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UPS & Fedex May Raise Prices for Holiday Season 2014

Demand up, temperature down - deliveries delayed; analysts predict that UPS & FedEx may raise prices during peak holiday season in 2014. 



Customers vented frustration and anger on carrier's are retailers web sites:"My kids and the rest of my extended family have no presents," "UPS Sucks," "[FedEx] has my mother alone in San Diego and in tears." 

"UPS understands the importance of your holiday shipments," the company. "However, the volume of air packages in our system exceeded the capacity of our network immediately preceding Christmas so some shipments were delayed."

Amazon.com also referred to UPS’s “failure” in an apology to customers on Christmas morning.

"On behalf of the entire team here at Nordstrom, I sincerely apologize for letting you down," Jamie Nordstrom, president of Nordstrom's online operation, wrote. "While we are dependent on our shipping partners to hold up their end of the bargain on getting your orders to you, we also realize that we are accountable for meeting your expectations and take responsibility for what happened here. .... Unfortunately, as you may have heard, the UPS delivery network was overwhelmed, and they were not able to meet their commitment."

How should Randa Accessories, and our partners, approach elevated, and yet skeptical, customer expectations in 2014?  I welcome your comments and suggestions. - DJK

David J. Katz
January 19, 2014

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UPS Cuts Earnings View, Citing Holiday ChallengesShipping Giant Says Surge in Online Shopping, Bad Weather Added to Costs

UPS said an 'unprecedented' wave of online shopping added to its costs. Getty Images
Procrastinating holiday shoppers, watch out. United Parcel Service Inc. may try to put a damper on last-minute Christmas deliveries next season.
At least that is what analysts are predicting in the wake of an unpleasant earnings surprise by the Atlanta-based package and delivery company Friday.
UPS warned that it would miss its fourth-quarter earnings targets when it announces its results at the end of the month, blaming an "unprecedented" rise in online holiday shopping that thwarted the "extraordinary measures" it took to meet Christmas demand. The company also cited a shorter time between Thanksgiving and Christmas, as well as bad weather.
UPS said Friday that it had deployed 85,000 temporary employees, 30,000 more than planned during the holidays. Still, on Dec. 23, its air network was so overwhelmed with overnight packages that it had to tell the public that it couldn't make all the deliveries in time for Christmas.
That's not like UPS, which boasts a typical on-time delivery rate of 99%. On Christmas Eve last month, its on-time rate plunged to 83%, according to numbers from SJ Consulting Group Inc., compared with about 97% on Christmas Eve in 2012.
UPS declined to comment further about its performance ahead of its earnings release later this month.
But the company's stellar on-time record depends in part on accurate forecasts. This holiday season it missed the mark when last-minute online shopping soared well beyond the company's expectations. Online orders on Dec. 23 were up 63% from a year earlier, according to Mercent Corp., which works with more than 550 retailers.
UPS delivered more than 31 million packages that day, a record for the company and 13% above its peak day the year before. Normally UPS's peak day is earlier in December.
The snafu has analysts predicting UPS and rival FedEx Corp. may raise prices for retailers closer to Christmas to prevent tardy shoppers from flooding the network next year. Carriers could add surcharges of between 10% and 25% during the last week before Christmas, said Satish Jindel, president of SJ Consulting. Those surcharges could be passed on to consumers. Both FedEx and UPS declined to comment on whether they might raise prices.
The surge of last-minute shipments affected both UPS and FedEx. However, industry experts said FedEx was affected less, in part because it typically sets contract limits on how many packages it will carry for a retail customer. On Dec. 24, FedEx's on-time rate was 90%, compared with 98% the previous year, according to SJ Consulting.
A FedEx spokesman declined to comment on its holiday-season performance.
It remains to be seen how much of the Christmas surge UPS will decide to take on, said Anthony Gallo, an analyst with Wells Fargo, adding that it is very expensive to add on staffing and equipment for just a half-month's business.
The company said it expects to report adjusted earnings for the year of $4.57 a share, compared with a previous projection of $4.65 to $4.85. Fourth-quarter earnings were pegged at $1.25 a share, below estimates of $1.43 a share from analysts polled by Thomson Reuters.
This is the second time UPS has revised its 2013 earnings downward. For the prior year the company reported earnings of $4.53 per share.
UPS reiterated its forecast for 2014, with diluted earnings per share growing in line with long-term targets for annual growth of 10%-15%.
Wall Street Journal

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