June 26, 2009, 12:00 AM

Retailers gain new options for navigating the last mile

With inventories lean and consumers expecting low-cost shipping, it’s crucial for retailers to find the best delivery deal.

Internet retailers place a heavy emphasis on building relationships with consumers, investing in expensive technology and employee training to provide the best online shopping experience, deploying sophisticated supply chains to fill their warehouses with the right products at the right time, and building customer service staffs that cater to customers’ every need.

But all those efforts and more to build customer relationships can come to naught if an online retailer can’t deliver the goods-the right package, in good condition, and when and where the customer expects it.

Moreover, customers often expect to get their goods delivered free of charge. Indeed, many retailers have been providing generous shipping offers as part of standard operating procedure and have stepped it up even more during peak holiday shopping seasons.

“There is pressure to provide free shipping as part of an overall hyper-promotional environment,” says Paula Rosenblum, managing director of research and advisory firm RSR Research LLC.

Delivering margins

Although shippers this year aren’t facing the same fuel surcharges that hit their wallets last year, the costs of providing shipping services may become still more of a challenge in the 2009 shopping season as retailers compete with promotional pricing on products as well as on shipping.

At the same time, many retailers this year, concerned about a decline in consumer spending, appear to be planning to stock less inventory than usual for the peak holiday shopping season, Rosenblum says. That will make it more difficult for retailers to sell much merchandise at good margins while trying to cover the costs of running product promotions and free-shipping offers, she adds.

Such challenges will also make it more important for retailers to take advantage of a growing number of options for getting goods delivered to customers.

Retailers, for example, for years have used manual or automated, software-based systems to choose the best mix of carrier rates and routes-an alternative to going with one carrier for the volume discounts. The evolution of web-based systems is making such carrier-shopping tools more accessible through web browsers as well as more integrated across a larger number of carriers.

Many of the best practices in handling delivery services can address many delivery-related issues, including some that only come up occasionally, such as how to account for fuel surcharges in selecting carriers. For example, more delivery companies are basing their rates on a combination of package dimensions and weight instead of weight alone.

Retailers are responding to these requirements with systems that can quickly figure overall package dimensions to ensure products are shipped in the least costly packaging materials, and they are using more flexible packaging like vinyl pouches to avoid more costly boxed dimensions.

Flexible shipping

Retailers are also finding it pays to be flexible in how they pass shipments on to carriers. By forwarding packages to a local U.S. Post Office for local delivery, for example, shippers can take advantage of rate incentives.

Other delivery companies that partner with the U.S. Postal Service will pick up packages from a retailer and forward them to a U.S.P.S. facility for local delivery. The cooperative service covers packages up to 70 pounds, provides online tracking of delivery status, and provides standard delivery within two to four business days.

FedEx Corp.’s SmartPost service, for example, which is a part of FedEx Ground, specializes in the delivery of low-weight, less time-sensitive business-to-consumer packages, using the U.S. Postal Service for the final mile to residences.

The U.S.P.S. also cooperates with other delivery companies on providing package-return services, with the Postal Service picking up packages from consumers’ homes and forwarding them back to a retailer or to the retailer’s supplier through a partner’s long-haul system.

The U.S.P.S. has also upgraded its web site, USPS.com. The site has been designed to make it easier for direct-to-consumer retailers to find information and services ranging from bulk mail center locations and domestic and international postal rates to certified vendors of shipping software, the Postal Service says.

A new business section on the site, for example, provides information on shipping payment options and rates, web-based tools for checking the accuracy of residential addresses, and lists of software vendors certified by the Postal Service for providing systems for managing lists of business and residential addresses. Shippers can use that software to confirm which addresses are residential as opposed to business-related, and thereby avoid shipping to residential addresses through carrier services that impose surcharges on shipping to homes.

“We are committed to making USPS.com one of the best government web sites, and one of the best web sites in the nation,” says Robert Bernstock, president, U.S.P.S. Shipping and Mailing Services. “These changes help guarantee that our web site is relevant, customer-focused and, most important, easy to use.”

Going global

Retailers also have a broader range of services for expanding their presence in foreign markets. FedEx SmartPost, for example, has expanded its service into Canada for U.S. shippers by using the residential delivery capabilities of Canada’s national postal system.

The SmartPost integration with the Canadian system provides shippers with trans-border features including paperless electronic customs clearance, package scanning sorting technology, and an intra-Canada returns service that includes refunds of cross-border duties and taxes.

“The success of FedEx SmartPost in the United States has been driven by our unique, economical service offering for catalogers, e-retailers and other companies that ship low-weight packages,” says Ward B. Strang, president of FedEx SmartPost. “We are expanding service into Canada based largely on requests from existing shippers who are looking for the same value, plus the added benefit of a comprehensive customs clearance solution.”

The service is available to all residential addresses, including P.O. boxes, in Canada and includes around-the-clock shipment tracking status updates via fedex.com, FedEx says.

FedEx Express, which provides one- and two-day delivery services, recently increased its presence in Mexico. It is expanding its air cargo terminal and bonded warehouse facility at Miguel Hidalgo y Costilla International Airport in Guadalajara, Jalisco, which serves as a principal center of operations for FedEx Express international and domestic shipments in Mexico.

In addition, FedEx has opened a new hub in San Luis Potosi to support FedEx Express Nacional, the company’s domestic express service in Mexico that it launched in October 2008.

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