The online shopping industry may have been a victim of its own success this holiday season.
With aggressive promotions and optimistic delivery promises, business from gift-buying shoppers rose for online retailers and shippers such as UPS. But fumbled orders and presents delivered after Christmas revealed that the e-commerce industry may not be prepared for the demands of the growing number of savvy Internet shoppers.
"If we say something will arrive by a certain date, it had better be there," said Stormy Simon, co-president of the e-commerce discount site Overstock.com.
In the new year, UPS and e-retailers say they will assess where to make changes for the next Christmas season. The wiggle room for these types of mistakes is limited; the e-commerce industry becomes more competitive every holiday season. "They can't disappoint anymore," said Sucharita Mulpuru, an e-commerce analyst for Forrester Research. "If they don't change, it's only going to get worse."
For now, e-retailers and shipping companies are pointing fingers at one another. Retailers are also trying to regain the trust of consumers who, despite their frustrations, aren't likely to shop online any less.
"UPS had some extreme difficulties this year, but when consumers think of it, they think of the brand — Overstock," Simon said. "So we have to make it right, with or without UPS."
Simon said some packages from Overstock that shipped through UPS were delayed, and the company is giving refunds and credits to customers — a lesson in how expensive shipping delays can be.
Faced with the shortest holiday shopping season in 11 years, e-commerce retailers tried to redirect last-minute spending away from the malls and onto the Web. And in what may have been the final undoing of UPS' Christmas plans, in the week before Christmas, Amazon signed up more than 1 million new members for its Prime service, which guarantees two-day delivery.
"That is a problem for shippers. A million new people signing up at the 11th hour to get free and fast shipping up until the day before Christmas?" Mulpuru said. "That is crazy. And that is unprecedented volume."
UPS ended up with more packages than it could fit on its planes — 132 million during the week before Christmas, said spokesman Tyre Sperling.
"The demand was greater than we had forecast," Sperling said. "We attribute it to the shift to online shopping."
To avoid a repeat next year, some retailers including Best Buy are pushing for more customers to pick up their online orders in stores. Some experts expect same-day courier services such as Google Shopping Express and eBay Now to take on a larger role, and still others say retailers, particularly the smaller ones, need to know their limits.
Zazzle, an e-commerce company headquartered in Redwood City, Calif., was offering promotions and two-day shipping a week before Christmas — a quick turnaround for a company that makes personalized gifts — while also juggling orders through Groupon. Gifts were shipped late, some with defects, and frequently orders were mixed up and mailed to the wrong customer, according to customers and sellers on the site.
"I found it ludicrous that they were continuing to take all these orders when they can't even fill the ones that they have," said Eliza Desmarais. On Nov. 24, she ordered a $25 T-shirt for her boyfriend for Christmas and paid $15 for shipping to her home in Quebec.
The gift never arrived, she said, and Desmarais couldn't reach Zazzle by phone or email.
Dominique Levin, vice president of marketing at AgilOne, a Mountain View, Calif., company that makes software to predict shopper behavior, said some small and medium-sized e-commerce companies need to invest in more sophisticated technology to meet consumers' expectations. "Amazon is setting the bar high," she said.
After services like Prime, customers came to expect free and expedited shipping during the holidays, and it may be too late to take that away, even if it means retailers have to pay UPS more or gamble on the package's arrival.
"As far as those promises," Simon of Overstock.com said, "I would stand behind them again, and just hope with that handshake with the carrier that it will get to the consumer."