The Big Story: UPS & FedEx’s Un-Deliverance

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Dec. 26 (Bloomberg) – Bloomberg’s Paul Sweeney, Julie Hyman and Lee Klaskow discuss UPS and FedEx being overwhelmed by package volume that they couldn’t deliver and what steps retailers are taking to make it up to customers. They speak to Adam Johnson and Trish Regan on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

Amazon, a little last-minute, i admit, but anyway, we ordered some toys online.

They were not there on christmas eve, like they had been promised.

My initial frustration was with amazon.

I wonder also how damaging it is to other brands relying on ups.

Amazon is pushing this off saying that they fulfilled their orders, and the fault is with ups.

What is interesting is how much ups anticipated the holiday.

They hired 55,000 extra people to help them over the holiday season.

They really beefed up their staffing, facilities, logistics.

But if you talk to analysts, this preparation is a collaboration process between ups and fedex.

They plan together, ahead of time.

Ups says partially to blame is higher than estimated demand.

Amazon did say that one million signed up for prime in the first week of december.

There were also some issues with the weather, although you should argue that they could have anticipated that as well.

You cover logistics, you know the ins and outs.

Where do you think ups really went wrong at the end of the day?

The crux is they were not able to protect the weather.

There was a shortened shopping season this year by about five days because of where thanksgiving fell.

Demand just over exceeded their capacity.

Short-term, not a great aim for ups in terms of the pr story, but long-term, it is a great aim.

E-commerce is picking up faster than people think.

Ups and fedex are huge beneficiaries of this.

Is that really the message here?

We are not buying at brick-and- mortar stores, we assume that we can do everything online.

I think what we saw this holiday season was traffic down at retail stores 20% into the holidays.

And then what we saw here was this e-commerce story.

It is bigger than people think.

The department of commerce has always said e-commerce is six percent of retail sales.

That has always been a low number.

It is much higher than that.

Retail sales on e-commerce in the week leading up to christmas was 14% of sales.

The problem is, consumers are left with less trust in the system the closer you get to the holiday.

So i come away with a more on that if i better make sure i buy it in person or order early.

I would argue that it is making us procrastinators and perhaps these hiccups will make us order earlier.

That is my take away.

You have to order early or you have to shop in the store.

I wonder what it will mean for sales next year.

If you look at amazon, every quarter, and jeff bezos is spending millions on additional gesture grecian centers, put geomet centers, bringing them closer to the big markets around the world, knowing that the volume is surging.

If you speak to amazon, they fulfilled their obligations.

E-commerce, these companies are making huge investments because they know this will become a bigger part of the economy.

Do you think e-commerce will morph into brick-and-mortar commerce?

You have to have the pope geomet centers closer to people.

It sounds that way.

You look at the amount of money these companies are investing into their full film and centers, if you think about it, same-day delivery is coming to a lot of product categories.

What do you have to do for same day delivery?

You need inventory on the ground in local markets.

I was really hoping for a drone.

Amazon is pushing off the blame to ups, but to your point, which is what a former guest said, amazon could have done better to manage those expectations.

Would it have been so bad to say, you cannot get it by christmas day.

I wonder if next year you will see a shift in customer patterns.

That said, you know that amazon and ups will move heaven and earth to prevent this from happening again.

In terms of amazon, ups and fedex are pretty much the only game in town.

So again i come back to that collaborative relationship.

They have to work something out themselves.

We are looking at fedex stock come up one percent.

Do they come out the winner here?

I think if we did not have the severe weather that we had earlier in the month, we would not be talking about fedex or ups.

We would probably be talking about wrapping up the year.

I think the weather played an important role.

It did create some bottlenecks, which when they were opened up, flooded their system.

Are we supposed to be prepared for that?

We will be running a piece later today.

Aren't you supposed to be able to manage this?

You are hedging it out.

As you know, when you listen to the weather for -- report before you go to work, it is difficult to predict the weather.

You could hedge it, but there are no better networks than fedex and ups, coupled with the service they offer with the usps, every home is touched.

You can get strawberries from central america shipped to california, covered in chocolate, and then deliver to maryland.

We have an incredible robust supply chain.

We do, but it just broke down.

Question to you, as the transportation and logistics analyst, as you look at the systems, what do these companies need to do to do better?

How many packages were really impacted?

We do not know what that number is.

It could have been 10, it could have been 1000. after one hundred 50 million packages, 1000 is not a disaster.

-- out of 150 million packages, 1000 is not a disaster.

Amy they need to look at some third-party carriers, if they were the issue.

We really do not know yet.

I am sure they are doing their postmortem now and they will be telling customers and investors what happened and what they will do next year to make sure this does not happen again.

This is not the first time this has happened with packages not coming on time.

It happened a couple of years ago with ups.

It was weather related.

This text has been automatically generated. It may not be 100% accurate.

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