The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
Retailers navigate a multitude of delivery options to meet customers’ varying needs.
While retail web sites work to differentiate themselves from stores with web-only features, personalized services, detailed imaging and other tactics, there always will be one thing that separates sites from their bricks-and-mortar counterparts: a reliance on delivery services to fulfill online customers’ orders.
And as shoppers have become more accustomed to online retail, their expectations of timely and reliable delivery services-across a variety of delivery options-have only increased. A comprehensive shipping policy has become a crucial part of e-retailing, experts say.
“A critical component of the online checkout process is the determination and selection of a shipping option,” says Rob Garf, vice president of retail strategies at research and advisory firm AMR Research Inc. “Retailers must offer multiple delivery methods, including overnight, ship-to-store and split shipments, and be crystal clear regarding cost and timeframe.”
At the same time, however, direct-to-consumer retailers also are facing increased shipping cost pressures through rising shipping rates and fuel costs. FedEx Corp. and UPS each implemented rate increases of 4.9% at the beginning of the year and in May the U.S. Postal Service launched a new rate structure based on the size and shape of packaging as well as weight, replacing a system that factored only weight.
For Internet retailing, the average postal rate increase comes to about 6%, says David Marinkovich, senior vice president of sales and marketing at DHL Global Mail. “The cost of fuel is having a big effect on retail shippers, but the Postal Service rate change that went into effect May 14 is the most dramatic postal rate change ever,” he says. “Some retail organizations that sell products like CDs, video games, books and apparel are looking at rate increases of about 54%.”
For example, apparel shipped in a box may be light in weight but now is subject to higher rates because of packaging dimensions.
The Postal Service contends the new system provides shippers more flexibility in shipping costs because it enables them to incur lower rates by simply shipping with different types of packaging, such as soft pouches instead of rigid boxes. The Postal Service has been conducting workshops, such as at this year’s eBay Live conference for eBay sellers, to help retailers take advantage of the new system.
Market pressures also are opening up more delivery options, as companies like DHL, NVC Logistics Group, FedEx Corp. and Yellow Transportation Inc. expand their services to the retail industry for delivery as well as return services. In addition to basic delivery, shippers now provide retailers with more options for specific delivery times that accommodate a customer’s personal schedule and “white glove” treatment that includes set-up and assembly of products like desktop computers and furniture as well as the removal of all packaging.
“What really affects our business is the growing expectations of consumers and the demand they place on specific delivery windows,” says Paul Henrid, president of NVC Logistics Group, a company that emphasizes service to manufacturers and large retailers in the movement of large, high-ticket items like plasma TVs and household appliances.
The demand for a broader range of delivery services for direct-to-consumer retailers is causing some vendors to step up their focus on the retail industry. “We’ve seen a real shift toward more b2c business,” says Rick Mathews, vice president of corporate sales and premium services at Yellow Transportation, which offers a range of delivery services for shipping to homes as well as distribution centers and stores. “We’ve had double-digit growth over the last two years with dot-com retailers.” Yellow’s clients include the online operations of several major retail chains as well as large web-only merchants.
Yellow divides its delivery services into three areas: Exact Express, which guarantees delivery to a retail customer’s home or other destination during a specific time period, such as between noon and 1 p.m.; Definite Delivery, which guarantees delivery by a particular date; and Residential Connect, which includes product assembly and set-up services.
FedEx, which has been reporting increases in its home-delivery service, also offers a range of services that guarantee delivery at a specified time of day as well as during evening hours or within a certain number of days.
NVC Logistics operates nationwide as a freight management company, operating under the name NVC Direct and partnering with more than 300 delivery services companies. It also offers delivery services with its own truck fleets in the New York City metropolitan area, with plans to expand this service to other major cities including Chicago and Los Angeles.
NVC also offers white-glove delivery services and recently upgraded its NVC Direct web portal to provide retail shippers as well as their suppliers more information on shipments. “We’re providing more depth of information on each shipment-exactly where it’s at, when it was picked up and when it’s expected to be delivered,” Henrid says.
Indeed, online access to shipping status is becoming a standard procedure in most retailer/delivery service relationships. While such information helps manufacturers meet the demands of retailers, it also helps retailers satisfy their customers. “Providing the ability to calculate shipping charges and delivery date will help set the right expectations with consumers,” AMR’s Garf says.
Newgistics Inc., which specializes in providing a returns service in conjunction with the Postal Service, is launching a new service this year that also handles local delivery to consumers’ homes. In the returns service, consumers can return an item through the Postal Service; Newgistics then picks up the items from a Postal Service bulk mail facility for delivery back to the merchant or manufacturer.
By acquiring transportation broker Logistics Management earlier this year, Newgistics gained the ability to provide additional delivery services that will deliver retailers’ packages to the Postal Service, which will complete the local delivery to consumers.
As online retailers look outside the U.S. to expand their markets, they’re also seeking more flexibility in shipping to overseas buyers. FedEx, for example, is working with the U.S. Department of Commerce to help retailers like golf equipment and apparel merchant RockBottomGolf.com sell overseas to markets including Australia.