Direct-to-Customer Commerce

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Strategic insights into the direct commerce industry, including ecommerce, direct marketing and related fields

Testing Same Day Delivery

The Wall Street Journal reported, today, on eBay and Amazon testing same-day delivery in a couple of major markets.  Here’s a link to the story.

In the San Francisco area, eBay has hired a crew of people, essentially, concierge shoppers, who will locate the product you want at a local store, buy and deliver it to you within one hour of the time you place the order.  Wow, quite a high level of customer service.

Don’t expect this to be a viable service in Yuma, Arizona.

I’m not sure it would be viable even in all of the top ten markets in the US.  But it will be very interesting to watch it.

Based upon the anecdotes of the article, we can imagine this service being used by customers in major markets (where there may be sufficient aggregated demand for such a service) for whom convenience carries a very high value and who is less price sensitive than average.

I think that’s a pretty limited market … but the beauty of the web / ecommerce, is, in part, it’s ability to aggregate demand in ways we’ve never been able to do under earlier retail models.

The economics of same-day delivery are very difficult to make work.

We’ll know same-day delivery has worked when FedEx, UPS and the USPS begin to offer the service.  But don’t hold your breath!

Filed under: Direct Commerce, Ideas, News, Opinion, , , , , , , , , , , ,

What’s the impact of the new FedEx rates?

Parcel Magazine has published a piece entitled, Assessment of 2012 FedEx Express Rate and Accessorial Increases.

If you ship via FedEx, this is a worthwhile read … and then adjust your forecasting shipping costs based upon the noted increases.

Filed under: Direct Commerce, News, , ,

The fourth step to multichannel commerce

Step 1 = a single, unified product master

Step 2 = a cross-platform, multi-channel order management system

Step 3 = a single view of inventory, updated in near-real-time.

Step 4 = a warehouse management system capable of item-unit-picking and parcel shipping (fulfillment processing)

More and more warehouse operators are coming to an appreciation of the differences between shipping to stores and shipping to consumer.  For those who don’t, the most typical problem is that both processes use similar terms, but the definition of the term varies with the environment within which you’re working.

Picking for a shipment to a store, is often at the case level.  Picking for a consumer is almost always at the unit level.  A case contains multiple units of a single item.  Pallets contain multiple cases, which may be of a single unit or mixed units — but all in cases.

Fulfillment of consumer orders usually requires:

  • more complicated picking instructions
  • variable picking strategies
  • more difficult packing (read “slower”)
  • slotting optimization (to reduce picker travel time)
  • more sensitive cut-offs for picking orders
  • coordination with multiple parcel carriers (USPS, UPS, FedEx, DHL and others) for pick ups based upon class of service (ground or expedited)
  • near-real-time updating of order status and inventory status

These are just the highlights … the actual list goes on much longer.  I’m only trying to highlight the differences between retail fulfillment and consumer fulfillment.

More and more Warehouse Management Systems (WMS) are capable of handling both retail and consumer fulfillment.  So, the more difficult matter is personnel management and scheduling.  In a typical retail operation, staff peaks in August-September for shipping Christmas inventory to stores.  And the staff increase is 20-30 percent over base levels.

However, for consumer fulfillment the increase in staff may reach 200-500 percent and run from early November thru mid- to late-December.  This dramatic increase puts a premium on the ability of Human Resources to hire quickly and well; plus the ability to train new people on any specialized tasks.

Filed under: Ideas, Opinion, , , , , , , , , , , , , ,

New Dimensional Weight Factor to Boost Shipping Costs

Here’s a link to an important article in Multichannel Merchant  — New Dimensional Weight Factor to Boost Shipping Costs.

This is a huge change.  The article documents a coming change by FedEx and UPS to reduce the factor used to calculate Dimensional Weights from 194 to 166.  The article explains the calculation, if you’re unfamiliar with it.

This change is important and noteworthy in both the short-term and the long term.  In the short-term, because it will mean an immediate rate increase on many packages.  And it will also increase the percentage of packages to which DIM weights will apply.

In the longer term, it portends a move towards DIM weights becoming the default or de facto method for rating the cost of shipping parcels.  After all, it’s generally accepted that planes and trailers are most likely to fill up space-wise before they fill up weight-wise.  So carriers will make the most money, if they charge based upon DIM Weights.

An example for comparison.  Let’s assume a 3# packaged being shipped to Zone 5 — the generic average parcel bound for a residential address.  Further, let’s assume a parcel 12″ x 12″ x 8″ — not huge, not small.  This parcel calculates to a DIM weight of 5.938 using the 194 factor; 6.94 using the 166 factor.

Here are UPS Ground rates (without accessorial charges, based upon the current rate table):

  • 3# Z5          = $6.24
  • 5.938# Z5 = $7.10 (an increase of 14% over actual weight)
  • 6.94# Z5    = $7.29 (an increase of 17% over actual weight)

This change by FedEx & UPS should result in a lot of work on product packaging, in an effort to reduce parcel sizes.  And it will put increased pressure on “free shipping offers.”

Filed under: Direct Commerce, News, , , , , , ,

Shipping Options for Residential Deliveries

UPS and FedEx are providing new options for residential deliveries.  Here’s the complete story in Multichannel Merchant.

The real news here is that UPS is offering it’s “Basic” service to a broader range of shippers, with much lower volumes.  Up until recently, UPS only offered this service to very large volume shippers, and as they usually do, offered only to clients who also had large volumes of commercial shipments as well.

This simply reinforces the conclusion that there is continuing pressure to find lower cost shipping solutions, especially in the face of increasing rates.  And, the USPS remains the lowest cost solution for “the last mile.”

For some time, it’s been the conventional wisdom that the USPS’ most profitable segment was parcel delivery, but the USPS does not seem to have been able to fully leverage that fact in their own marketing.  Thus, the recent USPS campaign around Priority Mail flat rate shipping.  Which is probably the most sensible advertising campaign the USPS has ever executed — good for them.

Good low cost shipping options remain an important component of direct commerce strategies — driven largely by the near universal attractiveness of free shipping offers.

Filed under: News, Opinion, , , , , , ,

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