Failure is not a winning strategy in the last mile

There is a saying that more can be learned from failure than success. But in the world of last-mile delivery, failure can often be a final outcome.

According to a Descartes survey released earlier this year, 75% of consumers had experienced delivery problems in the previous three months and 23% said they would not order from the retailer again as a result. Another 21% said they had lost trust in the retailer and 16% reported they had told friends and family to avoid the retailer.

A delivery failure is a costly lesson to learn for retailers and online brands.

Last-mile delivery technology company OneRail said that the cost of a failed delivery is $17.20, and 8% of all last-mile deliveries have a failure rate on their first delivery attempt. Research by Loqate found that 5% of all online orders never make it to the customer. In fact, Loqate’s research found that U.K. retailers spend an average of $240,000 per year on failed deliveries.

There can be many reasons for this, but the result is always the same.

Customer unsatisfaction

“That’s a disgruntled customer. That’s a customer that doesn’t trust you,” explained Bill Catania, founder and CEO of OneRail.

Catania just returned from the Home Delivery World Europe conference and told Modern Shipper he heard the failure rate there was as much as 30%. The business consequences for a failed delivery are many, Catania said.

“You have a delivery cost of that package to that porch the first time. You have the sunk cost of that delivery operation. You have the soft cost of the software stack. … There is the complete overhead of your transportation and supply chain department. And the other thing you have is the cost of the return. Not only are you hauling it in one direction, but you are hauling it in the other direction,” he said. “Generically, there is a cost of inventory carry that you bear where that product is in float. It’s on its way back to the warehouse, it has to get scanned in. Also, the cost of the exception. You have a phone call that inevitably comes in from a customer, or maybe 10 or 20 calls.”

Catania said the most common type of failed delivery is when the customer requires a signature upon delivery but then is not at the location when the driver arrives. But other issues can occur as well, and with just a few exceptions, many of them can be alleviated with the use of technology.

“A lot of capital is deployed around customer and product acquisition and you can blow it with a bad delivery experience,” he said. “Our belief is that humans plus technology creates the best exception management system.”

OneRail said that in 74% of the deliveries it orchestrates, an image is taken as proof of delivery. In 25% of the time, an image and signature are required and in 1% of the time it is just a signature.

Productizing delivery

Catania said that brands need to start considering delivery as a product.

“The first company that I can think of even before Amazon to do this was Domino’s with their tracking,” he noted. “Amazon worked for 10, 15 years to productize delivery and now the rest of the world is trying to figure out how we can productize delivery.”

Catania noted the success that Shipt has had with its model. Shipt shoppers are trained to communicate with customers if the preferred item is not in stock and offer possible alternatives. It is a model that Catania said can translate into the last-mile delivery world, and in fact, OneRail has adopted some of Shipt’s approach.

“If you are not home, the courier is indicating that and it will automatically trigger that dialogue that is captured by a real human,” Catania said. “It will initiate a text message to the customer to say that you requested a signature, you are not home and the courier is there, and then ask if it is OK to leave the package. It provides in real time a solution to how you can take a delivery that is off course and get it on track to meet the promise.”

Emotional customers

Failing to make a delivery in the direct-to-consumer space triggers “emotions” in the end customer, Catania said, noting that birthdays can be missed, Christmas delayed, and yet “94% of consumers blame the retailer with no blame at all on the courier.”

“If you are a retailer, you really need to understand that statistic because you are going to be held responsible,” Catania said, pointing to a OneRail customer that did testing on exception delivery management. In the test, when a customer was informed ahead of time that the delivery would be late, the retailer received a 20% higher net promoter score than retailers with deliveries that were late and no prior communication occurred.

“When you think about how the world has evolved, shippers have [previously] relied on carriers to send that message,” Catania said.

Changing times require new solutions, Catania noted, pointing to platform-based approaches similar to OneRail and other companies.

“We’re taking all the messaging per parcel, all the messaging from LTL, all the messaging from the courier, and we’re [consolidating that into a single message],” he said. “It puts the shipper first in terms of the messaging and ultimately puts the consumer first and prevents over-messaging.”

Winning at Jenga

Catania said the transformation of the supply chain is like a giant game of Jenga, where “everything doesn’t speak to each other” and needs to be aligned. Humans, though, remain a critical component.

“I love to solve problems with tech, but sometimes we need to [include the human],” he noted.

Catania pointed to another approach retailers and shippers should take — including the marketing department in the process.

“When these problems occur, let’s say it’s the fault of the shipper or courier, you need to take that data and put it back into your marketing systems,” he said. “There is an intertwine between marketing and fulfillment operations. It used to be a customer waiting in line; now it’s a failed delivery. Imagine you order something from a retailer and it’s a bad experience. Marketing needs to know that and [maybe] send a $25 gift card for your next experience.”

Eliminating failed deliveries is likely impossible but minimizing the damage could be key for customer retention. Technology, humans and communication all play a role in the process and could ultimately save hundreds of thousands of dollars a year.

Click for more articles by Brian Straight.

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Source: freightwaves - Failure is not a winning strategy in the last mile
Editor: Brian Straight