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UPS Holiday Preparedness to Cost Merchants Next Season

Unlike 2013, UPS delivery performance during the recent holiday shopping season went smoothly, the company said. But its financial performance for shareholders in the all-important fourth quarter was not as satisfactory, according to its CEO. And that could prove costly for online retailers later this year as the company works on introducing new peak holiday shipping rates.

In a press release on Friday, David Abney said, “Clearly, our financial performance during the quarter was disappointing. UPS invested heavily to ensure we would provide excellent service during peak when deliveries more than double. Though customers enjoyed high quality service, it came at a cost to UPS. Going forward, we will reduce operating costs and implement new pricing strategies during peak season.”

In the U.S., total revenue and package volume came in about as planned. But the expenses of implementing peak plans designed to provide high quality service for volume surges negatively impacted operating profit, the company explained.

Extra capacity was necessary to process the extreme spike in package volume on Cyber Monday and peak day, December 22, but demand was less than expected on other days. “This resulted in a sub-optimized network during peak season.”

UPS Chief Financial Officer Kurt Kuehn indicated the shipping carrier would put new measures in place to address the challenges encountered last quarter – including new peak rates during holiday season 2015:

We will continue to focus on improving operating efficiency and long-term cost reductions. While we’ve already implemented some initiatives to improve the revenue side of the equation, such as dim-weight; targeted peak pricing initiatives will be deployed in 2015. We will provide you with greater detail on fourth quarter results as well as our 2015 outlook on our earnings call on February 3rd.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.