A shorter, condensed peak holiday season saw strong demand between Black Friday and Christmas. Beyond that, however, the overall season was a mixed one for most retailers and carriers.

The CNBC/NRF Retail Monitor, powered by Affinity Solutions, showed a 1.74% month-over-month increase in total retail sales for December, excluding automobiles and gasoline. Core retail sales, which excluded restaurants, rose by 2.19% month over month. In comparison, there was a 0.19% decline month over month in November’s tepid performance. The shift in Thanksgiving timing, with Cyber Monday and the Sunday after Thanksgiving falling in December rather than November, gave the final month of the year a meaningful boost, according to a CNBC and NRF announcement.

“In North America, Black Friday week was our largest demand week ever on NIKE Digital, with sales up double digits,” Nike’s Executive Vice President and Chief Financial Officer, Matthew Friend, told analysts during the company’s Q2 earnings call on December 19.

Indeed, FedEx’s Executive Vice President and Chief Customer Officer, Brie Carere, noted a similar trend during FedEx’s Q2 earnings call in December. “I will say it picked up after Cyber Monday, it was a very strong week, and we are, from a December perspective, pleased volumes are running ahead of forecast. And as I mentioned, our peak surcharge capture from an absolute dollar amount will be up year-over-year. So we do think that December is going to be a very strong month.”

However, the peak holiday season for parcel carriers began in October, with increases in demand surcharges from FedEx and UPS. These surcharges gradually increased throughout the season, along with other surcharges, to capture anticipated increases in volumes.

However, visions of volume increases were tempered at best. UPS CEO, Carol Tomé, told analysts during the company’s Q3 earnings call in October, “We've been collaborating with our customers on daily volume expectations and the timing of their promotions. While our customers are still expecting a good holiday selling season, recently, shippers have tempered their volume expectations.”

The founder of shipping consultancy ShipMatrix, Satish Jindel, forecasted that UPS, FedEx, and other delivery firms would handle nearly 2.2 billion deliveries and returns between Thanksgiving and New Year’s Eve. The package carriers were prepared to handle 120 million parcels per day during the peak holiday season, but demand was estimated to be just 106 million packages per day.

For the three months ending November 30, the average daily volume for FedEx’s ground home delivery and economy parcels declined 0.4% while revenue per package for ground packages fell 0.6% for the quarter. On a quarter-to-quarter basis, revenue per package also slipped, which could be due to rate discounting to gain volumes.

While we do not know how UPS performed during the holiday season as of this writing, we can surmise its performance in December, at least, may be similar to FedEx. UPS expected December 18 to be its peak shipping day, estimating it would handle two million more packages than last year’s peak shipping day.

Retailers Turn to Alternative Last-Mile Services

The compact holiday peak season and higher surcharges from UPS, FedEx, and other traditional carriers resulted in retailers turning to crowd-sourced delivery services such as DoorDash and Instacart for same-day deliveries and deliveries past cut-off dates from traditional last-mile delivery providers.

December 18 was UPS and FedEx’s deadline for ground deliveries to reach their final destinations in time for Christmas, but for retailers such as Academy Sports, fast delivery at a lower cost for customers up to Christmas Eve was needed. “As we head into holiday, we've expanded our partnership [with DoorDash] to allow for same-day delivery options on academy.com, which is also powered by DoorDash. We expect this to be a big unlock the last four to five days leading up to Christmas,” Academy Sports CEO Steve Lawrence told analysts in December.

Additional retailers announced during the holiday season were Five Below, David’s Bridal, and Sports Basement. According to the DoorDash announcement, the new retail partners will also be available on DashPass, DoorDash’s membership program that offers members a $0 delivery fee.

Meanwhile, Canada’s pet retailer, Pet Valu, expanded its partnership with Instacart by offering over 600 locations across Canada exclusively on Instacart for same-day delivery.

Retailers’ In-House Last-Mile Services

Walmart and Target supplement their contracts with traditional parcel carriers such as UPS, FedEx, and the USPS with their own last-mile delivery services. Delivery speed is typically a reason for the use of these offerings.

“The popularity of expedited delivery has resulted in more than 30% of orders coming from customers and members that elected to pay a convenience fee to receive their delivery in less than one hour or less than three hours,” Walmart’s CFO John David Rainey told analysts during the company’s earnings call in November. Walmart likely benefitted through the holiday season by offering its own delivery service.

Target also noted growth in its last-mile services. Target’s CEO, Brian Cornell, told analysts in November, “We saw nearly 20% growth in our same-day delivery powered by Target Circle 360, as more guests learn about it and respond to the value and convenience this service offers. We also saw double-digit growth in Drive Up this quarter, which accounted for more than $2 billion in our Q3 sales. We also saw healthy growth in our ship-to-home business in Q3.”

What 2025 Holds

Overall, the 2024 holiday peak season was one in which UPS and FedEx mitigated their costs with higher surcharges, while retailers who would have traditionally handed a certain percentage of volumes to UPS, FedEx, USPS, and other traditional carriers instead gave those volumes to alternative carriers such as DoorDash and Instacart to reduce costs and expand service levels.

In addition, retailers continued to encourage Buy Online, Pick Up/Return in Store (BOPIS/BORIS), and deliveries to third-party locations to further mitigate costs and expand options to customers.

In 2025, retailers will continue to shift volumes away from traditional last-mile carriers because of costs and introduce new service levels, while those retailers that offer their own last-mile delivery services will likely handle more volumes themselves.