Good News: E-Commerce Up, Bad News: Shipping Did Not Keep Up

By Gary Kim December 26, 2013

There’s good news and some short term bad news in the online commerce business around the important Christmas shopping season in the United States.

 On Cyber Monday at Amazon.com, customers ordered more than 36.8 million items worldwide, which is a record-breaking 426 items per second, with more than half of Amazon customers using a mobile device.

The e-commerce sales volume trend continues, and notably, use of mobiles for e-commerce exploded. So record sales volumes is the good news.

The temporary bad news is that UPS, which expected to ship more than 132 million packages over the holiday season, experienced demand significantly higher than that, causing delays, exacerbated by weather events.

It isn’t yet clear whether some retailers, in an effort to make up for sluggish sales, extended their shipping deadlines (“arrival before Christmas”), putting unexpected demand on the UPS delivery system. But that could not have helped.

That is probably on top of online volume growth of at least 15 percent.

The shipping delays appear not to have been caused by Amazon’s own logistics system, but rather inadequate UPS capacity. It is not clear whether Fedex, the other large carrier, was similarly affected.

Amazon says its own fulfillment centers processed customers’ orders in time for holiday delivery.

UPS, the world’s largest package-delivery company, says the volume of air packages exceeded its capacity immediately preceding Christmas, despite the normal seasonal uptick in shipping supply (trucks, planes, people).

So the good news, for Amazon and other online merchants, is that customer receptivity continues to grow. The bad news is that an unexpected demand surge caused the delivery system to fail, in many cases.

That’s likely to cause the shipping delivery firms to adjust the amount of “surge” capacity they will put into place for the next holiday season. But one might also suspect that some additional delivery mechanisms will be sought, by Amazon and others, or by UPS and Fedex, working with new partners, as a result.

As always, the issue is how to deal with surges of demand. But the bigger picture is that online commerce now is growing faster.




Edited by Cassandra Tucker

Contributing Editor

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