Are UPS and FedEx Being Set Up for Another Christmas Failure?

Package delivery services are already falling behind on deliveries, and crunch-time is only just upon them.

Time heals all wounds, but also makes for short memories. Two years ago, retailers overpromised consumers on their ability to get gifts under the Christmas tree in time for the holiday by cutting it too close with the deadlines they set for submitting an order. It resulted in widespread chaos and angry customers as both UPS and FedEx were unable to keep up with demand.

It looks like retailers may have made the same mistake again.

According to customer analytics firm StellaService, Dec. 21 is the most popular cutoff date again this year for getting your order in, one day later than last year, when retailers had eased back after 2013's debacle when UPS had a horrendous 83% on-time delivery rate and FedEx was hardly better with a 90% success rate.

After implementing a number of strategies to rectify the problem in 2014, including hiring tens of thousands of new temporary workers and investing hundreds of millions in infrastructure improvements -- along with retailers not being so overly aggressive in making promises that were nearly impossible to keep -- the carriers rebounded, with both delivering nearly every package on time.

Getting goods into the hands of consumers as quickly and cheaply as possible has become a key defining difference in whether a company can grow. It was that forced the retail industry to change its shipping practices after its Prime membership service guaranteed free two-day delivery. In fact it was retailers rushing to offer their own free-delivery options that helped fuel the Christmas meltdown.

Both FedEx and UPS made additional modifications this year, including raising shipping rates and changing how they calculated postage. They complained that big, bulky items that took up limited real estate in their trucks needed to compensate for their size.

Not even hiring tens of thousands of seasonal employees is helping carriers like FedEx meet their own stringent on-time delivery rates.

Retailers made changes, too. Amazon, for one, began taking greater responsibility and control of the delivery process, testing drone delivery , contracting with crowdsourced delivery services, and possibly even starting its own delivery network that would rival UPS and FedEx.

Others, like Wal-Mart , which helped pioneer the concept, began using their stores as a distribution center of sorts, offering customers free delivery for items ordered online if they picked them up in stores. That retailers may generate some incremental business as shoppers buy more goods once they're in the store is simply gravy.

Yet despite all the changes -- and the package carriers hiring a combined 150,000 seasonal employees between them this year -- they're still falling behind. And with retailers having again gotten exuberant in their belief that they can cut it close once again, FedEx and UPS have seemingly been set up to play the Grinch again this Christmas.

According to The Wall Street Journal , increased e-commerce sales are taxing the ability of the carriers to make good on order-delivery deadlines. UPS' on-time delivery rate has fallen to just 91% while FedEx is down to 95%. While online sales were expected to grow 11% from last year, Black Friday sales actually came in 14% higher this year. Retail shipping consultant Spend Management Experts told the Journal , "Volumes are coming in much higher than planned. You can only process so much volume so quickly." ShipMatrix found 91% of orders delivered by UPS during Cyber Week were on time, compared to 97% a year ago, and that's before they hit crunch-time with last-minute orders.

According to StellaService, retailers like Barnes & Noble , Gap , and J. Crew have set a Dec. 21 order deadline, perhaps challenging the ability of the carriers to come through. Yet they're not the ones pushing the envelope furthest. lululemon athletica , Macy's , and Sears have all promised delivery if orders are made by the 22nd, and Nordstrom even went so far as to set a Dec. 23 deadline.

Interestingly, Best Buy , which two years ago had set a Dec. 23 drop-dead date and saw many missed deliveries, set a Dec. 17 deadline this year.

While UPS and FedEx will again bear the brunt of the blame if packages aren't delivered on time, it's clear that it's really the retailers who are at fault if all you get in your Christmas stocking this year is a lump of coal.

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The article Are UPS and FedEx Being Set Up for Another Christmas Failure? originally appeared on

Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends and lululemon athletica. The Motley Fool owns shares of Barnes & Noble. The Motley Fool recommends FedEx, Nordstrom, and United Parcel Service. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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