Retailers looking to ship their goods this holiday season could face challenges finding transport.
FedEx (NYSE: FDX) and United Parcel Service (NYSE: UPS) have told some of their largest customers that their holiday capacity is already spoken for, according to a Wall Street Journal report on Monday. Should those customers have any extra trailers with holiday orders, there is no guarantee they will be picked up in time, according to shipping consultants who spoke to the Journal.
Image source: Getty Images.
The idea of a busy shipping season is no surprise. The coronavirus pandemic has pushed consumers online and has led to record business-to-home shipments already in 2020. FedEx told investors last month it expects "a peak like no other" this holiday season. But it is still remarkable to see capacity booked so early in the quarter.
Investors should approach the news with caution. While it seems certain transportation companies are going to deliver blockbuster volume numbers in the fourth quarter, it's usually these companies that get the blame when holiday gifts do not arrive in time. There is a risk that an influx of packages could overwhelm the system and lead to horror stories this holiday season.
The high volumes could also impact Amazon (NASDAQ: AMZN), one of the biggest shippers in recent years. The company has been building out its own logistics network, which will likely be put to the test this holiday season. And with other shippers booked solid, there is little chance excess capacity can be pushed off to a third party.
But if Amazon is able to use its in-house logistics to deliver gifts as other retailers who rely on third-parties struggle, it could add to the company's e-commerce dominance.
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