Trying to make sense of Peak Season

Gauging the 2012 Peak Season in late October appears to be a bit of a mixed bag.

On one hand, things regarding Peak simply are not the same as they used to be in many respects, the biggest one being that in recent years it has failed to live up to the billing for obvious reasons: the economy, the Wall Street meltdown of 2008, lack of credit which followed the financial crisis, jobs, and many other factors.

In conversations with shippers and carriers, many have indicated that things appear to be more or less “normal,” when it comes to Peak, mostly in describing the seasonality component, which in many cases still show October being the most active month in terms of inbound volumes to North America in advance of holiday shopping.

In a recent interview, Paul Bingham, economics practice leader at CDM Smith, said that in looking at this year’s Peak Season, there are seasonal trends at work although the underlying demand factors are somewhat muted due to continued softness in consumer confidence and spending but even with that he said retailers are seeing sales that are “OK,” though not accelerating.

One notable exception to this is that instead of the majority of imports coming in August, that may be shifting to July, as noted in the LM news section this month.

But it also could be due to the fact that that many retailers brought in cargo early in advance of the possible strike between the International Longshoremen’s Association and the United States Maritime Alliance over a labor contract, which was set to expire on September 30 but received a 90-day extension through December 29, according to Hackett Associates Founder Ben Hackett.

He added that increased inventory levels could be due to low demand as well as pre-stocking due to the possibility of the for now-averted strike. But he also explained that inventory levels “are within a narrow range of movement” and do not suggest that another recession is imminent.

During its third quarter earnings call yesterday, UPS Senior Vice President of Worldwide Sales, Marketing and Strategy Alan Gershenhorn said the dramatic rise of e-commerce continue to alter consumer behavior and shipping patterns.

“Historically, peak season volume ramped up from Thanksgiving to Christmas,” he said.  “This year, we are planning for 2 peak periods: one that revolves around Black Friday and Cyber Monday, the other compressed into the 2 weeks before Christmas.”

The UPS executive added that when the company speaks to its global customer base about their expectations for this holiday season, customers say they are cautious—but also remain optimistic.

“Economic uncertainty around the world has them uneasy about how their consumers will respond this year,” he explained. “On another note, the retail inventory to sales ratio is still historically low. So their supply chain is constrained to keep up if demand is more than predicted.”

Again, back to the aforementioned point about Peak Season being a mixed bag: Determining its full impact and effect really is an inexact science if you think about it. I guess we will have a better idea in a few weeks. Until then, buckle up and enjoy the ride.