According to Forrester, e-commerce purchases of furniture are projected to grow at a compound annual rate of about 15 percent from 2014 to 2019. Parcel companies find it difficult to service bigger boxes because they may not fit through their automated sorters or be easily read by high-tech package scanners. In addition, these bulky items often require extra labor for manual handling, increase usage of cargo space and require larger trucks to deliver in residential neighborhoods. Combined, large size items make deliveries unattractive for the likes of FedEx and UPS. As a result, the growth of demand for these bulky products online has been a windfall for better suited logistics companies.
Third-party logistics and white glove delivery service provider XPO reported revenue growth of 5 percent YoY and net income growth of 316.7 percent on Nov. 2, 2017. CEO Bradley Jacobs directly attributed these gains to e-commerce demand for contract logistics. For the 2017 holiday season, XPO announced the opening of 8 new last-mile hubs that will focus on white glove services and delivery of heavy goods purchased online. Last-mile delivery companies are filling a growing service gap that seems to have taken UPS and FedEx by surprise.
FedEx ground has seen a 240 percent increase in oversized packages over the past decade and now account for 11 percent of all volume. To accommodate this growing need FedEx has added new facilities specifically for oversized packages. However, these facilities do not address the common needs of large-item delivery, including delivery to an upstairs room, connecting an appliance to utilities, removal of an old large item, or unboxing to ensure the item arrived intact. Large bulky items that successfully sell online inherently must have price points high enough to justify direct to consumer delivery, whether delivery costs are included in the overall selling price or paid separately by the buyer. Consumers purchasing products with such high price points are going to expect and require white-glove-level services to ensure a successful delivery.
Wayfair, an e-commerce-focused furniture retailer, is already taking matters into their own hands. A year ago, all of the last-mile warehouse facilities were run by third parties. Increasing concerns about inconsistent customer service and damaged tables and beds prompted Wayfair to take over half of the facilities, trying to infuse a sense of teamwork and enthusiasm among its workers. Retailers with a footprint of warehouses and storefronts will follow suit and reduce the transit distance of large-item deliveries. The bulkiness of items such as patio furniture and mattresses will provide cost savings that outweigh gains seen from small-item omnichannel fulfillment already practiced by major retailers like Wal-Mart.
Items that years ago were not envisioned to be routinely purchased online are now proving to be some of the highest growth verticals in e-commerce. The lack of service options from major parcel carriers and the physical challenges of large items sets the stage for a highly fertile and competitive environment for logistics providers.
Enjoy curated articles directly to your inbox.