Will Consumers Step Away From Online Shopping?

Dec 27, 2013 8:04am

Morning Money Memo …

There’s nothing more convenient than sitting in your pajamas and doing last-minute shopping online — until the system breaks down and the packages don’t arrive on time.

Some big-name retailers and shipping firms weren’t ready for the pre-Christmas spike. In some cases promises of free fast delivery didn’t match reality, and now experts wonder if some consumers will step back from online shopping.

“We always have last-minute Charlies, but this year even people who normally complete shopping earlier completed shopping later,” said Marshal Cohen, chief retail analyst at market research firm NPD Group.

Amazon’s stunning success may have added to shippers’ problems. The largest online retailer says in the third week of December alone more than 1 million people signed up for its $79 Prime membership, which offers free shopping.

According to IBM Digital Analytics Benchmark, total online sales shot up 37 percent compared with last year in the weekend before Christmas.

Analysts say FedEx and UPS typically work closely with big retailers to get a sense of the volume of packages they’ll handle during peak times such as  the holiday season. But this year they “underestimated the demand for Internet retailing during the holidays,” says David Vernon, a senior research analyst at Sanford C. Bernstein. Weather also played a role in the delays.

“Frankly, the right hand wasn’t talking to the left,” said Forrester research analyst Sucharita Mulpuru. Marketing teams at many web retailers “were not talking to the operations and supply chain teams,” he said.

Widespread reports of delayed shipments could become a problem for UPS and FedEx. Neither firm released estimates of how many packages were affected but said they represented just a small fraction of total holiday deliveries.

“The central pillar of their business is a perception of reliability with their customers,” said Jeremy Robinson-Leon, COO of Group Gordon, a corporate and crisis PR firm. This year’s snafus “just really erodes trust among customers.”

Sen. Richard Blumenthal is calling on UPS to refund customers whose packages didn’t arrive on time for Christmas. The Connecticut Democrat said he was disappointed after learning consumers were quoted arrival dates before the holiday “but instead were left empty-handed.”

UPS spokeswoman Natalie Black said air and international customers who didn’t receive their packages on time are entitled to a refund under its service agreements. Such guarantees, however, were suspended for ground packages shipped after Dec. 10.

For the 50th time this year, the Dow Jones index closed at a record high. Stock market averages have been up six trading days in a row. The Dow gained 122 points Thursday, now closing in on 16 thousand 500.

Twitter shares are on fire. The online firm reached a new high Thursday. Twitter shares have soared 76 percent this month alone. They changed hands at a furious rate, accounting for about 4 percent of total volume Thursday on the New York Stock Exchange.

Oil prices have been moving higher in recent days. West Texas crude is above $99 a barrel. Gasoline prices are off their recent lows and are higher now than they were this time last year.

Richard Davies is a business correspondent for ABC News Radio. 

 

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