Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
An analysis of 25 large e-retailers shows a third didn’t get at least some orders under the tree as promised. Analysts say e-retailers might rethink their shipping deadlines next year and that shipping costs could increase.
Pushing order cutoff dates for guaranteed Dec. 24 delivery later in the calendar leaves little room for errors, as some e-retailers are finding out this year. A survey of 25 of the largest e-retailers in North America by sales shows 32% of e-retailers didn’t get at least some orders that were placed on the order cut-off date under the tree on time. Analysts say later cutoff dates, higher order volume and bad weather helped overburden delivery services.
Customer service measurement firm StellaService placed three orders with each e-retailer on their stated order cutoff dates for standard delivery by Christmas Eve. StellaService directed orders to arrive at addresses in three regions: the East, Midwest and West. Of the 75 orders, StellaService says 12% missed the delivery estimate and says e-retailers sent all but one of the orders via United Parcel Service Inc. UPS this week said the volume of air packages in its system exceeded it capacity and some shipments were delayed. A UPS spokeswoman says it delivered "nearly all the volume" of the delayed packages on Thursday, Dec. 26, and that UPS was back to its normal delivery volume on Friday. The spokeswoman declined to say how many packages were affected and to comment on the StellaService data.
FedEx Corp., which says it had no major disruptions in the week before Christmas, says it will work directly with customers to address "any isolated incidents."
Amazon.com Inc. subsidiary Zappos.com, Nordstrom.com and Staples.com had Dec. 23 as their latest cutoff date for standard shipping. StellaService ordered sneakers at Zappos.com, tablets at Staples.com and handbags at Nordstrom.com. Zappos.com delivered all three as promised, whereas at least one of the tablets and one of the bags didn’t make it as Staples and Nordstrom had planned. Ty McMahan, director of content at StellaService, says Nordstrom sent e-mails Dec. 24 to the StellaService analysts who placed the orders to let them know that the orders might not get there. “The message said UPS is having trouble and we’re sorry to tell you your package may not get there on time,” McMahan says. “That was a smart move on their front, to be upfront and transparent that they might not deliver on their promise.”
Dell Inc., TigerDirect and BarnesandNoble.com also proactively e-mailed customers to let them know their orders might not arrive on time, StellaService says.
StellaService says Apple Inc. and PotteryBarn.com, part of Williams-Sonoma Inc., modified their previously stated cut-off dates to allow consumers more time to place their orders. Apple extended the cutoff one day—and delivered all three tablets in the test successfully—whereas at least one shipment of dinnerware from PotteryBarn.com didn’t. The home décor e-retailer had moved its deadline from noon Dec. 20 to midnight of the same day.
McMahan says TigerDirect.com, a unit of Systemax Inc., moved its shipping cutoff date several times during the season and had conflicting information posted on different parts of the e-commerce site, which would confuse customers. TigerDirect.com ultimate put the cut-off on Dec. 20. He says e-retailers should be clear about their cutoff dates and display them prominently on their sites. “Looking ahead at 2014, this is something retailers will likely improve upon,” he says.
Other orders StellaService placed that didn’t get delivered on time were placed with Dell Inc., for an order placed on Dec. 17; Macys.com, Dec. 21; Gap.com, Dec. 19; TigerDirect.com, Dec. 20; and Kohls.com, Dec. 19.
Retailers mentioned in the report did not immediately respond to requests for comment from Internet Retailer.
Amazon.com Inc. is No. 1 in Internet Retailer’s Top 500 Guide. Nordstrom is No. 28; Staples, No. 2; Apple Inc., No. 3; Williams-Sonoma, No. 22; Systemax, No. 25; Dell, No. 8; Macys, No. 12, Gap Inc. Direct, No. 19; and Kohl’s Corp., No. 26.
A “very small percentage of orders” placed with Overstock.com Inc. during the last week of Christmas were delivered late, says Stormy Simon, co-president of the web-only mass merchant that is No. 31 in the Top 500. Overstock uses UPS, FedEx and the U.S. Postal Service. “UPS experienced some hiccups,” she says without getting more specific. Overstock will give affected customers “O dollars” which is Overstock’s version of a gift card, but the amount depends on the specific customer situation.
Some top e-retailers said today they had no or few holiday shipping problems.
“Overnight delivery is prohibitively expensive given the cube size. That's probably the biggest reason we didn't have any problems,” says CEO and co-founder Niraj Shah, CEO and co-founder of web-only housewares and furnishings Wayfair LLC, No. 52 in the Internet Retailer Top 500 Guide. “For us items had various cutoffs. The main one was last Friday, although we did have some items ordered as late as Monday for Christmas.”
Geography helped, too.
Bounthay Khammanyvong, vice president of operations at youth apparel retailer Karmaloop.com, No. 118 in the Top 500, said Friday the web-only merchant had few complaints into customer service about holiday deliveries. Karmaloop’s order cutoff for next day air delivery was 10 p.m. on Dec. 23 for delivery by Christmas. Khammanyvong says all the retailer’s orders made it to the UPS world hub in Louisville, KY, on time that night—a task made easier given that the retailer’s warehouse is a 15-minute drive away.
“Fortunately, we didn’t have many customers not getting their packages,” he says. “My sources at UPS told me that it mostly impacted people outside the major urban areas and the majority of our customers are within the major urban areas across America.”
Thanks to e-commerce, shipping volume for the U.S. Postal Service for this year’s holiday season increased 19% over last year, a USPS spokeswoman says, which exceeded expectations. The Postal Service had anticipated a 12% increase. Besides the unexpected increase in holiday package volume, bad weather also contributed to the problems, the spokeswoman says. Besides bad winter weather in some parts of the country, the last weekend before Christmas brought a 37% year-over-year increase in sales, according to IBM. “You had the combination of acts of God and the uptick,” says Paula Rosenblum, managing partner at research and advisory firm RSR Research LLC. “It was just a confluence of bizarre circumstances [and] over-promising in the face of those acts of God,” she says.