April 1, 2009, 12:00 AM

Shipping Strategies

(Page 2 of 2)

“We look at the Harvey system’s history records to see the average shipment costs in given service areas,” Nason says. “Because these are constantly changing, we learn more about the system all the time.”

Without the Harvey system, he says, Alibris would lack a common shipping data repository with tables for analyzing service combinations based on such factors as weight, geographic areas, rates and service levels. “We would have a much more complex problem,” he adds.

Alibris sells books sourced from a network of about 15,000 suppliers, many of which drop-ship orders directly to Alibris’ customers. Other suppliers ship to an Alibris warehouse, where the retailer manages the fulfillment.

But whether customers receive their packages directly from suppliers or from an Alibris warehouse, Alibris relies on the Computerized Parcel System to provide information on the best combination of carrier rates and time in transit. For suppliers who drop-ship, Alibris offers to reimburse them for delivery charges based on the carrier service it identifies through the Harvey system, Nason adds.

Harvey’s Computerized Parcel System is priced from $895 to $2,595 for the first six months, depending on the number of carriers included in the system and the volume of address-checking required by a shipper, says president and CEO Bert Hamilton. After six months, the price ranges from $595 to $1,095 per year. Harvey also offers a separate version of the software called CPS Basics, designed to integrate with Google Checkout and other online order-processing systems, for an annual fee of $495, Hamilton adds.

Best of both worlds

Nason, a former logistics technology manager for UPS, says using a third-party system enables Alibris to deliver reliably while dividing shipments among multiple carriers. “We get the best combination of service level and efficiency as if we were using one carrier, but also the best mix of rates and delivery times through a combination of carriers,” he says.

For some shippers, however, nothing beats having an exclusive or nearly exclusive arrangement with a single carrier. Like BuySeasons and Zappos, UWantSavings ships from a primary warehouse located minutes from a major UPS airport shipping center. Working with a single carrier has enabled the retailer to charge a flat rate of $5 for the first item in an order, plus $3 for each additional item, for delivery within three days to the entire eastern half of the U.S. and within four days to nearly all of the western half, co-founder Jeff Anderson says.

That has helped lead to 32% of orders coming from repeat customers, putting the young retailer on a course to do $1 million this year, he adds.

Zappos, though it has used UPS for nearly all its shipments since the retailer launched in 1999, continues to leverage its arrangement with the carrier as Zappos grows in sales and product categories, says Sean Kim, director of business development at Zappos. While UPS has been a good partner from the start, he adds, it has been flexible in key areas such as increasing the number of times it pulls trucks out of the retailer’s distribution center located near the UPS WorldPort terminal in Louisville, Ky., to get shipments heading to customers as soon as possible.

“Instead of pulling all their trucks out of our facility at once late in the day, they now do multiple pulls each day as necessary,” Kim says. “That is a great example of how UPS helps us provide the best service to customers.”

Like BuySeasons, Zappos keeps a line of communication open with other carriers, and may use FedEx, DHL and the U.S. Postal Service for certain domestic or international shipments. The two retailers also are testing a new returns service offered jointly by UPS and the Postal Service.

Although they don’t comment on the specific terms of their contracts, which may last for a year or more before being renegotiated, each retailer says it has been more advantageous to continue developing their relationship with the same carrier instead of accepting the periodic contract offers they receive from competing carriers.

For now, Kim says, Zappos will stick with its policy of working with a primary carrier for nearly all shipments because it supports the retailer’s strategy of customer service and ongoing growth.


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