December 27, 2013 in Nation/World

Late spike in shopping, especially online, a nice surprise – but swamps UPS, FedEx

Mae Anderson Associated Press
 

Americans waited until the last minute to buy holiday gifts, and many retailers weren’t prepared for the spike.

Heavy spending in the final days of the mostly lackluster season sent sales up 3.5 percent between Nov. 1 and Tuesday, according to MasterCard Advisors SpendingPulse, which tracks payments but doesn’t give dollar figures.

The jewelry sector was, by MasterCard’s calculations, the top-performing holiday category.

Online shopping led the uptick, with spending up 10 percent to $38.91 billion between Nov. 2 and Sunday, research firm comScore said.

“We always have last-minute Charlies, but this year even people who normally complete shopping earlier completed shopping later,” said Marshal Cohen, chief retail analyst at market research firm NPD Group.

The late surge caught companies off guard. UPS and FedEx failed to deliver some packages by Christmas due to a combination of poor weather and overloaded systems, leaving some unhappy holiday shoppers.

E-commerce giant Amazon.com said it had its best holiday season ever. On Cyber Monday alone, 36.8 million items were ordered worldwide from the site, amounting to 426 items per second, according to the company.

Amazon is offering customers with delayed shipments a refund on their shipping charges and $20 toward a future purchase. And other retailers such as Macy’s said they are looking into the situation.

Visits from mobile devices made up a record 48 percent of all online traffic – up 28.3 percent from last year. Tablet users spent $98.61 per order on average, while smartphone users shelled out $85.11.

The last-minute surge this year solidifies the increasing popularity of online shopping, which accounts for about 10 percent of sales during the last three months of the year. It also underscores the challenges that companies face delivering on the experience, particularly during the holiday shopping season that runs from the beginning of November through December.

Analysts say FedEx and UPS typically work closely with big retailers to get a sense of the volume of packages they’ll handle during peak times like the holiday season. Extra flights, trucks and seasonal workers can be added if the projections are large.

But this year, David Vernon, a senior research analyst at Sanford C. Bernstein, said weather played a role. The early December ice storms in Dallas could have hurt operations, he said, and packages can start to accumulate. And that got compounded by a late surge in shipments, he said.

“Clearly, as a group, (they) underestimated the demand for Internet retailing during the holidays,” Vernon said.

Another problem was the growing popularity of retailers offering free shipping. Amazon, for one, has a two-day free shipping offer that comes with its $79 annual Prime membership. The company said in the third week of December alone, more than 1 million people signed up for the membership.

“Frankly, the right hand wasn’t talking to the left,” said Forrester analyst Sucharita Mulpuru. “The marketing teams of a lot of Web retailers (offering free shipping) were not talking to the operations and supply chain teams.”

The resulting delayed shipments could be a problem for shippers. UPS and FedEx did not quantify how many packages were affected but said they were just a small fraction of total holiday deliveries.

The Los Angeles Times contributed to this report.

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