however, that volume difference alone doesn't fully explain the disparity in performance. LateShipment’s observations suggest specific unexpected breakdowns in the delivery infrastructure that exacerbated the frequency of late deliveries with UPS, especially during the first half of the holiday season. UPS was widely in the press for these delays during the first half of the holiday season, and seemed to take several emergency measures to rein in the delay rate during the second half. The fact that UPS was able to mitigate these delays later in the season also adds validity to the conclusion that UPS faced specific unexpected delivery issues unrelated to the volume increase.
How Delays Affected Retailers
From a retailer perspective, irrespective of the cause, delays are always bad news. In the eyes of their customers, merchants are still held responsible for a late or poor delivery experience, and they pay the price for these delays in the form of decreased customer loyalty. In many instances, a retailer learns about a delivery issue only when an angry customer calls, and the holidays often bring a deluge of such calls. This is never a good situation to be in and always sets alarm bells off, prompting actions to fix underlying issues. However, unlike other parts of the business where a customer facing an issue of this magnitude leads to immediate action, it's not always possible to take swift action to address problems with shipping carriers. Often, the only option available to retailers is managing customer expectations and keeping them informed about last-mile delivery issues.
What Retailers Can Do
The unfortunate reality is, even with shipping services being a true commodity, retailers usually have a relationship with only one shipping carrier, with whom they've pre-negotiated volume discounts and tight integrations with their supply chain. Switching to a different carrier, even when merchants experience serious issues with their current carrier, as occurred with UPS during the holidays, isn't necessarily feasible. However, that doesn’t mean there won’t be businesses reaching out to an alternate carrier and exploring switching partners before the next holiday season.
Since retailers don’t have full control over shipping, they need to look for ways they can maintain control over the situation. One way is through customer service. Merchants can invest in customer relationship management (CRM) platforms that allow them to communicate delays with customers as soon as they become aware of them, thus increasing customers’ happiness, loyalty and trust in their brands.
Delays are inevitable during the holiday season and often outside the control of retailers. Merchants can ensure they have fewer angry customers next holiday season by planning ahead and investing in new technology that can help them proactively contact customers as delays pop up.
Sriram Sridhar is the co-founder and CEO of LateShipment, a software company that tracks companies’ carrier packages, instantly recovers up to 20 percent of total shipping costs and automatically refunds claims for 50-plus service failures.
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