The online retailer has spent nearly $300 million acquiring three shipping software vendors over the past nine months.
Consumers and government regulators keep the heat on delivery practices.
For the all the promises that the web brings to direct-to-consumer retailing, it can all amount to naught if consumers don’t receive their purchases in a timely manner. Even if delivery is fast and to the correct address, consumers still have to either be home at the expected delivery time or make a special trip to a shipping facility. And that may leave them wondering why they didn’t just shop in a store in the first place.
One online shopper with little time to visit stores bought about a dozen holiday gifts for her family online and had them shipped to her office, knowing she wouldn’t be home during available delivery times. But with several of the boxes larger than expected, she realized that getting all of them home was not going to be easy. As she enlisted co-workers to help carry the boxes out of her office, down an elevator and out to her illegally parked car, she grumbled, “I’ll never shop like this online again.”
Handling the last leg of consumer deliveries has never been easy. During the heady days of the early Internet boom, delivery services like Kozmo.com and Webvan.com, figuring the dawn of web retailing would offer a goldmine of a delivery market, emerged to specialize in delivering virtually anything to consumers under the most flexible delivery schedules. But faulty business plans doomed Kozmo and Webvan, leaving a void in delivery services designed specifically for e-retailers.
Setting an example
Web retailers who are tempted to over-promise with delivery services, meanwhile, face scrutiny from federal agencies. Staples Inc., for instance, agreed in May to pay $850,000 and cease making promises it couldn’t support regarding granting customers real-time visibility into inventory and quick delivery times. For its part, Staples says that only a small percentage of its shipments did not arrive as promised and that it has implemented a more flexible policy of letting customers cancel orders when it appears shipments will not meet a timely schedule. But the fact remains that delivery is an important criterion on which e-retailers’ performance is judged-by consumers as well as federal officials.
“Customers now expect to be able to check the status of an order and to be notified about delivery delays,” says Kent Allen, analyst with Aberdeen Group.
Fortunately for retailers who don’t want to bear the cost and risk of operating their own delivery operations, other services have since started to pick up where Kozmo and Webvan left off. United Parcel Service of America Inc., which handles a majority of shipments for products ordered online, has expanded its ability to provide alternate delivery sites through its acquisition of Mail Boxes Etc., a national chain of about 3,000 pack-and-ship outlets, and is rebranding the stores as The UPS Store. Now consumers are more likely to find a UPS shipping site in their neighborhood rather than in an outlying industrial area where UPS usually places its traditional shipping centers.
The U.S. Postal Service is also planning to expand its delivery services for direct merchants in a new package-return service expected to begin this year. The plan calls for web and catalog merchants to pay discounted postal rates to cover the delivery costs of packages returned to them by customers.
Back to the future
UPS, FedEx Corp. and the Postal Service all promote improved services to e-retailers, including more customer-friendly returns services. And those improvements could be important to continued growth in the online channel. FedEx touts its ability to integrate its truck, air, distribution centers and online tracking service to handle unusually large delivery schedules, as it did on June 21 in shipping 250,000 Harry Potter books in a single day for Amazon.com. In another example, shoe retailer Zappos.com reports that its ability to offer free shipping and free returns through UPS on all of its orders has helped it realize a surge in sales from $1.6 million in 2000 to about $60 million this year.
But the national shipping services aren’t the only ones catering more to e-retailers. In a bit of a throwback to the boom days of the Internet, Ensenda, a San Francisco-based delivery services company started by a former executive of
Webvan, is building a web-based network of local carriers that offer same-day, direct-to-consumer deliveries in major metropolitan areas. And in a move that may yet raise the bar in some respects for local delivery services, Ensenda enables retailers to enter information about planned deliveries onto a web application, which automatically arranges for a local courier to handle the last leg of deliveries to a consumer’s address. “This is new competition for UPS and FedEx, and I don’t think the big guys are going to ignore this space,” Allen says.