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Gilt diversifies its shipping strategy
April 7, 2015
By Allison Enright Editor
The flash-sale retailer has moved the majority of its ground shipping volume from UPS to
Newgistics. While delivery takes a little longer, the savings allow the e-retailer to offer free
shipping on more orders and other discounts.
Flash-sale e-retailer Gilt Groupe Inc. has shifted the majority of its
daily ground shipping—an average of 20,000 packages a day—from
UPS Inc. to consolidator Newgistics Inc., which carries packages
through its ground network and hands them off to the U.S. Postal
Service for final delivery. The change, says Chris Halkyard, the
e-retailer’s chief supply chain officer and general manager of
distribution services, will save the e-retailer money it will reinvest in
promotions intended to increase the lifetime value of customers.
The move is a result of Gilt reviewing its shipping contracts with
an eye toward diversifying the mix of shippers its uses. That
process began in earnest following the 2013 holiday season, which
ended with many parcels shipped late in the season arriving after
Christmas. UPS subsequently conceded it wasn’t adequately
prepared for the late rush.
“Holiday 2013 was a huge issue and a tough season,” Halkyard says.
“It made people in my position and my counterparts think of not
only would we like cheaper options, but also about how we want to
take some of the pressure about capacity off and not have all our
eggs in one basket.” Gilt is No. 59 in the Internet Retailer 2014 Top
500 Guide.
Recent rate increases, accessorial charges to account for gasoline
prices and special services, and the shift to dimensional weight
fees by UPS and FedEx are raising the cost of many e-retail ground
shipments, leading merchants to look for alternatives. (Learn
more in the story Diversifying Delivery, in the April issue of Internet
Retailer magazine.)
Halkyard says that while it takes an average of about four days, or
1.5 more days than it took UPS, to get consumers their packages
this way, consumers aren’t complaining, and the savings allow
Gilt to offer more free shipping promotions and better discounts.
“We see this switch improving our LTV,” he says, referring to the
customer lifetime value (LTV) metric that projects how much in all a
customer will spend with a business.
Gilt began working with Newgistics about three years ago to handle
product returns, and Halkyard says he was happy with the services
the vendor provided. But it wasn’t until recently that he gained
confidence in the ability of the USPS to meet Gilt’s standards to
handle last-mile delivery responsibilities and allow the e-retailer to
shift outbound ground shipping away from UPS.
But Halkyard says package tracking improvements made by the
USPS over the last several years helped convince him. “[The USPS]
has rapidly scaled their technology. There’s more real-time tracking.
A couple years ago, it was a joke—they were bringing a knife to a gun
fight—but that has changed dramatically now.” He also likes that Gilt
packages can be delivered to consumers on Saturdays.
Tracking parcels shipped via the Postal Service as recently as two
or three years ago was more haphazard, shipping experts say, with
packages sometimes being scanned when received by the USPS,
sometimes at local post offices and sometimes upon delivery.
Often there was a lag between when a scan happened and when the
information was uploaded so the customer could see it and know
where a parcel was. That’s no longer the case.
“The USPS is getting aggressive in the e-commerce space,” says Todd
Everett, chief operations officer at Newgistics, and it more reliably
handles last-mile delivery than in the past. “They recognize the parcel
business and servicing the e-commerce market is a critical part of
their business.”
When considering the move, Halkyard says he called an old Air Force
buddy who is a mail carrier in El Paso, Texas, and asked him if the
tracking improvements were as good as he was hearing. “He said ‘I’ve
got this scanner in my hand right now and I have to scan everything,’”
Halkyard says. “He said at the start of every shift [management]
highlights anybody who’s not scanning and that every carrier is held
fully accountable.”
Gilt began testing delivery via Newgistics during the holiday season,
with shipments going to addresses in the Midwest. Happy with the
results, the e-retailer rolled it out for deliveries going to the coasts
in February. It continues to use UPS for expedited deliveries, like
overnight and two-day shipping.
Plenty of other e-retailers are re-examining their shipping strategies
and carrier mix as well. Find out what e-retailers including Amazon,
Newegg, BabyAge, Ampere Creations and others are doing and what’s
driving the changes among carriers in the story Diversifying Delivery,
the cover story of the April issue of Internet Retailer magazine.
newgistics.com
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