September 29, 2009, 12:00 AM

The Customer is King

Even in a tough economy, retailers are finding ways to deliver packages to customers more quickly, and with good customer service.

Online sales are growing at Dick Blick Art Materials, even though the art supplies market has been stagnant to slightly shrinking, says John Polillo, executive vice president of operations at Dick Blick Co, parent company of the multichannel retailer. “Our e-commerce channel is growing as we steal market share,” he says.

The ticket to Dick Blick’s success, he adds, is depth of product selection and service, including displaying a toll-free number on every page of its web site so shoppers can easily reach a customer service agent. Along with competitive pricing and extensive product information, the retailer also ensures that it can quickly offer the most efficient and fastest shipping service, whether it chooses the best service or lets its customers decide.

“We’ll ship any way the customer wants, including UPS, U.S.P.S. or FedEx,” he says. “Having the flexibility and ability to handle all modes of shipping service levels completes the service picture for us.”

Choosing efficiency

Dick Blick manages its shipping services through its Flagship shipping management software from Kewill Inc., which enables it to automatically or manually choose the most efficient carrier and shipping service for each customer order-or to choose the one that a customer requests even if it isn’t the most cost-effective.

“The real benefit with our system is being completely independent of carriers, even if I have negotiated a discount with a carrier to save me money,” Polillo says. “The customer is king, and she gets whichever carrier she wants.”

Shipping has always been a critical service for online retailers, who rely on fast, reliable and efficient deliveries to compete against the immediate satisfaction and personal touch that consumers receive in physical stores. The past year has brought new challenges to shipping managers as the economic downturn and a fall-off in shipping volumes have put pressure on carriers, including UPS, FedEx Corp. and the U.S. Postal Service, to maintain service levels while also covering their operating costs.

The loss of DHL Express has left retailers and other shippers in the U.S. with only three nationwide carriers-UPS, FedEx and the U.S. Postal Service-of small parcels (packages up to 150 pounds) that cover most of what online retailers ship to customers. But the narrowing of the carrier base hasn’t necessarily left retailers wanting for more shipping options-at least not while volumes are still off their historical levels.

Under more normal economic conditions, carriers typically grant their best mix of rates and services to the shippers that bring them the highest shipment volumes. But today, with overall volumes down, the major carriers are pressed to attract as much volume as they can to cover their fixed costs of operating national and global shipping fleets and networks, says Tim Sailor, a principal with shipping consultants Navigo Inc.

Pressure on carriers

“The pressure on the carriers now is enormous,” he says. “They have fixed costs, and they need a certain level of volume to keep their systems operating. Once they hit that volume threshold, every additional package is incremental revenue. That’s what they’re all chasing now.”

Adds Polillo: “For the next six to nine months or even longer, it will continue to be a buyer’s market whatever a shipper’s size, with good opportunities to negotiate good rates.”

Meantime, shippers are taking advantage of what some say is an expanded level of flexibility in how major carriers provide services as well as an extended range of delivery options throughout the shipping industry. Shipping services companies like Mail Express Inc., a2b Fulfillment Inc. and DHL’s Global Mail unit, in addition to FedEx SmartPost and UPS Mail Innovations, for example, are providing ways to maximize efficient shipping through the U.S. Postal Service by aggregating and sorting mail and forwarding it to local postal facilities for final delivery at the best mix of speed and low rates.

Mail Express and DHL Global Mail focus on small packages, mostly up to about five pounds. A2b Fulfillment provides similar services for forwarding small packages through UPS as well as the U.S.P.S.

Ingram Micro Inc., which provides distribution and logistics services for clients including retailers of CDs, DVDs and small computer devices, uses FedEx SmartPost and UPS Mail Innovations for reliable 5-day ground deliveries with a 99% on-time rate, says Rob Kamman, Ingram Micro’s senior program manager for transportation. But it’s planning to also begin using Mail Express this month after tests showed it can reliably deliver small packages of up to five pounds within four days throughout the U.S., also at close to a 99% on-time rate, he adds.

Backing free shipping

And retailers are also finding other ways to work with the major carriers. At Allen Edmonds Shoe Corp., a Port Washington, Wis.-based manufacturer and retailer of men’s footwear, a recent project with UPS enabled it to shore up the way it accepts custom orders to rebuild its calfskin-leather shoes.

The rebuilding process, which the company refers to as “recrafting,” involves stretching the original soft leather tops over new heels and soles-a process that costs the customer about $95 for a virtually new pair of shoes, compared to the original price of about $280 or more.

Allen Edmonds handles about 50,000 recrafting orders a year, and offers free shipping on all orders whether shoes are shipped to customers or back to the factory for rebuilding. Until about a year ago, however, the company’s order system was bogged down with manual processing that made it difficult and costly to ship shoes back and forth. A major problem was that customers would send in shoes for recrafting with personal requests and contact information on hand-written notes that were often tough to read and tedious to file.

“We’re cobblers working with old-world technology and a lot of manual labor,” says chief marketing officer Colin Hall. “We had never jumped into the digital age, until we revamped our online order process with UPS.”

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