The rise of eCommerce has affected the logistics of all consumer goods, including heavy goods such as furniture. Unlike businesses shipping small parcels, heavy goods shippers have had to face a new challenge: how to ship their large products, nationwide, in a cost-effective way. The logistics for furniture retailers has also evolved in response to eCommerce’s ascendance. Vendors used to ship a truckload of furniture to brick and mortar retailers and let the retailer manage their local deliveries, but now more and more retailers are shrinking their in-house delivery capacity and electing to use drop-ship programs provided by the vendor. This allows them to not only avoid stocking up on any inventory, but to pass all the headaches associated with shipping heavy goods to the vendor.
Pure eCommerce furniture eTailers have further shifted the shipping burden to vendors and driven the search for end-to-end shipping solutions, since they have no logistics capabilities, not even a physical presence, and limited expertise. The end-to-end solutions offered by heavyweights like UPS and FedEx are not up to the task of shipping furniture, since unlike in a standard parcel delivery, the logistics provider has to deal with heavy and, in most cases, bulky pieces, which need special handling for a successful delivery.
This changing landscape has resulted in a paradigm shift in heavy goods shipping: a progression towards LTL (less-than-truckload) and threshold deliveries, where a non-furniture-specific trucking company will drop the furniture in its original box outside the customer’s home. This process foregoes any inspection prior to delivery that would ensure the product is in adequate condition. The delivery team has the customer sign a proof of delivery and moves on to their next stop, leaving the customer to figure it all out by themselves.
And then…BOOM, something is wrong with the order! A piece is missing, the product is damaged or, not infrequently, the customer actually damages the product themselves in their efforts to assemble the product.
At this point, the customer is angry; they decide to return the product by either asking for a replacement or cancelling the order entirely. The nightmare has begun – whatever projections you made about the shipping cost of this order can be thrown out the window.
A Data-Centric Approach
This where data can play a big role.
At Deliveright Labs we comb through massive amounts of delivery data to produce valuable insights into what drives delivery failures. These findings are then implemented into our last-mile delivery platform, Grasshopper.
We have analyzed some major, and vexing, factors that add to a shipper’s delivery budget. We decided to share our findings so our customers can learn how to optimize their shipping decisions and reduce their overall cost. We focused on the hidden underlying costs, most of which are not straightforward to calculate. For each cost, we have assigned a % of the original shipping cost to help you see how impactful each cost can be.
Costs Associated with a Failed Delivery
Here are the top costs that flow from a failed delivery:
- Customer service (3%-5% cost of delivery): When a delivery fails, the customer will contact the furniture seller’s customer service team to explore their options. The resolution process can take much time and back and forth between the shipper, the delivery team, and the customer in order to figure out what exactly happened. This added call volume can force the shipper to hire additional customer service reps to handle post-delivery issues. At Deliveright, we calculated that the number of inbound calls stemming from delivery issues is 50%-70% lower for an order shipping through Deliveright as compared with other carriers. This is due to the use of automated communication modules such as RoboCalls and a function that allows customers to schedule their own deliveries, along with our automated post-delivery resolution center which preemptively reaches out to the customer should an issue arise.
- Compensation (50%-70%) – Many retailers offer compensation to customers for failed deliveries, so that they will accept the issue and leave the product in their home, precluding any additional shipping costs. This compensation can range from $50 to hundreds of dollars in certain egregious cases.
- Redelivery cost (50%-70%) – In cases where you have to redeliver a product due to defects, missing pieces, or a missed delivery appointment, the overall shipping cost on the order will jump by at least 50% with the first redelivery. In some cases, redelivery can cost a lot more if it requires repair, repackaging or special handling (hoist, walkups).
- Return logistics cost (100%-150%) – When a customer cancels their order and decides to return it, the real troubles begin. You, as the shipper, will have to coordinate with your shipping company to pick up the order and ship it back to the vendor. These return logistics transactions are some of the most expensive transactions for any retailer, so much so that many retailers prefer to let the customer just keep the product rather than returning it (case in point: this well-known Wayfair ‘hack’). On top of all this, many items are no longer in a condition to be resold after traveling back and forth, so they will sit in your warehouse and accumulate dust. A return order can turn a profitable transaction into an absolute loser. We would advise giving the customer a large credit or refund rather than picking the piece up.
- Reputation (?%) – One of the most important yet hardest to quantify costs is the reputational damage that a failed delivery can have on an eTailer. All it takes is one frustrated customer to wreak havoc on your reputation all over the internet. It is impossible to determine how much business can be lost from a bad review, particularly if the review is the first thing a potential customer sees when going to purchase your product.
- Cashflow (5%-10%) – Many businesses operate such that they only collect the proceeds from a sale after the delivery has been completed. By delaying collection, failed deliveries can have a direct and clear impact on your bottom line. Faster, smoother deliveries can translate to a much better cashflow.
- Vendor claim (10%-15%) – When a product is deemed damaged, eTailers will start the claims process. As the number of claims rises due to the fact that your deliveries are threshold and are not inspected beforehand, you will need to hire an employee to process these claims. In addition, not all claims will be honored by the vendors, which forces the shipper to absorb any losses on the product.
Taking it all in, one can clearly see that the the upfront shipping cost of a cheap, threshold delivery doesn’t tell the entire story, since it doesn’t include the numerous back-end costs of deliveries failing. By upgrading from a threshold to a White Glove delivery, where your product is inspected and touched up (if needed) before delivery, and the product is assembled and installed in the customer’s home, you are likely to save thousands of dollars down the road in exchange for a small upfront cost.
At Deliveright, we encourage our customers to upgrade to a White Glove delivery. We see it as if they are buying an insurance policy against the manifold costs of a failed delivery. Having serviced hundreds of thousands of deliveries for our customers, we can confirm that the White Glove option, in particular for furniture, mitigates all of the above costs. Over time, as our customers and others learn to analyze and probabilistically factor in all of the potential costs of a botched delivery, and not just the initial delivery quote, we believe the industry will shift from threshold to embracing White Glove delivery service.