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Capacity Crunch Could Result In 700 Million Late Parcel Deliveries–Salesforce

FreightWaves
·3 mins read

A capacity crunch during the peak holiday shipping season will result in delays affecting as many as 700 million global parcel deliveries, according to a forecast from IT giant Salesforce.com, Inc. (NYSE: CRM).

In its forecast, which was published late last week, San Francisco-based Salesforce said that global peak demand will exceed available capacity by about 5%. This will result in shipping delays and higher rates as carriers pass on their own cost increases and capitalize on what will be a seller's market for shipping space. Shippers can expect to be hit with about $40 billion in peak delivery surcharges from Nov. 15 to Jan. 15, Salesforce said.

FedEx Corp. (NYSE: FDX) and UPS Inc. (NYSE: UPS) have announced delivery surcharges of as much as $5 per parcel on their largest customers, depending on their peak weekly volumes and the services being utilized. The U.S. Postal Service (USPS) will impose the first peak-season surcharge in its history. The USPS levies will be imposed on high-volume commercial users like Amazon.com Inc. (NASDAQ: AMZN), UPS and big parcel consolidators that induct millions of parcels from merchants deep into the postal delivery network for last-mile service.

Salesforce urged shippers and retailers to leverage store networks to make it convenient for online shoppers to pick up their items either inside the store or at the store's curbside. Well-executed strategies offer convenience and flexibility to the consumer, Salesforce said. Just as important, they eliminate the need to ship the product to the home, thus saving on exorbitant shipping costs, it added.

The BOPIS model, demand for which has grown exponentially during the coronavirus pandemic as many consumers remain reluctant to enter stores, could help retailers grow their peak digital revenue by as much as 90% compared to the 2019 season, Salesforce said.

Total digital holiday sales will hit $940 billion worldwide and $221 billion in the U.S., both

all-time records, according to Salesforce projections. Global online holiday sales will grow by 30% over 2019 levels, compared with 8% growth in 2019 over 2018, Salesforce predicted. U.S. digital sales will soar by 34% in 2020, nearly tripling the year-on-year increases from 2018 to 2019, it said.

In the U.S., digital commerce will account for 30% of all holiday retail sales, according to Salesforce data. Globally, 18% of retail sales will be transacted digitally. Still, overall holiday sales are expected to be flat year-over-year as weakness in brick-and-mortar activity neutralizes the digital surge, the company said.

The first test of the 2020 peak cycle starts Tuesday, when Amazon launches its two-day Prime Day shopping program, which was postponed from July, and rival Target Corp. (NYSE: TGT) goes live with its own two-day online-ordering program. Salesforce said that the mid-October launches could pull forward 10% of online sales that would normally occur during "Cyber Week," the first full week after the Thanksgiving holiday. Cyber Week's 2020 volume is still expected to grow 28% year-over-year, Salesforce said.

One of the benefits of an early start to peak is that it may motivate consumers to buy early and avoid the last-minute ordering crunch that could be especially perilous this year, experts have said.

The challenge for the retail supply chain will not end when the holidays do. About $280 billion in global online purchases are expected to be returned, equal to 30% of all activity, Salesforce said. Online returns typically exceed returns of brick-and-mortar orders. However, with more digital commerce than ever being transacted this holiday, returns volumes are expected to be unprecedented.

The Salesforce report is striking in its sheer breadth. The company, considered the leading customer relationship management (CRM) platform, said it analyzed data from the activities of more than 1 billion shoppers in more than 40 countries. It also relied on data from third-party sources.

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