The “last mile problem” remains one of the biggest challenges for online retailers: how to find profitable ways to deliver products to residential customers’ doorsteps. Delivering physical products to homes is costly and complex, and the expectation of free shipping creates an added burden. Even Amazon is a long way from solving the problem, with its net loss on shipping now around 5% of sales.
A wave of high-profile innovators, from Instacart to Uber, are bringing fresh approaches to the last mile problem. But we can also learn from someone with a much longer track record in last mile delivery: Santa.
Santa trains his customers to behave in ways that minimize his costs
One of the biggest problems for online retailers is that the well-intended desire to offer customers a choice about the time of delivery also significantly raises costs. Same-day delivery is a particularly expensive variant of this phenomenon. There are many examples of bankrupt online retailers who learned too late that offering customers a great service is not a winning long-term strategy if you can’t make money at the same time.
Santa Claus has a near-perfect strategy for creating an efficient delivery schedule. By delivering to every house on the planet on only one day each year he keeps his “wasted” time between drops to a minimum. The genius of Santa’s business model is that his customers don’t think their choice has been restricted – in fact they prefer to all receive their deliveries on the same day.
Santa only offers “unattended” deliveries to eliminate wasted time on the doorstep
Another tricky part of the last mile problem is that customers may need to be at home to receive their deliveries. It adds cost to the transaction for the retailer and time and effort for the customer. In my experience this is one of the biggest barriers to the growth of online home delivery.
Yet again Santa has it figured out. By delivering through the chimney when his customers are asleep Santa doesn’t need to worry about waiting for someone to answer the doorbell and then sign for the package, or even how to arrange a re-delivery if the customer isn’t home. And by leaving the delivery right where it will be opened on Christmas morning he’s making life even simpler for his customers.
If your business had a mentoring session with Santa, what changes would he recommend to improve your customer offer and increase your efficiency at the same time?