As the 2015 holiday season concludes, retailers can now cool off from what was one of their heftiest tasks of the year: efficiently managing the shipping of goods.
In this Executive Q&A, Jarrett Streebin, Founder and CEO of shipping API developer Easypost, discusses why full-scale, peak volume testing is so vital to shipping success, what’s actually involved in offering on-demand shipping, and why “shipping air” costs retailers a pretty penny with every package they send.
Retail TouchPoints (RTP): What trends did you notice from last year’s holiday season as retailers handled more shipping duties?
Streebin: Twitter is a good analogy of the state of shipping last year, in that early on, the web site was down constantly. They would have no traffic, and then suddenly have 100 times more traffic than they’d ever seen. That’s essentially the problem that a lot of these e-Commerce companies have, is they’re gathering 50% to 90% of their volume over the course of a month, and often specifically around set dates such as Cyber Monday and Black Friday. They were seeing this huge spike, and it was something they’ve never seen before or they hadn’t seen that year previously.
To effectively scale for all the problems you may or may not have can be really challenging. It’s like training to run only one mile, then running a full marathon. Things may break that you don’t expect to break, and that’s the core of the challenges these companies are having.
RTP: How did retailers apply the lessons learned from last year to the 2015 season?
Streebin: One thing we see that’s tried and true is locking down your infrastructure. On the logistics side, this should take place some time in the late summer/early fall. That way you can be sure that this process works once the holidays come around.
Retailers should also be running stress tests. Run a big promotion in late fall, whether it’s on the technical side or the shipping side, and see how you perform. If we had to go up to 100 or as many as 10,000 extra employees, test it. When most of these retailers start testing, they may say they don’t want to spend too much money testing it. However, if they don’t run tests, they’re probably going to lose a lot more money if it goes down during peak season.
RTP: How do retailers go about the scientific aspect of testing? Is it generally trial and error?
Streebin: The retailer’s biggest need point is handling the shipping volume. That’s going to make or break your holiday season. If a retailer has the biggest day of the year and their site goes down for four hours, that can literally cost them 5% to 10% of your overall revenue for the year.
In the words of cyclist Floyd Landis, ‘You’re never overtrained, you’re undertrained.” You can never really test this too much, especially from the starting point of some of the companies that aren’t really doing adequate testing already.
RTP: How has the presence of newer, on-demand delivery models fit into shipping in 2015?
Streebin: Actually, none of my top 100 enterprise clients have even asked for it. Amazon markets it a lot, because their game is marketing how great their shipping is, but in terms of real demand from the shippers and even the customer side, we’re not seeing it.
I always go to back to the fundamentals. If you’re going to offer same-day delivery then you need to have inventory in every city that you want to offer the service in, or you need to have some inventory in your city, in which case you need to have that integrated into whatever your inventory management system is. You then have to be able to tell a customer within a second on the web site whether or not you can deliver within an hour, or provide the regular delivery option.
It’s a really complex transaction that has to take place. The problem is effectively communicating between our underlying inventory and the end customer, whether or not we have the item and can get it out the door in time. Additionally, there’s the demand that makes it worthwhile to set up that process. You’ve got to have a lot of customer demand in each city that you want to operate in.
RTP: What expectations do you still see customers having in 2015 and beyond?
Streebin: It’s always reliability over speed. The shipping costs of same-day delivery are going to be $20 to $40 per order for most retailers in the market. At that price point, most shoppers would get in their car and drive to Target or Walmart. On the customer side, the most important part of shipping is the price point. If it’s free, that’s perfect. If it’s going to be expensive and I’m going to have to pay for speedier delivery, it’s still only going to matter on Dec. 22, when I need it shipped by Christmas Day.
RTP: What do retailers need to iron out most in holiday shipping going forward?
Streebin: It all goes back to packaging. Most companies are shipping so much air, and at least 30% to 50% more space in the packages than necessary. Consequently, they’re paying 30% to 50% more than they should on shipping.
Not many VPs of Logistics or CFOs are taking into account box sizes, but that’s where the costs are. If you’re shipping air and you’re not optimizing how your packages are shipped, then you’re spending a lot more on shipping then you need to.