This year they stood and delivered

And what of FedEx Corp.? The company seemed to offer up a fresh cut to its guidance every time management took to the airwaves last year and got itself banned in early December from carrying packages for third-party sellers on Amazon.com Inc.’s Prime service because of alleged poor performance.

Amazon, too, was facing pressure to prove that its rapidly expanding (and costly) internal logistics arm was capable of handling a condensed peak holiday season without the hiccups that plagued legacy carriers in the past.

There was plenty of opportunity for things to go wrong, and yet, while early estimates suggest not everything went perfectly, there’s little sign of the kind of customer outrage that would have been expected had the delivery companies ruined Christmas.

Handling the last-minute deluge

Total volume likely topped 2.7 billion packages in the period between Black Friday and New Year’s Eve, up from about 2.3 billion in 2018, according to estimates from SJ Consulting Group Inc. UPS and FedEx did struggle a bit to accommodate that deluge within the shorter time frame:

FedEx delivered an estimated 95 per cent of packages on-time, down from 97.6 per cent in the prior year, while UPS’s performance slipped to 96.8 per cent from 98.5 per cent, according to Satish Jindel, founder of SJ Consulting.

But Jindel points out that customers are apt to be significantly more aggrieved about a package not showing up by Christmas Eve than they are about a December 14 delivery slipping to December 16, for example.

UPS and FedEx have become more careful about over-promising on delivery dates for last-minute orders. As a result, “when it came to getting everything by December 24, they made it happen,” Jindel said.

That may explain why customer-service complaints seemed to be relatively contained in 2019, according to an analysis of web-search volumes by Raymond James Financial Inc. analyst Patrick Tyler Brown. In 2017 — when UPS cited a $125 million increase in operating costs — and in 2015, when FedEx cited a 60-basis-point drag on margins, search volume for customer service at the two carriers spiked to about 2.5 times the annual average, Brown wrote in a report.

But UPS and FedEx seemed to have kept their customers happier this year. Whether the companies had to sacrifice their profit margins to do that remains to be seen.

UPS is expected to report fourth-quarter results later this month, while FedEx will disclose its numbers for the fiscal period that includes most of the holiday season in March.

A win by any measure

A smooth peak season with a limited dent to earnings would be a major victory for FedEx and UPS. But there’s an important footnote to that, because Amazon’s logistics arm also appears to have had a successful holiday in its first real shot at being a major carrier.

There’s no 2018 data comparison, given Amazon’s remarkable growth over the past year, said Jindel of SJ Consulting. Amazon said in mid-December that it was on track to deliver 3.5 billion packages to customers worldwide in 2019, with its internal logistics arm handling “approximately” half of its own global deliveries.

SJ Consulting estimates that Amazon’s on-time performance was 98.9 per cent during the 2019 peak season. Given that Amazon largely focuses on the final stretch to customers’ doors — the so-called last mile of the delivery route — that figure isn’t going to be comparable to the FedEx and UPS numbers.

But it is roughly in line with the estimated on-time performance for the US Postal Service, which also mostly handles last-mile deliveries. FedEx and UPS may have finally gotten a handle on the surge of e-commerce shipments over the holidays, but all those years of muddling along and trying to figure it out means they now have to share that market — and with a competitor who’s much less constrained when it comes to spending.