The success or failure to get packages to customers on time will be a differentiator after the holiday, with implications for loyalty and return rates in the new year, according to a note this week from MKM Partners analysts Bill Kirk and Roxanne Meyer.

The advantage has shifted to brick-and-mortar stores, and, with so many consumers still leery of shopping inside due to the pandemic, especially those offering curbside pickup and other BOPIS services, they said.

But in the final week before Christmas Day, several retailers are still offering last-minute delivery options that threaten to tax an already overburdened system. The shippers themselves, anticipating an unprecedented number of packages in light of record e-commerce sales all year, set cutoff dates that are by now long passed.

They have now posted warnings about expected delays, which are common this time of year anyway due to volatile weather patterns and seasonal volume increases. The pandemic has magnified the usual challenges, however, beyond the added e-commerce. Many workers, either sick or taking precautions, aren't showing up to work, and distance requirements are complicating warehousing and fulfillment. All were tight-lipped about specifics when asked just how many more packages they are moving back and forth across the country right now.

"The U.S. Postal Service, similar to the broader shipping sector, continues to face near-term pressure on service performance across categories as it manages through a historic record of holiday volume this season," a USPS spokesperson said by email. "This negative impact is compounded by the temporary employee shortage due to the COVID-19 surge, as well as ongoing capacity challenges with airlifts and trucking for moving this historic volume of mail."

FedEx in an emailed statement similarly noted "the surge in demand this holiday season on top of volume increases created by the COVID-19 pandemic. Despite these unprecedented challenges, our networks are flexing as designed to provide the best possible service to our customers." 

A UPS spokesperson declined to discuss e-commerce "so that our team can focus on getting packages delivered," including holiday deliveries and vaccine distribution.

Still, many packages are taking longer to arrive, with Christmas just days away, Kirk and Meyer noted. "While it is well-known, shipping has been the big wildcard, there’s ample evidence from our social media checks that consumers are experiencing multi-week shipping delays," they said, adding, "Customers are going to be disappointed if they are overly reliant on delivery options for the Holiday season."

Nevertheless, several retailers like Madewell and Best Buy are keeping up the pressure by pushing new "order by" dates this week. Others, including American Eagle, are sticking with touting buy online, pick up in store. The looming holiday disappointment from late deliveries will be the most recent reminder to consumers that shopping online comes with its own pain points. That will have consequences, MKM warned. 

Near term, that means that, as consumers are forced to head to stores for pickup, they may avoid malls, leaving those retailers at a disadvantage, according to MKM. After the holiday, it will likely further fuel even the higher-than-expected return rate in the first quarter (which could lead to deeper markdowns) and threatens to damage loyalty, the analysts said.

But, while many retailers may suffer meaningful consequences from any delivery snafus this week, off-pricers may revel in them, MKM also wrote. "We believe this disruption means that off-pricers will get access to high-quality products in the coming months," they said.