FedEX and UPS Poised to Handle Holiday Demand

In-Store and Early Shopping to Alleviate Shipping Demand

The holiday rush may be a lot easier than expected for FedEx (FDX) and United Parcel Service (UPS) this year, with more people shopping early and in-store than in 2020. An extra shipping day between Thanksgiving and Christmas is also expected to help the delivery companies meet holiday demand.

This is welcome news to the industry and investors who were bracing for delivery delays. UPS said it feels confident about the holiday season, with 26 of its leading 30 retail shippers running holiday deals earlier than in the past. Consumers are also aware of supply-chain issues and are placing orders earlier, which stretches out the season and reduces the likelihood of delays during peak shipping times.

Deficit Still Persists

For the holiday season, analysts expect the shortfall between the shippers’ capacity and the number of packages to ship to stand at 1.3 million from Thanksgiving until the end of 2021. In the fall analysts had expected that gap to be 4.7 million packages. In 2020 it was about 7.2 million packages.

Strategies put in place by the industry—including adding delivery on Saturdays, shipping more products to stores, and ramping up capacity—have helped. But given that there is still a deficit, albeit smaller, experts say consumers should still get their orders in as soon as possible. FedEx expects shipping to increase 10% during the peak holiday shipping days.

Unanswered Questions

Despite the upbeat outlook, FedEx and UPS are not completely in the clear. Both companies are having a difficult time finding drivers, and may also need to deal with inclement weather and COVID-19 outbreaks. If the number of virus cases increases during the holidays, requiring workers to quarantine, it could create delays. Last year, 14,000 Postal Service workers had to quarantine during the peak holiday period.

Barring any of those issues, with more people venturing out and retailers stocking up early, FedEx and UPS may be in a good position to have a happy holiday.

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