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UPS gift-shipping delays show perils of stores overpromising

By Mary Schlangenstein
Bloomberg

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The failure of United Parcel Service Inc. and FedEx Corp. 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 Corp. to Amazon.com Inc. to 1-800- Flowers.com Inc. offered gift cards and refunds after angry shoppers took to social media to vent their frustrations at the missed shipments.

On its website, UPS said the volume of last-minute air packages exceeded its capacity to process them.

Merchants battling for market share during a ho-hum holiday season have been trying to outdo one another with deep discounts and promises that shoppers can wait as long as they want to order gifts online. While analysts say the shipping mistake 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.”

On Saturday, Barnesville, Minn., resident Bernadette Odden ordered videos for one of her daughters from Amazon, which promised to deliver them on Christmas Eve. They never arrived. Odden, 35, called Amazon and received a $20 credit, which she immediately cashed in for a camera.

“I don’t think Amazon should take the fall for UPS’s screwups,” she said in a telephone interview. “From now on, I will possibly check which courier is being used.”

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

“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.

“The majority of the shipments that were set for delivery by Christmas Eve did make their delivery destinations,” Gardner said. “Some of those shipments were delayed.’’

She expected the delayed items would be delivered Thursday.

In an e-mail, FedEx said it had shipped 99 percent of its ground deliveries on time and didn’t specify a percentage for its air shipments.

Online stampede

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. Merchandise purchased via personal computers gained 10 percent this year to $42.75 billion, ComScore Inc. reported Thursday.

While 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’s status as the world’s largest package-delivery company wasn’t enough to absorb rapidly changing consumer behavior. Americans are waiting longer and longer to pull the trigger on purchases, said Marshal Cohen, chief retail analyst at NPD Group, a Port Washington, N.Y., research firm.

“We have watched retailers groom the consumer to wait,” he said. “It’s like rewarding bad behavior. You’re saying to the consumer, ‘the longer you wait, the better the deal, don’t be fooled.’ ”

Benjamin Hartford, a Robert W. Baird & Co. analyst, expects UPS to change its policies and pricing in 2014 so that consumers who choose to order late pay a premium, helping even out package flow through the peak season.

“They are cognizant of the reputational risk this presents,” Hartford said.

1-800-Flowers.com said a small percentage of gifts missed the delivery deadline. Yanique Woodall, a spokeswoman, said a $20 savings pass was offered to customers. Amazon also offered customers $20 gift cards and refunds on purchases that UPS didn’t ship on time.

Department store chain Kohl’s is contacting those affected and will fully cover the cost of all items not delivered on time, Jen Johnson, a spokeswoman, said in an e-mail.


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