UPS Braces for Holiday Delivery Surge in December

During UPS’s Q3 earnings call, CEO Carol Tome revealed that they expect package volumes will peak a little bit later this year compared to 2021 as customers postpone holiday purchases until Christmas or go back to “more pre-pandemic shopping behaviors,” such as in-store shopping or opting for store pickups. 

Christmas-Like Surge During Q2 2020 & 2021

Before the COVID-19 pandemic, the holiday season used to be the busiest time of year for UPS.

However, when nationwide lockdowns took hold in March 2020 to mitigate Coronavirus transmission, millions of homebound consumers quickly turned to eCommerce for their shopping needs, creating an avalanche of packages that UPS wasn’t prepared for.

During the second quarter of 2020, UPS’s average daily volume (ADV) in the US increased by 22.8% or 21.1 million packages a day. 🤯 And despite experiencing a decline in domestic demand in Q2 2021, the legacy carrier’s ADV was only down by 0.8% during that quarter. 

What happened was people felt highly optimistic about their spending and started holiday shopping earlier than before to avoid delays and missing out on popular items (#FOMO). Many were even willing to shell out extra dollars to receive their packages within 1 to 2 days.

But this year, retailers have a surplus of products and not enough buzz because consumers are now more conservative with their spending in attempts to make ends meet amid a looming recession, marking the end of their 2-year shopping spree.

UPS Predicts Package Volumes will Peak in December

The prediction follows a quarter wherein the company suffered a 1.5% drop in its domestic ADV and a 5.2% dip in its international ADV due to a general slowdown in economic activity (e.g., disruptions to manufacturing output in China).

“In the third quarter, the global economy softened, especially outside the United States,” Tome explained during the quarterly earnings call.

“Softening” is a stage in the economic cycle where a market shifts from rapid growth to slow growth to flat revenue growth.

In retail, if there’s more supply than demand, businesses are forced to offer promotions like deep discounts to win inflation-fatigued customers and boost sales.

Given the current economic situation and retailers facing inventory bloat, we may see more products on sale this Christmas compared to the previous years. 🛍️

In fact, holiday shopping started early at Amazon.

For the first time, the retail giant held a second Prime Day called Prime Early Access Sale that ran from October 11 through 12 to reduce inventory glut. However, reports show that the event failed to best the initial Prime Day launched back in July. 

It could be that customers simply didn’t like the featured products or they wanted to wait for bigger bargains usually offered during BFCM and Christmas.

Either way, UPS is ready for the anticipated package volume surge in Q4, although overall volume in this quarter is expected to decline from 2021 due to contractual agreements with Amazon and Amazon itself bringing more and more of their logistics and shipping into its own growing internal network.

To prepare for the holiday season, UPS is reportedly working with major shippers and looking to hire 100,000+ seasonal workers to ensure timely delivery of packages across the US. It has also recently put shipping limitations on Amazon to make more room for its B2B segment and provide businesses with excellent logistics service during peak. 🚀

Related: 3PL Logistics Backup Plan for Amazon, How to Ship to Amazon FBA (And Speed Up Check In Times)