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How UPS Stole Christmas (and E-Retailers Might Save It)

Updated from 12:11 p.m. EDT to include FedEx and Amazon comments and stock prices. 

NEW YORK (TheStreet) -- UPS (UPS - Get Report) was feeling particularly Grinchy over Christmas, leaving many customers' trees bare.

Perhaps "stole" is too strong a word but in failing to deliver gifts by their promised arrival date, UPS left some customers without that usual warm and fuzzy holiday feeling. 

The Atlanta-based shipping company experienced an avalanche of online orders in the days leading up to Christmas, causing delays and sending customers to social media to vent. To a lesser extent, packages sent via FedEx (FDX - Get Report) also experienced delays.

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With e-commerce now such an integral part of Christmas shopping, it's becoming clear that delays in the old-world model of physical delivery is lagging behind the new-order demand for buy-now-get-now purchases. 

While UPS has yet to respond to requests for comment, a FedEx spokesperson said delays were isolated incidents and were being addressed.

"Our 300,000 team members delivered outstanding service during this holiday season and we experienced no major service disruptions in the week before Christmas despite heavy volume," said FedEx spokesperson Bonny Harrison. 

By early afternoon, Amazon had surged 1.1% to $403.56, UPS was trading 0.11% lower to $104.35, FedEx was up 0.75% to $143.06 and Kohl's had shed 0.13% to $55.75. 

As a result of delays, many e-retailers such as Amazon (AMZN - Get Report) and brick-and-mortars such as Kohl's (KSS) and Wal-Mart (WMT) were unable to deliver on guarantees that orders placed would arrive before Christmas.

As compensation, Amazon has offered refunds on shipping charges and $20 gift cards to affected customers, while Kohl's said it would pay the cost of any goods that arrived late.

Retailers could take comfort in signs that higher-than-expected volumes at UPS and FedEx reflects well on the improving outlook of consumers and the continued recovery of the U.S. economy since the Great Recession began in the fall of 2008.

During the peak of sales beginning Dec. 16, UPS anticipated it would deliver 300 packages per second. The delivery company said volume more than exceeded a forecast of 132 million deliveries.

Amazon, meanwhile, said it was able to process and package all holiday orders on time, indicating that delays were from third-party delivery services. IBM Digital Analytics estimates Web orders surged 37% over the year-ago pre-Christmas weekend.

"Amazon fulfillment centers processed and tendered customer orders to delivery carriers on time for holiday delivery. We are reviewing the performance of the delivery carriers," Amazon spokesperson Mary Osako told TheStreet.

With such disparate reactions to the overwhelming demand, it becomes clear this is a source of conflict between the new and old economy. E-commerce has proven year after year to be the new normal, but being funneled through the older transportation model of UPS is leaving much to be desired.

According to CBS, FedEx and UPS are upping the ante over Thursday and Friday, calling in extra drivers and renting U-Haul trucks to deliver delayed packages.

Kohl's nor UPS immediately responded to requests for comment.

--Written by Keris Alison Lahiff. 

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