Logistics

Seth Godin wrote about his thoughts on delivery charges for online stores. Here is a snippet:

Two things have changed. First, Amazon has taught millions that free shipping is the way the world should work. As a result, anything more than free just feels wrong. Second, other merchants have realized that you can make 100% of your profit from shipping and handling and do quite well.

We are stuck between those two extremes on our e-commerce sites. We are tempted to go with "free delivery" as a major selling point, and to help encourage cautious South Africans that shopping online is a good idea

However, delivery is not cheap. We have found a great courier provider in Borntosend, but the cheapest that we can send even a small package is still over R50. On a R500 order, that's 10% we're giving up, which is about a third of our profit.

We've decided to take the middle-ground and cover our costs, but not make any profit off delivery. We charge R50 per order on Flag Kit, Bug Zapper and Yuppiechef. That means we take a bit of a knock on heavier orders, but usually we've made more profit on those already.

More from Seth:

Online, the economics are clear. Repeat business is what matters, and that happens when you surprise people (for the better). Not when you rip them off.

Kalahari offers free delivery on orders over R350, which is a nice incentive for customers to bulk up their baskets before checking out. I know that I've added an extra book to my order to get over the delivery threshold. This is easier for Kalahari because of their volumes - apparently around 1,200 deliveries a day - so they have been able to negotiate their courier company down to around R25 per delivery.

Perhaps if the DTI wants to encourage small business they should subsidise e-commerce deliveries. It would be a massive help in getting online businesses off the ground, and monitoring would be quite easy too - submit the invoices from your courier company and receive a R25 subsidy for each order.

We can only dream.

(Thanks Lisa for the link to Seth)

So true:

Thanks to XKCD.com

The SA Postal Service didn't handle our stuff with the tender loving care we would have liked. [shock, horror!]

One of our clients sent us this photo.

Each racket has its own case and is packed in a very sturdy box. So, I guess someone chose to sit on it while taking his lunch break. We will be sending the customer two rackets just to say we are really sorry.

I saw this ad last night and absolutely loved it - it really struck a cord as to where we are in our process of setting up systems to handle the stuff that’s between “Here” and “Germany”. FedEx is currently setting up shop to take on the domestic market in SA, this after recently buying out local courier service, Supaswift. We are going to give them a try soon…especially because they have nice boxes.

[gv data="MrMURochE6Y"][/gv]

Last week we received payment for an order that was placed in September 2006 for 3 x 6m ground mounted flag poles. Since then we have decided to not sell flag poles because they’re not the most convenient things to package and deliver, but we had to honour this quote because back then we also didn’t specifiy that quotes were valid for 30 days! Poles are particularly tricky if they’re headed for the middle of the Transkei (which we did last year).

We’re still undecided about whether to put poles back on the site. There is a demand, and customers often want a pole and flags at the same time. If we only offer flags they might go somewhere else for the whole order. We need to decide whether to stay absolutely focused (”country flags to your door in a hurry”), or to keep our range wider and appeal to a bigger market. A wider range will mean modifying the ordering system to allow for different delivery times and charges for different products, which is not ideal.

This week we had an enquiry for Bug Zappers from a customer in Kent, England. We are not trying to sell internationally because it creates too many middle-men (China to Hong Kong, Hong Kong to the SA importer, SA importer to us, us back overseas) plus double customs and lots of delivery charges. But we do appreciate that the Bug Zapper is a special product, and when you want to get your hands on one there aren’t a lot of options. So we quoted a price for 3 rackets (they fit nicely in one box), and the customer accepted.

Then we got some quotes for international shipping. Notice how this part happened after we had already quoted the customer? Yip, we’re not that bright.

A box of 3 rackets weighs 1.15kg and the dimensions are 53cm x 24cm x 4cm. That’s about the size of 2 small Debonairs boxes end to end, and not much heavier. ACT Logistics quoted around R800 and Berco Express quoted R710 (ex VAT, but apparently you don’t pay VAT on international shipments?). That was way, way higher than we had expected. With a deep breath and a grimace we turned to the South African Post Office.

You might have noticed that the Post Office website is not too shabby. The design is clean and there is a lot of information, although the navigation is not always obvious. We have used the PO Box renewal facility in the past and it was very impressive (read here). On the site we found the rates booklet in PDF which is handy. Their courier cost was very similar (around R700), so clearly that is the minimum rate for a small parcel to an international destination (I wonder how Amazon does it so cheaply in reverse?), but they do offer normal international postage (10 days air freight as opposed to 4 days courier), so we decided to go with that.

This morning Shane and I went to the local Plumstead Post Office with our box of Bug Zappers and the customer’s address. We were greeted by a teller whose mood was closer to a Home Affairs worker than a Vida e Cafe waiter. I guess she knows that we’re only using the Post Office as a last resort, so a cheery disposition is just a waste of energy. She weighed the parcel and quoted R203 for air freight (about R130 for sea freight), plus R6 for insurance.

We tried to pay via credit card, but apparently the Post Office doesn’t accept credit cards. Can you believe that? The second-hand jewelry shop in the tiny centre down the road from us does, but for some reason Post Offices don’t. In an interesting case of irony, the Post Office even calls themselves a bank. They do accept debit cards, but this is not ideal because each transaction costs us a charge from our bank.

We asked if we could open an acccount (not a bank account, a retail account for paying a bill once a month) because we plan on taking lots of small deliveries to the Post Office every day, but that’s not possible either. In my usual hot-headed way I threw out the comment, “I guess this is why PostNet exists”, to which the teller responded curtly, “Have you been to PostNet? They charge double, and use us for postage anyway.” Although she didn’t see it, this was exactly my point. Why has a PostNet branch opened up in just about every South African town (200 according to their website) when they offer the same products as the Post Office, outsource delivery to the Post Office, and charge more than the Post Office? Today I found the answer - PostNet cares, and tries to understand what customers really want. They are usually staffed by the franchisee him/herself, which means there is an element of passion and desire to help, they offer accounts for businesses and they accept credit cards.

The Post Office could technically solve these (and a few other) problems and blow PostNet out of the water. But I wouldn’t count on it.

At Live Alchemy we are trying to keep our systems and staff as flexible and scalable as possible. Part of that strategy involves having orders processed (checking for payment, ordering stock, packaging, giving to courier company) by people working from home. Our first “home processor” is Shane’s dad, who starts in February. We are setting him with a new computer, ADSL line, phone and lots of bubble wrap, while at the same time trying to develop an online system that will keep track of everything so that we can see what’s going on from here. I will post soon about my ideas for system we are developing.

I came across a company in America called LiveOps that specialises in setting up this type of “virtual call centres” for companies. It’s a bit easier over there because of the level of broadband that they have which enables things like routing of phonecalls over the internet, but we can still imitate some of the ideas. Read a bit more about the concept here.

Today I received a call from a client who was wondering why the invoice that he received with his flags was less than what we had originally quoted and what he paid (His accounts department alerted him to the discrepancy). Our conversation went something like this:

"Uum, sir, could you please tell me what name is on the top of the invoice?", I asked

"Oh, it says XXXXXXXX", the client responded.

"Oh dear!…..that's our suppliers invoice", I ashamedly responded. 

Very embarrassing I know, but there is a reason why this happened. The courier company would pick us the order from the supplier and then send it to the client without anyone from Flag Kit being involved. Great in principle, but not very realistic. We learned the hard way and have since had all flags from the supplier sent to us, allowing us to do a quick quality check and package each order the Flag Kit way.

We got mail today:

To whom it may concern,
I am really disappointed in the poor service and delivery of your organization.

The events unfolded as follows:

• I placed an order for one Bug Zapper via your online services over two weeks ago.
• I received a receipt twice via email shortly after payment.
• I received a postal tracking number earlier this week.
• I was only contacted on Monday the 4th of December to be informed that the transaction did not occur. The salesperson assured me that he would fix the problem on the system .
• Today I followed-up delivery with the postal service, after tracing my parcel with the tracking number , I found that it is on it ’s way back to Cape Town! I was told that the parcel was not marked clearly as to the delivery address.

Your website states clearly that delivery is 3 to 4 days, this information is false and should be corrected. I deal with customer on a daily basis and try to adhere to the dates I set for delivery.

It is unpleasant to receive complaints from customers when their goods are not delivered on time, I do however rectify the problem and put measures in place so as for it not occur again.

I await your reply and a solution to this dilemma.

We called the writer and are sending him another Bug Zapper on overnight delivery regardless of what happens to the first delivery - and we’re throwing in an extra zapper to ease the pain. We want to be known for great service and delivery, so something like this makes us wanna reach for a bottle of Jack.