It goes without saying that distribution is a key part of any ecommerce business. Your choice of courier is a fundamental decision that affects almost every facet of your daily business and interaction with customers, as well as, crucially, your bottom line. If you’re sending, or planning on sending, more than a couple of packages each day, you’ll need to set up a business account with a courier company. As a business account holder, you’ll get discounted rates and a daily collection from your premises.
Setting up an account with a courier is a potential minefield of tariffs, rates, charges and surcharges and the whole process can seem daunting if you’ve not done it before. To make matters worse, once you’ve agreed rates and set up an account, negotiating charges is much more difficult, so it pays to negotiate everything and make sure you’re happy before signing on the dotted line. Courier companies will be flexible on most charges while they are competing for your business, but once you’re in, they are generally a lot less accommodating.
The Startup
If you’ve just started up and this is your first courier account, you won’t have much leverage with which to negotiate. Established companies will be able to provide couriers with a ‘profile’ upon which rates can be agreed. Obviously, the more volume and the larger the spend you are offering them, the more likely they are to drop their rates to attract your business.
If you have no initial volume to offer the courier, they will probably try to take advantage by offering you much higher rates than you’d normally expect to pay. From experience, it is as this stage where you’ll find the largest difference between couriers. Some companies are geared to work with larger organisations and won’t be very interested in your startup – these will be the ones that offer you the highest rates. Others might be interested in capturing you early on and growing with you, and will offer you a much more competitive deal. As always, it pays to shop around extensively, especially at this stage. You might also try predicting a volume and opening with that – always inflate your prediction a bit, it doesn’t do any harm.
Don’t go into any negotiation with a courier company blind. It pays to have a good idea of what the current ‘market rates’ are. Try to talk to other businesses, both smaller and larger than yourself, to get an idea of what people are paying for the basic services. Don’t expect to be able to equal their prices if you are much smaller, but it will give you an anchor for negotiating. For example, if another company is sending out 1000 parcels a month and paying £5 per parcel, you’ll know to perhaps aim for £6 0r £7 (or even lower if you’re good at negotiating), and you’ll know to send packing any courier that comes at you with £10.
For what it’s worth, I found that a volume of about 200 consignments a month was where couriers started to take us seriously and offer competitive rates.
Booking Agents
Another option to consider, while you’re building an initial sales volume, is to use one of the large booking agents, of which there are now quite a few. I have used Inteparcel (UK) before and been impressed with their prices. These companies have large accounts with most couriers and thus get very low rates. They effectively ‘sell’ you the couriers’ services, with a markup, and you’ll then use their account to send out your parcels. Even with their markup, it can still work out cheaper to use these booking agents rather than setting up your own account. This is due to the fact that many of these couriers just aren’t interested in working with micro-businesses. The business model of the booking agents takes advantage of having many small customers to build up an large volume overall. You might even be able to get preferential rates from the booking agent based on very little volume.
Aside from the often more competitive rates, using a middle man gives you the advantage of switching actual courier with greater ease than would otherwise be the case. If you sign up directly with a courier, switching to another can be quite an upheaval – you’ll have to devote time to meeting and negotiating with new companies and then adapting to and possibly integrating with their systems. If you operate through a booking agent, they do the heavy lifting. You might even be able to pick and choose between different couriers for each consignment, which is a luxury you definitely won’t have if you use an account with just one courier. This could help you take advantage of the most competitive rates offered by each courier to different areas or countries.
The downside to using an agent, without a doubt, is the customer service. Since you are using their account to send parcels, you won’t have direct access to the courier’s customer service channels and will probably be forced to speak to an undermanned call centre operated by the booking agent. In my experience, having direct access to your courier’s customer service desk is essential if you want to be able to offer your customers efficient service in turn.
Other Points to Consider
It’s not all about the money. Presumably driven by the growth in online shopping, the courier business is developing at a frenetic pace. Some companies are keeping up with developments and technology, allowing them to offer a whole host of advanced services, like timed delivery slots and SMS notifications. Others, it seems, have not invested so heavily in infrastructure and the quality of their service is bound to suffer. Here are some points to look out for:
- Handling method: Behind the scenes, your parcels are subject to a lot of abuse, which can lead to expensive damages and replacements. But no two courier companies handle their parcels in the same way. Most of the big companies, like UPS, DHL and Interlink use highly automated conveyor belt systems. My own experience is that this produces a much higher instance of damages than companies that use more ‘manual’ methods of handling, like ‘cage’ systems. Be direct with your sales rep. Ask them how they intend not to smash your parcels to bits. Ask them if they have any contracts with customers who send fragile or sensitive products. Turn on your bullshit radar as most reps will obviously try to blag their way around this. At the end of the day though, some couriers are simply better at not damaging your stuff and you might have to simply try a few companies before you find one that performs adequately. Here’s a tip – ask them if the company has any flower delivery contracts.
- Technology: The most modern couriers have made great advances in recent years in IT infrastructure and as a result are able to offer a whole load of useful services. Online tracking is now a given, but in addition, look for: online consigning (i.e. their core system, not just the tracking elements, can be accessed from the internet, allowing anyone to create, delete or amend consignments), SMS and/or email notifications of delivery to customers, live vehicle and delivery data (e.g. parcel scanning data that is uploaded to their system in real time, GPS vehicle tracking), photo proof of delivery attempt, digitised proof of delivery.
- Delivery Services: Not all couriers offer exactly the same services, so if there is something specific you need, make sure they have it. To be honest, most couriers these days offer an identical set of services, but there are a few specialist services that you might only find being offered by certain companies; these might include: heavy or strangely shaped items, dangerous/perishable/fragile items, delivery to certain areas, delivery at certain times (evening, Saturday etc.), timed delivery slots.
- Integration: There needs to be some way for you to communicate information about the parcels you have for delivery to the courier company. Only 5 years ago, we were doing this by handwriting addresses onto carbon copy paper and labels and handing a stack of sheets to the courier when they came to collect. Things have moved on a lot since then – at the very basic level, you might have to type addresses and delivery details onto the courier’s computer system for each consignment. Of course, some sort of automated integration between your system and theirs is preferable, but the ease with which that ‘bridge’ can be built depends greatly on the nature of both your system and theirs, so it’s worth looking in detail at how easily you will be able to integrate the two systems. If it’s difficult, it’s likely to be extremely costly. Worst still, this financial investment will act as a future barrier to changing away from that particular courier to another.
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