UPS imposes shipping limits on these retailers as holiday shopping soars

UPS set shipping limits on retailers like Nike, Gap and Macy's this holiday season. Yahoo Finance's Brian Sozzi shares the details.

Video Transcript

JULIE HYMAN: We are seeing stocks slightly higher. The S&P up very marginally right now. We were just talking with XPO logistics CEO Brad Jacobs about some of the challenges of this holiday season, although he seems like he's confident that companies are on top of it. But as I alluded to, Brian Sozzi, UPS has now said there are going to be some limits for some of its retail partners.

BRIAN SOZZI: Right, Julie. Brad Jacobs at XPO saying, calling this holiday season the mother of all peaks. And he's really right on the mark there. Because a lot of these shippers and retailers have never even seen demand like they're seeing during this holiday shopping season. And keep in mind, this comes before they're going to have to deal with demand because of a COVID-19 vaccine.

But specific to UPS, we are seeing reports out there, first reported by the Wall Street Journal, that UPS may not-- is not necessarily taking packages from a select group of retailers. GAP is mentioned, Macy's. Now a source does tell us tell me that this relates primarily to unplanned shipment volume. So basically, UPS has worked out the shipments it could take from a lot of retailers before the holiday season. What they're doing now is saying, just because the demand is so strong, unplanned purchases that they did not agree upon cannot be taken. Consumers will get their packages, maybe just a little delayed.

MYLES UDLAND: Yeah, Sozzi, it's an interesting story along those lines, as you're hearing where this is essentially-- let's call it a drop ship type model, right? The supply chain doesn't really have excess capacity to deal exactly with that. And I think it also goes back to a retail story we've been discussing all through the holiday season, which is that there's now an expectation from retailers themselves that consumers are going to be more deliberate, space things out. People aren't going to be kind of doing a last second surge.

And it's-- in a weird way, it sort of shows how fine tuned the whole operation is, right? I mean, if you're planning on a smoother rollout, and all of a sudden you get an influx of 1%, 2% to 3% the volume orders above what you expected, now your shopping partner says, hey, we wouldn't agree to that, or we don't have that kind of space to meet that promise that you made-- whether it's overnight shipping, two day, three day, whatever it might be. And I think it's interesting to see in real time, maybe, all of our habits just sort of getting streamlined and containerized, as it were, as we go on, as we go along here.

JULIE HYMAN: I think it's interesting. To me, the real challenge during this holiday season is not necessarily going to be can they get your package to you in the time you want it. It's how do they communicate about that? For example, our producer was telling us this morning he ordered something and was already told it won't get to him until early January. So to me, as long as these companies can be transparent, can predict well that supply chain and logistics, and how it's going to look with their customers, that's going to go a long way toward helping this process.

The problem is, when you order something, and you expect it to be there by Christmas or by Hanukkah, and it's not. So we'll really see how well they have fine tuned, if you will, the transparency and predictability of the whole process. We shall see.

BRIAN SOZZI: And I'll leave you all with this deep thought on this Thursday morning. And Myles, you could probably appreciate this. You're a longtime Buffett watcher. This indicates, what you're seeing today from UPS and FedEx, really how the wide moat around these businesses. Retailers are relying on these companies like never before. It also indicates, prices are going to go higher for UPS and FedEx in the new year. They have raised prices. But really, expect more increases. Why? Because they can.

JULIE HYMAN: Good point. All right, Sozzi.