Strong consumer spending, online shopping help FedEx, UPS
Memphis-based FedEx Corp. expected its busiest day of the year Monday with package deliveries totaling 8.5 million, a 5 percent increase over last year. Atlanta-based UPS Inc. braced for its peak on Dec. 20 with deliveries of more than 20 million packages, also a bump over last year.
Neither company knows for sure how many of those packages are headed to online shoppers, but with a nationwide growth of more than 20 percent a year predicted for Internet sales, many obviously are.
“It’s just a convenient way to shop,” said Jeff Wallace, a University of Memphis economist.
Internet shoppers can’t simply bring their purchase home. Someone must deliver them.
“Any increase in online buying is an instant increase in the shipments via UPS or FedEx,” Wallace said. “It’s a direct translation in new shipping for them.”
Also, he said, the shippers are benefiting from the overall strength of the national economy.
“We were all expecting doom and gloom, particularly after the two hurricanes in late August and early September,” Wallace said. “But the growth we’re seeing in the economy has been very surprising, and we’re also seeing that reflected in retail sales.”
Predictions for holiday shopping have been hazy, particularly because of rising home heating and fuel costs, and retailers won’t know until after Christmas what kind of season they will have.
But some economic indicators point to a rebound in consumer confidence, and many retailers are counting on discounts and holiday promotions to boost sales.
For shoppers, such promotions often mean free shipping for catalogue or online (or E-commerce) sales ? leading to more packages for shippers like FedEx and UPS.
“There’s no question that E-commerce as a percentage of total sales is growing and there’s also every indication that we’re going to get a modest growth in total sales this holiday season,” said Ted Scherck of the Colography Group of Atlanta, which analyzes the transportation industry.
The National Retail Federation predicts a 6 percent growth in holiday sales over last year.
For any increase in total sales, “the package carriers will grow north of that number,” Scherck said.
Company spokesman Norman Black said UPS also expects to ship more packages this holiday season than last year but declined specifics.
Shipping on the company’s busiest day last year was projected at “about 20 million,” he said, while “more than 20 million” is expected this season.
“Every company has to make their own decisions about financial reporting … and in our case we just don’t talk about things in the middle of the quarter,” Black said.