The hidden costs of storefront delivery — and how to avoid them

During the height of the COVID-19 pandemic, retailers turned to e-commerce. For many smaller retailers and digital-only brands, that often meant using a last-mile delivery provider such as DoorDash, Instacart or one of the thousands of other local services that popped up.

It also meant building an online store. Some last-mile providers offer this capability, either through their apps or via a branded website. In other cases, the business needed to invest in a platform. 

But according to Will Walker, senior marketing manager of enterprise at last-mile delivery provider Roadie, those that chose the former option may be paying higher fees to access the delivery service.

“For those retailers relying on a storefront delivery platform as their only e-commerce experience, what they are really doing is handing over [control of the customer and brand experience] … to these platforms,” Walker told Modern Shipper.

Walker said it is common for the retailer to pay commission fees ranging from 10% to 30% of the order for delivery services, but “hidden” in the fees might also be a marketing or technology charge that could be as much as 20%. That is a fee associated with maintaining the delivery storefront for the brand.

In some cases, the delivery platform may run specials the retailer is not aware are occurring. Walker pointed to Grubhub’s May promotion in New York City as an example. The delivery firm offered “free lunch” on its platform (which was really a $15 discount on the delivery charge), predicting the promotion would double traffic on its platform. The issue was that neither drivers nor restaurants were aware of the promotion, and the result was, predictably, chaos and many angry customers.

Walker said he also has heard from some retailers that the delivery providers may also mark up the price of the item on their storefront. The result is a loss of control for the retailer and potentially a lost customer because of the higher price.

“Because these platforms are not just focusing on the delivery, they are not focusing on the customer experience,” Walker said. “They are looking for ways to make revenue, and one of the ways they do that is marking up the price incrementally [and the retailer may not know].”

Data drain

The other issue for retailers is the data drain taking place. 

A third-party provider that runs a storefront for a brand is collecting thousands of pieces of data on the retailer’s customers. In a world of privacy concerns where first-party data is becoming increasingly important, the loss of access to this critical data could be impacting the retailer’s ability to effectively plan inventory and sales promotions, understand customer behavior and better engage with the customer.

“They could be losing out to competitors that are collecting that data and they may not be aware of trends,” Walker said. “Platforms often don’t pass the data back to retailers. Retailers would know what is selling but not additional data [like what other products people are considering].”

Walker acknowledged that storefront delivery platforms have a place in the market, but retailers need to be aware of their limitations and the consequences of handing over omnichannel control.

“What seems to be a ton of upfront value over the short term … over the long term they are giving up so much, it really starts to show those hidden costs,” he said.

Maintaining control

Roadie utilizes gig workers to handle both business-to-consumer and business-to-business deliveries, much like the big-name gig platforms. However, Roadie, which has over 200,000 crowd-sourced drivers on its platform, doesn’t offer a storefront. Instead it has built its technology to connect with most major omnichannel platforms.

“You don’t have to surrender that storefront and customer experience to these delivery platforms,” Walker said. “The best platforms are going to integrate directly. The best e-commerce systems will be able to integrate directly with delivery platforms like Roadie.”

Even for smaller retailers that don’t feel they have the resources to build their e-commerce platform, Walker noted Roadie’s integration with both Shopify and Zapiet. In both cases, the brand retains complete control of the customer experience and associated data.

Walker advised brands to consider a few key components of a delivery provider’s service to see if it is a fit:

• Where are they located?
• Can they handle the items you are selling (i.e., do they need a car, van or box truck)?
• Can they handle the volume will you have, including surges? 

“Delivery has really grown very quickly over the last few years, and there are huge spikes in volumes,” Walker said. “If the company is focused on owning that relationship with the customer, they want to own that relationship. So, if there is a component of anyone’s network you are looking at, look at whether you will still own that [relationship]. The more you can be in control of that customer’s experience … the more sticky the relationship and the more you can sell them.”

Click for more articles by Brian Straight.

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Source: freightwaves - The hidden costs of storefront delivery — and how to avoid them
Editor: Brian Straight