January 3, 2014, 2:19 PM

Rethinking UPS and FedEx contracts in light of the holiday shipping fiasco

Many online retailers are offered discounts if they give up the right to hold carriers to an on-time delivery standard for most of the year, says a shipping consultant. Waiving those rights is neither necessary, nor a good idea, argues Ken Wood of LJM Consultants.

In light of the shipping fiasco which took place around Christmas, with both UPS and FedEx missing expected delivery times for many shipments, I thought it was appropriate to repost an article I wrote awhile back.  

I preface this article with two important points. First, you as a retailer should understand that you are not entitled to a “money back guarantee” for late-delivered ground packages during the holiday season. That’s because both UPS and FedEx discontinue their guaranteed delivery time refundpolicy for ground shipments for the two-week period prior to Christmas Day. (The air and international shipment guarantee is still is effect, with a 90-minute delivery time extension).

Second, getting your money back for late-delivered shipments is not going to make your customer’s child, who didn’t receive her Crayola Melt N' Mold Wax Factory under the tree this year, feel any better.

Given the recent developments, this may be a real good time to think about how your customers feel when they do not receive their shipments on time during the other 11 and a half months of the year. It is never a positive feeling for your customer and it is never a positive reflection on your company when a package is delivered late. Delivery is important to consumers. Studies consistently show online shoppers put a high value on free shipping, and that they are unlikely to shop again at an e-retailer that delivers an item late or in poor condition.

With that said, why would you ever give your packages to UPS/FedEx and say, “Here, deliver these packages when you can, I know you will try your hardest?”

Here is the original article I wrote, with a few minor edits:

UPS and FedEx are two of the best-run corporations in the United States and they are extremely good at what they do. However, both carriers are continuously trying to renegotiate customer contracts to include the elimination of the right for shippers to file claims for Guaranteed Service Refunds (GSR's)/Money Back Guarantees. This is rarely, if ever, a wise decision for a shipper.

Before you agree to waive any of your rights you may want to ask yourself “How could not holding your carrier to an on-time delivery guarantee negatively impact your business? Let me list a few possible outcomes of late-delivered packages: potential unsatisfied and lost customers, increased customer service calls from your clients asking where their packages are, more merchandise returns, lost shipping charge revenue and restocking costs.

Most companies spend a tremendous amount of time and money putting processes in place to ensure the customer service experience for their clients is the best it can be; from the time an order is taken to the time it is shipped. Why then would your carrier expect you to disregard all that time, effort and investment to your infrastructure and not hold them to their service guarantee? Shipping is your last chance to make a good impression on a customer. If a package is late, it can destroy the entire customer experience. The 2013 holiday shipping disaster is a great example.

To entice you to give up your right to file for late delivery refunds, your carrier may offer (1) an additional incentive in exchange for you not holding them to a service standard or (2) add a clause in their agreement stating that as long as they are 98% on time, you cannot file for a late delivery refund. Who is monitoring that by the way? What 2% of your clients do you not care whether or not they get their shipment on time? Even if you could answer that question, it is not up to you, because it’s the delivery company that decides which parcel to deliver late. Neither of these choices should be acceptable under any circumstances. The waiver is not proposed to benefit you.

I often wonder if the real reason why carriers promote the GSR/Money Back Guarantee Waiver is ultimately to try to discourage the shipper from using a professional outside auditing/contract negotiating company—a company like mine, LJM Consultants. Knowing that the majority of auditing companies focus primarily on guaranteed services refunds for their income, a shipper who has waived their right to claim late delivery refunds is much less appealing to an auditing company. Many auditing companies will not take on a client that has a GSR Waiver, and that is perhaps the ultimate goal of the carriers.

The better auditing firms, including LJM, are not deterred by the GSR Waiver because they understand there are many additional refund opportunities, including: inaccurate residential adjustments, duplicate billings, dimensional weight errors, bogus address correction fees, packages that were manifested but not shipped, and delivery area (rural) surcharges, to name a few.

And when there are delivery problems, as there were in December, auditing firms can obtain tangible compensation for their clients. In fact, LJM had a record month for obtaining guaranteed-service credits for our clients because of the recent delivery snafus.

In our many years of experience, we are certain, that through proper contract negotiations, you will be able to receive the additional incentives the carriers offer while continuing to hold the carriers to a service standard. You do not have to sacrifice service for discounts. After all, it is both the shipper and the customer who potentially suffer from the service failures.

We recommend that you never give up your right to file for late deliveries and when it comes time for contract negotiations, you seek professional assistance.


Ken Wood is the founder and owner of LJM Consultants, which helps retailers and other shippers negotiate shipping contracts and audits UPS and FedEx invoices.

 

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