The Last Mile: How Small Business Can Win the Delivery Race with Amazon
Consumers expect convenience like never before. With the right strategy, local shops can benefit from the home-delivery boom.
PHOTO CREDIT: Getty Images
Santa Claus had a lot of help this holiday season. Amazon dominated sales, accounting for 55 percent of all online transactions on Black Friday on its way to setting a one-day sales record on Cyber Monday. One survey found that 63 percent of shoppers planned to do at least some of their holiday shopping on Amazon this year.
And while this is easy to see during the holidays, it's not an extreme example, This is now a year-round phenomenon. Thanks to the e-commerce giant, consumers have come to depend on the convenience of online shopping and home delivery.
It's amazing how quickly we have all gotten used to the immediate gratification that's shipped in those smiling brown boxes. I know a steady stream of them crosses my front porch, and I'm sure that's the case for you as well.
Amazon's incredible growth and the potential threat it poses to traditional retailers has been well documented. But small business owners don't have to be left behind. In fact, local shops may be well-positioned to benefit from the home delivery boom.
Now that the holiday rush is over, and the early-winter retail lull is setting in, this is the perfect time for small business owners to assess how they can respond to these shifting trends -- and make changes in time for the 2018 holiday season.
Bootstrap your delivery operations
Amazon's success is built on a massive logistical operation. It's a daunting prospect. How can you possibly compete with a company that owns 4,000 truck trailers, 40 Boeing 767s, and has a distribution center located within 20 miles of 44 percent of U.S. households?
You don't have to. Your small business is probably located within 10 miles of all your customers, and you know how to reach them better than anyone. For little added expense, you can ask existing employees to make deliveries in your neighborhood, or adjust your seasonal hiring to include couriers instead of clerks.
This is old news for many small companies. Home delivery has always been a central part of the business model for florists, dry cleaners and local pizza shops. Even Walmart figured this out. The country's largest private employer is leveraging its 1.4 million workers as couriers, allowing them to earn extra money by making deliveries on their way home.
Use Amazon's sales platform to your advantage
Amazon isn't just the world's largest online retailer, it's also a sales channel used by thousands of other retailers. Sales by small businesses accounted for half of the purchases made on Amazon in 2017, including 140 million items on Cyber Monday alone.
The fees for selling your products on Amazon typically range from $1 per item up to a 15-percent referral fee (depending on the volume and category of items sold). The advantages are obvious: You get access to Amazon's 150 million monthly visitors and the marketing muscle of the e-commerce giant. If you have Amazon fulfill your orders, you even get the advantage of free shipping to Prime members.
Keep an eye on your shipping costs
If there's one lesson to be learned from Amazon's success, it's that consumers have come to expect cheap and easy delivery. In fact, charging too much for delivery could cost you customers. One survey found that shipping cost is the number-one reason online shoppers abandon their carts.
Offering free or discounted delivery is easier said than done, of course, when that expense eats into your margins. That's why it's essential to closely monitor costs and calculate how much it affects your business. You can think of this expense as a percentage of gross sales, just as you would any other cost of goods sold, and adjust prices (or other expenses) to preserve your revenue.
To keep costs down, you should regularly compare rates across shipping services such as UPS, FedEx and the U.S. Postal Service. A useful tool for finding the best rates is Shyp, a cloud-based dashboard that also integrates with ecommerce platforms like Shopify. For local deliveries that you can't handle yourself, look to on-demand service platforms like TaskRabbit for flexible, affordable options. (Not coincidentally, Amazon has launched its own on-demand platform for local deliveries, Amazon Flex.)
Let your customers come to you
Local retailers have a unique opportunity to turn the home delivery model on its head: Promote free in-store pickup and make it easy for online customers to come to you. This eliminates your shipping expenses completely -- a savings that could be reflected in your prices.
For the customer, driving to your store may not be quite as convenient as home delivery, but you can offer other advantages. Focus on building a top-notch e-commerce experience on your website, and create a designated pickup spot in your store that's well-organized and efficient.
And of course, there's another important benefit that your shop has over those brown boxes: Your smile is real.