Personal Finance

Late Christmas packages reveal the perils of overpromising

The failure of United Parcel Service and FedEx to deliver packages in time for Christmas has exposed the perils of retailers promising to get last-minute gifts to customers.

Chains from Kohl’s to to offered gift cards and refunds after shoppers took to social media to vent their frustrations at the missed shipments. On its website, UPS said Thursday that the volume of last-minute air packages exceeded its capacity to process them.

UPS said it scrambled to get all packages not delivered by Christmas to be completed by Thursday, including all the late deliveries in the Kansas City area, said spokesman Tyre Sperling.

Merchants battling for market share during a ho-hum holiday season tried to outdo one another with deep discounts and promises that shoppers could wait as long as they wanted to order gifts online. Although analysts say the shipping problem is unlikely to make Americans abandon online shopping, they say parcel delivery companies will have to boost capacity and retailers may need to seek alternatives to prevent a recurrence.

“You had a perfect storm of events from the consumer side, the retailer side and the shipping side,” said Craig Johnson, president of Customer Growth Partners LLC in New Canaan, Conn. “Normally those kinds of schedules are all kind of prepared or coordinated with the carriers.”

UPS is conducting an analysis of what caused the delayed air shipments, said spokeswoman Peggy Gardner.

“We’re looking at all aspects this year and talking with our shippers as part of the process following every peak season,” she said.

Gardner declined to discuss the number of shipments that missed the scheduled delivery day.

FedEx said it shipped 99 percent of its ground deliveries on time and didn’t specify a percentage for its air shipments.

U.S. retail sales rose 3.5 percent this holiday season, MasterCard Advisors SpendingPulse reported Thursday, in line with other predictions for relatively weak sales. Yet Americans are stampeding online to buy holiday gifts, putting more pressure on shipping companies. Although online sales were softer than expected the week before Christmas, that can be explained in part by retailers piling on discounts earlier, pulling forward sales in a season that was six days shorter than last year.

UPS’ status as the world’s largest package delivery company wasn’t enough to absorb rapidly changing consumer behavior. Americans waited longer and longer to pull the trigger on purchases, said Marshal Cohen, chief retail analyst at the NPD Group research firm.

“We have watched retailers groom the consumer to wait,” he said.

Putting further pressure on the shipping companies, retailers trying to compensate for a “mediocre” shopping season extended their order cutoff so customers could receive their purchases on Dec. 24, Johnson said.

During peak periods, shipping companies add trucks and aircraft and hire thousands of temporary workers.

UPS and FedEx “may need to increase investments to handle such volume surges,” Anthony Gallo, an analyst at Wells Fargo Co., wrote in a note to investors. “The 2014 Thanksgiving and Christmas calendars will be similar to 2013.”

Most last-minute purchases ordered two to three days before Christmas ship by air. UPS offers refunds for air and international packages that don’t arrive on time during peak shipping season. There were no guaranteed delivery times for packages shipped by ground after Dec. 11. Ground deliveries have similar cutoff dates every year during the peak season.

“The majority of the shipments that were set for delivery by Christmas Eve didn’t make their delivery destinations,” Gardner said. “Some of those shipments were delayed.” reached out to customers as soon as it learned shipments were going to miss the delivery deadline.

“A very small percentage of our gifts were affected” because of UPS’ issues, Yanique Woodall, a spokeswoman, said in an email. “In some cases we were able to substitute their gifts with our same-day delivery floral arrangements from our florists. In addition, to apologize for any inconvenience, we offered a $20 savings pass to our customers.”

Amazon also offered customers $20 gift cards and refunds on purchases that UPS didn’t ship on time. The world’s largest online retailer cited failures in UPS’ transportation network in messages to customers, saying its own fulfillment centers processed customers’ orders in time for holiday delivery. Amazon is reviewing the performance of the delivery carriers, spokeswoman Mary Osako said.

Kohl’s is getting in touch with those affected and will fully cover the cost of all items not delivered on time, said spokeswoman Jen Johnson.