Shipageddon likely to cause serious X-mas delivery issues in US
The seemingly insatiable appetite of US consumers for online shopping is powering Amazon to new heights.
The e-commerce giant reported a 37% jump in revenue for the third quarter, to $96.1bn, with operating income soaring to $6.2bn, up 93.7% year on year, while net income shot up 200% to $6.3bn.
And parcel firms riding the e-commerce wave are also showing strong balance sheets. UPS, which reported its latest quarterly figures on Wednesday, trumpeted a 15.9% rise in revenue to $21.2bn. Net income advanced 11.8% to $2bn and operating profit was up 11.0% to $2.4bn.
Amazon reports sale increase up to 38% year-on-year
And according to Amazon, the fourth quarter is going to be even better. “We’re seeing more customers than ever shopping early for gifts, which is just one of the signs that this is going to be an unprecedented holiday season,” said Amazon CEO Jeff Bezos.
Amazon predicts net sales in the next quarter to end up between $112bn and $121bn – 28%-38% higher than a year ago. Its tally for the current quarter is getting a boost from Prime Day, the Amazon shopping orgy that was moved from its July slot to 13-14 October this year. The company has not disclosed its sales figure for the event, only saying that figures for its third-party sellers on the platform were up 60%.
Jason Goldberg, chief strategy officer at Publicis Communications and chairman of shop.org, a division of the US National Retail Federation, estimates that this points to a haul of between $7bn and $10bn for Prime Day, but “probably closer to $7 billion”.
Shipageddon will seriously hit retailers and delivery companies
The question is, if the event – coming more than a month ahead of the traditional peak US retail frenzy between Thanksgiving and Christmas – has drawn in some consumer spend that would otherwise flow later in the season. Some pundits have argued that Amazon had effectively extended the peak season by six weeks.
Mr Goldberg noted that retailers were anxious to pull in sales earlier this year, worried about delivery problems and inventory burn-out later in the season.
Pundits have predicted a “Shipageddon”, as retailers and delivery firms will be overwhelmed by the volume of parcels generated in the weeks before Christmas.
DHL is bracing itself for 50% more shipments this peak season than last year. The integrator is looking to add 7,000 seasonal workers to cope with the anticipated volume, said Scott Sureddin, CEO DHL Supply Chain North America. And UPS announced a US-wide sign-up blitz, aiming to bring in at least 50,000 seasonal employees.
Delivery bottlenecks unavoidable during Shipageddon Christmas period
The tidal wave of parcels will strain the system, leading to delays and bottlenecks, said Mr Sureddin, adding: “We will see final-mile capacity constraints.”
Many of his customers are making preparations to ensure that their items of higher value will be prioritised over products with lower margins, he said.
Market research firm eMarketer is forecasting US retail sales in the holiday season to rise by 0.9% to $1.013 trillion. It projects a 4.7% decline for brick-and-mortar retail to $822.79bn, while retail e-commerce will climb 35.8% to $190.47bn.
The firm estimates that e-commerce will account for 18.8% of total retail sales in the season.