Reducing Delivery Costs: 7 Tips Every Retailer Should Know

Picture this: you’re caught between two tsunamis coming at you from opposite directions. Pretty daunting, right? Well, that’s a pretty good metaphor for what retailers are facing these days. On one hand, they’re battling shrinkage, which includes inventory losses from both operational slip-ups and theft. On the other, there’s this massive wave of returns they need to manage.

To put it in perspective: according to the National Retail Federation, the total amount of returns in the US retail industry hits a staggering $743 billion in merchandise. This figure towers over the market value of Walmart, America’s retail giant.

But here’s the kicker for retailers: amidst all this chaos, they’ve got to keep their delivery costs lean without compromising on giving customers a smooth and enjoyable experience. Instead of fixating on what’s out of their control, it’s crucial for retailers to zero in on what they can manage to trim those delivery costs. So, let’s dive into what those controllable factors are and how tackling them could be a game changer.

Read Also: The Retail Playbook for Thriving in an Omnichannel World

1. Happy Returns of the Day

Facing a tidal wave of returns, U.S. retailers grapple with $145 million in returns for every billion dollars in sales, a figure that represents a daunting 14.5% of their total transactions. With the expectation that these numbers will only grow, the challenge intensifies to keep returns efficient and cost-effective, all while preserving a stellar customer experience. This situation demands not just managing costs but also turning the returns process into a positive touchpoint with customers.

This is where the magic of geocoding and dispatch management platforms comes into play. Many countries do not have a standardized way of noting down addresses or zip codes that give some clarity on its precise location. Geocoding drastically cuts down on the headache of reattempted deliveries on these unclear by accurately locating unclear addresses, thereby saving costs and boosting customer satisfaction. Meanwhile, dispatch management platforms smooth out the wrinkles in the returns process, automating the grunt work and keeping customers in the loop with real-time updates.

Additionally, optimizing the logistics of returns by strategically planning routes and fully utilizing vehicle space can significantly reduce operational expenses. By clubbing pickups and deliveries efficiently and maintaining transparent communication, retailers can not only trim down costs but also build stronger bonds of trust and loyalty with their customers, turning the challenge of returns into an opportunity for enhancing service excellence.

Read Also: The History, Evolution and Future of Reverse Logistics

2. Mix it up with omnichannel

Omnichannel retailing, the strategy that integrates all shopping channels like online or in-store isn’t just a buzzword—it’s a cost-saving revolution for retail businesses. Imagine a customer browsing online, then picking up their order in-store, or vice versa. This seamless blend of shopping experiences does more than just boost customer satisfaction; it cleverly distributes the delivery load. Instead of every order piling onto the delivery system, customers become willing participants in the logistics chain, picking up their purchases at their convenience. This not only alleviates the pressure on delivery infrastructure but also significantly slashes delivery costs and makes for a great customer experience as they do not have to pay delivery charges anymore.

Moreover, omnichannel retailing offers retailers the golden opportunity to optimize their inventory management. With a unified view of inventory across all channels, businesses can strategically position their stock closer to where demand is highest. This proximity reduces the need for long-haul deliveries, further cutting down transportation costs. In essence, omnichannel strategies turn logistical challenges into advantages, making deliveries more efficient and cost-effective. By leveraging the power of omnichannel retailing, businesses not only meet their customers where they are but also pave the way for more sustainable and economical delivery systems.

Read Also: Omnichannel Retail Fulfillment and the Role of Logistics

3. On Optimal Routing

In today’s world, where instant gratification is the norm, retail businesses face the pressing challenge of fulfilling orders swiftly without breaking the bank. Take XYZ Retail for example, juggling 100 diverse orders ranging from on-demand to next-day deliveries. Prioritizing these, especially in traffic-congested urban mazes, seems like a herculean task.

This is where the magic of optimal routing comes into play. By leveraging data on real-time traffic, driver schedules, delivery priorities, and vehicle capacities, retail businesses can carve out the most efficient paths for their fleets. These aren’t just any routes; they’re meticulously calculated courses designed to dodge delays, cut costs on fuel, and ensure timely deliveries across the board. In essence, optimal routing transforms the daunting task of delivery into a seamless ballet of precision and efficiency, keeping both the bottom line and the customer satisfied.

Read Also: The Definitive Guide to Logistics Route Optimization

4. Keep Customers Posted With Every Turn

One of the critical issues that retailers face today is rising Where Is My Order(WISMO) calls. This peaks when orders vanish into the ether of transit or hit unforeseen snags, pushing customers towards the brink of cancellation. Such scenarios not only erode customer trust but also dent the retailer’s revenue and inflate costs with reattempted deliveries. In an arena where giants like Walmart, Target, and Costco set the pace, emerging retail players are finding that maintaining high delivery efficiency is no longer optional but essential.

Read Also: 3 Reasons Why Real-Time Communication is A Must For Delivery & Fulfillment

At the heart of this delivery efficiency lies robust real-time communication between drivers and customers, transcending mere package tracking. This involves timely updates on order progress, sharing driver contact information, offering rescheduling options, and proactively communicating real time ETAs. Crucially, in the event of potential delays, prompt notifications and customer service outreach offer customers the flexibility to adjust their expectations or plans. Such transparent and continuous communication not only mitigates WISMO calls from customers but also transforms delivery experiences from unpredictable waits into predictable delights, significantly cutting down on the costs associated with delivery misunderstandings.

5. Only (Definite) Time will tell

Offering time slot options for deliveries is a game-changer for retail businesses seeking to balance cost efficiency with customer satisfaction. In today’s fast-paced world, customers value the ability to choose delivery times that fit their schedules, significantly reducing the chances of missed deliveries. This flexibility not only enhances customer experience but also streamlines logistics operations, allowing businesses to adjust their delivery strategies according to customer availability and preferences.

Furthermore, by leveraging time slot scheduling, retailers can introduce premium charges for expedited deliveries, such as 30 minute to one-hour slots or on-demand services, appealing to customers willing to pay extra for convenience. This can compensate for additional fuel consumption to cater to these priority deliveries . During peak shipping periods, this system ensures efficient use of vehicle capacity, enabling retailers to meet increased demand without compromising service quality while optimizing for cost. Additionally, offering discounts for selecting eco-friendly delivery slots can incentivize customers to choose options that align with sustainable logistics practices, boosting revenue while supporting environmental goals.

Read Also: How Locus is managing customer-preferred time windows for its clients

6. Delivery Zones Make All The Difference

Retailers can significantly cut delivery costs through zone-based routing, a method that smartly groups deliveries by delivery zones. Consider a scenario where two trucks head to the Upper East Side of Manhattan, a less crowded area compared to the bustling Midtown. There’s no need for the same fleet intensity here as in Midtown. By avoiding overlaps in delivery zones, retailers can improve fleet efficiency and reduce costs.

The challenge lies in determining the right number of vehicles per zone without any redundancy. Zone-based routing elegantly solves this by assigning the most suitable resources to each area, eliminating redundant routes. This strategy not only prevents vehicle overlap but also optimizes planning time and vehicle use. Consequently, it leads to fewer vehicles needed for deliveries, translating into significant savings and a streamlined, cost-effective delivery operation.

Read Also: Why Cross-Fleet Utilization Might be the best bet for Business Growth

7. Dive deep into delivery data

Diving into the world of real-time delivery data is like unlocking a secret level in a video game for retail businesses, where the rewards include slashing delivery costs and boosting customer happiness. This real-time information acts as a GPS for the logistics team, guiding each delivery move with precision. If a traffic snarl-up is brewing along the planned route, the system can reroute drivers on the fly, avoiding delays and saving on fuel—think of it as navigating through the urban jungle with a map that updates itself every second. This agility in delivery operations means packages reach customers faster, using less fuel and resources, which directly translates into cost savings for retailers.

But the magic of real-time data doesn’t stop at rerouting; it’s also about continuously refining the delivery process. By analyzing this live feed, retailers can spot trends, such as certain areas consistently causing delays or specific times when the demand spikes. With these insights, they can adjust their delivery strategies, perhaps by pre-positioning inventory closer to high-demand areas or scheduling more drivers during peak times. This proactive approach to logistics management means retailers can do more with less, reducing the overall cost per delivery.

Bonus Tip: Invest in an advanced dispatch management platform like Locus

Before we wrap up, there’s a bonus tip worth considering: investing in an advanced dispatch management platform, specifically Locus. Retail businesses have several options when it comes to selecting dispatch management software, but Locus stands out as a particularly effective solution to the challenge of rising delivery costs.

By adopting Locus’ dispatch management platform, retail businesses position themselves strategically to streamline their delivery operations and manage costs more efficiently. Locus’ use of dynamic routing solutions, along with sophisticated algorithms and real-time data analytics, significantly improves route planning and boosts driver productivity, and in turn leads to substantial reductions in unnecessary mileage and fuel expenses. Even if there are any last-minute changes like delivery cancellations or ad-hoc delivery requests, it provides the updated route plan within a few minutes so that drivers can deliver orders efficiently. This not only helps lower operational costs but also enhances the reliability of service offered to customers, fostering greater trust and satisfaction.

The platform’s intuitive design makes the integration of these technological advancements into existing operations smooth, allowing businesses to quickly see improvements in efficiency and a decrease in delivery costs. In the competitive and ever-evolving world of retail logistics, embracing Locus provides a clear route to operational excellence and cost savings. For retailers looking to elevate their delivery efficiency and cut costs, considering the advantages of Locus might just be the strategic edge needed.

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References

https://nrf.com/research/2023-consumer-returns-retail-industry