Are you considering doing e-commerce? First consider delivery.
In the first half of 1999, investors plowed over a billion dollars into about 100 companies involved with consumer retailing over the Internet. Over 250 million dollars were committed to home furnishings e-tailers (see "last mile is the toughest, below). These are the same investors that funded the computer and Internet startups and they see home furnishings as a winning opportunity.
Surveys report significant customer dissatisfaction with many Internet purchases, particularly in the areas of delivery and customer service. The logistical challenges of home delivery are far more challenging and costly than many recognize. It just isn't valid to compare the challenges of delivering books to case goods or upholstery. Companies that will prosper and achieve an unshakable foothold in the fastest growing sector of the economy will be those with the best delivery and logistical support systems.
I am writing from the perspective of retailers that want to sell by e-commerce, but retailers that don't plan to sell in this mode should understand the pitfalls and design their marketing plan to counter the Internet momentum.
What many people fail to consider is that the actual process of getting the product from the factory to the home remains the same. This is true whether the consumer places an order through an 800 number, a direct mail catalog order sheet, a local brick and mortar retailer, a North Carolina furniture mall, or an e-commerce web site. When the purchase is made, the delivery options are limited.
If you have decided to sell via e-commerce and have already established the technology to support the web site, how are you going to deliver?
Packages meeting the weight and dimension requirements of FedEx, UPS and USPS are the easiest. The best in class companies have verified that the product inside the package is satisfactory and the packaging is appropriate to get the merchandise to the customer's home. When the customer receives the goods, he or she unpacks, assembles as required and disposes of the packaging materials. Hopefully they save packaging materials until they are truly satisfied. Customers who receive packages via FedEx, UPS or USPS don't know or care whether their purchase was drop shipped from the manufacturer, a warehouse or the retailer.
Are there potential problems with this method of delivery? Think for a minute about the amount of damage and the number of errors you experience at your retailing establishment when you receive accessory items such as lamps and pictures via UPS. When problems occur, are there hassles associated with contacting suppliers, UPS claims, etc? You bet! When you are engaged in e-commerce, catalog retailing or have your customer's orders drop shipped, you must be prepared to handle those problems in addition to returns in accord with you customer satisfaction guarantee.
The challenges escalate with case goods and upholstery that are too big for UPS or FedEx. Customer satisfaction plummets when regular LTL carriers pull up at their home, expecting only to deliver to the curb, while the customer expects a lot more. Some catalog and e-tailers don't provide much information about their delivery practices, so customers are shocked when they find that they must cart their purchases up the driveway into the house, unpack, assemble and then dispose of the cartoning materials. If multiple manufacturers are involved, it is likely that this scene will be repeated for each, because many e-tailers work with drop ship programs to avoid inventory exposure.
Contrast this with the North Carolina 800 number retailers and certain major national players with a long track record of making home deliveries of large furniture items. Goods from one or more manufacturers that are destined for an individual customer are consolidated at the trucker's dock and loaded out. Appointments are made and the delivery team arrives at the customer's home, opens and preps the furniture in the truck, accomplishes the delivery and leaves, taking the excess packaging materials. Their track record has been pretty good, but there have been horror stories that involve manufacturers shipping faulty product, delivery companies failing to arrive at the appointed time (or even day without a call) or suddenly going out of business.
Regardless how the delivery is accomplished, there's another issue. After the delivery of goods purchased on the web is made, the customer may feel that the piece doesn't have "the look" or the quality they expected. Of course they want to return it. This is standard practice and no problem with clothing items purchased from non-local sources. And then the hassle can start. Do your return policies provide for a credit memo or a refund? How do you handle the situation when a customer 1,000 miles away has disposed of the packaging materials and wants the piece out of their home? Most purchases are made with credit cards and their policies (as well as federal regulations) can result in time consuming customer service problems for you.
With over fifteen years of delivering furniture anywhere in the USA and Canada (including delivery to a yacht in transit from New England to Florida and delivery to an architect in Tokyo), I believe there are two business models that make economic and customer service sense. The first is to engage one of the emerging delivery companies that offer national service. Quality service has a sometimes surprisingly high cost and there are still geographic gaps throughout the nation, but it can be done.
One of the best business models currently being embraced by a select number of home furnishings e-tailers involves creating alliances with local retailers. Many consumers will be drawn to great web sites with effective marketing programs. Alliances with local retailers will allow customers the additional advantage of being able to see and touch the home furnishings. Plus, it will allow for efficient and effective delivery service. The winners in this approach may be the new e-tailers, manufacturers or even cooperative buying services. The big advantage will be the ability to transport the Internet purchases along with retailer purchases to the local retailer who will accomplish quality delivery, just as they accomplish delivery for special orders.
The big challenge will be setting up fair compensation for the alliance members. That is beyond the scope of this article but I offer a suggestion to any retailer contemplating an alliance. Start reading up on activity based costing so you know what charge will yield an appropriate profit.
Select Home Furnishings e-tailer Investments January-June 1999
Della & James.com $45 Million - furniture.com $48 Million - GoodHome.com $50 Million - HomePoint.com $16 Million - HomePortfolio.com $24 Million - Living.com $41Million - Tavolo.com $35 Million
The Last Mile Is The TOUGHEST
Editor's Note: A number of furniture e-tailers have addressed the challenges of delivery to remote customers. One of the larger start-ups purchased a North Carolina retailer to get a "leg-up" on the learning curve in long-distance consumer delivery. Several others, including udzyn.com are pursuing strategic partnerships with local home furnishings retailers to combine national marketing with local sales, service and delivery.
FURNITURE WORLD asked Steve Antisel, President of (brick & mortar) Bookout Furniture and e-commerce retailer FurnitureFind.com to provide his perspective on this issue. FurnitureFind.com has had eleven consecutive quarters of strong sales growth, supported by a staff that has increased from fewer than 40 to over 160 employees in just over 18 months.
"In the three years we've spent building the FurnitureFind.com model, delivery and logistics are easily the most challenging aspect of the business. The "last mile" to the customer's door is the toughest. Here's a brief synopsis of what we've learned since opening the doors to FurnitureFind.com in 1996.
"There is no shortage of companies who claim to have the capability to do home delivery, but over a succession of tests during our first year, we had difficulties of one kind or another with all of them. Some had great tracking but the quality of their handling wasn't up to par; others had decent handling but had sub-standard (or non-existent) ability to track our orders. Others were just plain slow.
"We came to the conclusion that the only way to do it right was to build it ourselves. Working closely with a "furniture van" moving company we set out to jointly develop a proprietary national delivery system called Kid Glove Home Delivery™.
Put simply, we've spent a great deal of time (and money) integrating a comprehensive communications system into their existing national delivery (physical) infrastructure. It's taken twoyears, thousands of man (and woman) hours, and dozens of trips all over the country.What makes Kid Glove Home Delivery unique is the combination of high quality handling, plus our proprietary communications system; a Web based real-time tracking system; and a quality assurance system. Just like in our store, (Bookout Furniture, Niles, Michigan), the system is designed to leave every customer with a smile.
Kid Glove Home Delivery is the product of three years of climbing a very steep learning curve. While it's still not perfect, (and people still make mistakes), we believe it's the closest thing there is to a big-box version of "FedEx" in existence today.
"When you get down to it, building a Web site is not difficult at all. . . the real challenge is quality fulfillment and service. (That's another story.) The "last mile" is the toughest, but it's also the most important.
Daniel Bolger of The Bolger Group helps companies achieve improved transportation, warehousing and logistics. Questions can be directed to Mr. Bolger care of FURNITURE WORLD at dbolger@furninfo.com.