With 3 billion packages to go, online shopping faces tough holiday test

E-commerce became a lifeline for consumers and companies during the pandemic. But this holiday season, online shopping will strain the industry as never before: An estimated 3 billion packages will course through the nation’s shipping infrastructure — about 800 million more than delivered last year.

This flood of packages is hitting shipping companies at the end of a year of frenzied demand for everyday household items by a public largely stuck at home and wary of doing its buying in person. The deliveries could make or break some smaller retailers already on the edge financially because of lockdowns and fewer customers in their stores.

Packages that don’t arrive by Christmas will be a disappointment for customers but a disaster for these struggling retailers, which have been forced by the coronavirus pandemic to rebuild their business around e-commerce. The future of retailing is increasingly online, and companies don’t want to give customers any reason to think they can’t deliver.

“Everyone is preparing for the worst and holding their breath,” said Ravi Shanker, a transportation analyst at Morgan Stanley. “It is far easier to lose at peak shipping than to win.”

To cope with the surge, the large shipping companies have expanded weekend deliveries and hired more workers. They have also played hardball with retailers, introducing steep holiday surcharges on shipments and enforcing strict limits on how many packages companies can send out each day.

FedEx and UPS, the biggest private US carriers, have enormous leverage over how many packages will be delivered and when, and some retailers worry about pushing back against their demands for fear of being cut off.

But the carriers are also under pressure, largely from Amazon, which has been building out its own logistics business and is becoming increasingly independent in shipping. If more retailers falter this holiday, that only strengthens Amazon’s dominance.

By one accounting, 7.2 million more packages need to be shipped each day this holiday season than the system has the capacity to handle.

That figure came from ShipMatrix, which provides technology to the shipping industry. Its president, Satish Jindel, said expanded weekend deliveries were covering part of that shortfall, “but not all of it.”

“Demand exceeds capacity, no matter what part of the country you are in,” he said.