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Freight firms see slow-growth, but express companies expect bright future

MARITIME shipping, trucking, railways and brick-and-mortar retailers in the US market are complaining of slow growth in the Christmas season, but express delivery companies predict high growth in their busiest month, reports the Wall Street Journal.

The Cass Freight Index report, which tracks North American freight shipping volumes, fell 1.5 per cent year on year in September, and is below September readings since 2011 as well as falling 5.3 per cent in October.

Railway consumer goods shipping - container and trailer volumes - reported 1.4 per cent slower growth year on year in the third quarter with ocean freight growing one per cent in the third quarter, according to Maersk.

Said Maersk Line CEO Nils Andersen: "I think the low growth has taken everybody by surprise, It was below what we expected but did not meet our hopes for the peak season."

Union Pacific CEO Lance Fritz said peak volumes on the rails have been muted. "I don't know what to expect out of consumers going into the holiday season."

Meanwhile UPS predicts a 10 per cent year-on-year volume increase between Black Friday and New Year. The US Postal Service expects to be up 11 per cent while FedEx predicts a 12 per cent rise while DHL forecasts a 40 per cent hike.

Said UPS chief financial officer Richshiard Peretz: "Obviously the economic news has been mixed, but at the end of the day - even on the consumer side - you see a larger, faster paced strength in the e-commerce space as compared to retail."

Retailers have painted a mixed picture, with some mall-based chains issuing warnings on weak consumer spending, and other big-box stores including Wal-Mart and Home Depot reporting rising sales. Amazon.com sees fourth-quarter sales up 14 to 25 per cent.

One big difference between freight and small parcel delivery operations stems from today's high inventory levels, which retailers think they can sell off online come December.

When store shelves are full, manufacturers produce less and fewer freight shipments are sent, said Joseph LaVorgna, chief US economist for Deutsche Bank.

Retailers also manage inventory differently. Instead of stocking 50 sweaters at each store, some retailers will keep just 10 on hand, leaving the rest at a centralised distribution centre. When the store runs out, UPS or FedEx delivers.

At other store locations, retailers are stocking up to use those as mini distribution hubs, employing holiday workers to pick and pack that same sweater for pickup by a delivery man for shipment to an online shopper.