John Haber, founder and chief executive officer of Spend Management Experts, describes how parcel shipping weathered high demand and tight carrier capacity during the 2020 peak holiday season, and into 2021.

The final weeks of 2020 were “one of the most challenging peak shipping seasons in history for retailers,” Haber says. The obvious culprit was COVID-19, which stranded consumers at home and created a surge in demand for e-commerce deliveries. In response, both UPS and FedEx were forced to cap volumes for their largest shippers. The crunch also spilled over to regional providers, the U.S. Postal Service and last-mile delivery.

Shoppers had plenty of warning about the coming capacity shortage, with retailers imposing strict cutoff dates for orders, but many still procrastinated about making their holiday purchases, meaning that millions of packages weren’t delivered in time for Christmas.

The massive volume of holiday purchases became a flood of returns in January. Both UPS and FedEx experienced record amounts of returns — in UPS’s case, nearly 2 million packages a day, a jump of 25% over the prior year. At the same time, retailers extended returns thresholds from 30 to 90 days, meaning that volumes will continue to run through the parcel network for more weeks than usual. Still, says Haber, there are recent signs that capacity is beginning to open up, compared with the fourth quarter of 2020.

FedEx and UPS both imposed rate increases at the start of 2021, and retailers are having to deal with the additional expense. For some returns — especially low-value or bulky items — they’re declining to take them back at all, while still offering refunds to consumers. The cost of processing and restocking the returns is simply too high to justify the exercise, says Haber.