Nouveau Niche

Nov 01, 2004 10:30 PM  By

When Barnes & Noble, the national book chain, decided to offer same-day delivery in Manhattan for customers who ordered through its e-commerce site, it had specific — and demanding — service requirements. ▪ The small parcel carrier that the chain selected had to be able to offer BN.com’s customer service staff real-time access to its tracking system. The carrier had to be able to guarantee 7 p.m. delivery even though it wouldn’t start delivering until 2 p.m. or 3 p.m. And it had to provide delivery at a price point that allowed BN.com to offer free delivery for orders of $25 or more. ▪ That Barnes & Noble found a small package carrier that met its requirements probably isn’t too surprising. But that the company was Vienna, VA-based Lasership, and not one of the giants that dominate the small package business, might seem much more surprising.

It shouldn’t.

“Lasership just had a better understanding of what it takes to get a package delivered in Manhattan,” says BN.com CFO Kevin Frann, whose e-chain uses UPS for its national deliveries. “They know which doors to use, where to get into a building, how to get around the city.”

There is, in fact, life outside of the biggest small-package delivery firms, especially for companies — like the $60 million Lasership — which have established a niche or can provide specific, customer-related services. Other firms, like Dallas’s Dynamex, specialize in certain kinds of deliveries, such as perishables like pharmaceuticals or time-sensitive documents. But regardless of what they do differently, they have one thing in common: They know they can’t compete with DHL, FedEx, and UPS on reach or scope or volume pricing.

So, says Lasership CEO Ali Dilmaghani, whose company started life as a local courier service: “The biggest thing is flexibility. We need to alter our technology or adjust our cut-off times not for what works best for us, but to accommodate the customer.”

BY THE NUMBERS

At first glance, there wouldn’t seem to be much room in the small package delivery business for anyone but the three largest companies. UPS is a $33.5 billion company that delivers some 13 million items to 200 countries every day. FedEx’s small package subsidiary, FedEx Ground, recorded almost $4 billion in sales in fiscal 2004.

So where does a $250 million company like Dynamex (pronounced “dynamics”) fit in?

“We like to think we are an alternative to the big three,” says Andre Smith, Dynamex’s director of national accounts in the United States. “And we try to be that alternative by helping companies answer a couple of questions. What do they want to do, and how do they want to do it? Then we put a solution together to make it happen.”

In fact, despite the largest companies’ immense size (and that doesn’t even include the U.S. Postal Service, which vigorously competes with DHL, FedEx, UPS, and their ilk), there is apparently plenty of room for companies like Dynamex. Velocity Express is a $300 million shipper with facilities in 84 of the top 100 U.S. markets; it specializes in financial and pharmaceutical deliveries. CD&L, with 65 facilities in 20 states, had $166 million in sales in 2003 and is a major presence in the New York area. Lone Star Overnight offers rates that it says are as low as one-half those of the national shippers on deliveries in and between selected cities in Texas and Oklahoma.

“At first glance, it doesn’t look as if there would be much need for smaller companies,” says Jeff Kline of consultancy DM Transportation Management in Memphis. “The key would be to find a niche, like oversized packages, or find a customer who needs a specific service that the biggest companies can’t offer.”

Which is where much of the regional carrier market exists. The largest companies, with their hub-and-spoke delivery systems, aren’t set up to handle intra-city or intra-state deliveries as well as their smaller competitors. As Frann says with a laugh, if BN.com wanted to use a national chain for its Manhattan service, the shipper would probably have to forward the books to its regional distribution center and then redirect them back to Manhattan. Many smaller carriers, on the other hand, sort at the pick-up point, saving that step.

BETTER FIT

This doesn’t mean the largest companies don’t do what they do very well, say customers, consultants, and other shippers. It just means there are some things that others can do as well, or even better. This may be one explanation for a number of consolidations among regional shippers over the past couple of years, because they see these sorts of opportunities.

That’s the case at Dynamex, says Smith. It offers not just on-demand and scheduled shipping, such as dock sweeps, but provides comprehensive outsourcing services that include branded and co-branded deliveries. For example, an office supply chain can outsource its deliveries to Dynamex, which can then use Dynamex-labeled trucks, trucks without any labeling, trucks with the office supply chain logo, or trucks that sport logos that say “Office supply chain delivered by Dynamex.”

“Obviously, if you’re making widgets, your core competency is not delivering the widgets,” says Smith. “What we offer is a chance to eliminate employees, reduce overhead, optimize routes, and reduce administrative burdens. We help them best use the value of their assets.”

Another area of opportunity is time-sensitive financial deliveries. A key piece of Lasership’s business, says Dilmaghani, are paychecks and financial documents for some of the country’s largest payroll-related companies. It’s no problem at all for Lasership to deliver check proofs to an airport after banking hours, a delivery that a larger shipper might not consider to be worth the trouble. Regional carriers, though, don’t see that sort of delivery as any trouble at all. Says Smith: “We see ourselves as filling some voids, and there are new voids out there all of the time.”

A good example is the relationship between Lasership and BN.com. Lasership is the third carrier the e-chain has used in the five years it has offered same-day delivery in Manhattan. The other shippers, says Frann, were unable to combine delivery efficiency with price and technical support. That hasn’t been a problem with Lasership. “We can’t promise our customers same-day delivery and then not give it to them,” Frann says.

Lasership has done that. One of the reasons, say Frann and Dilmaghani, is that the shipper made it possible for the e-tailer to track packages. BN.com customer service representatives can see, real time, where the package is on the delivery route. That means that when a customer calls to check on a delivery, the service rep can say it’s the fifth delivery on the route, and should arrive by 6 p.m. Says Frann: “That’s an extra bit of information we can give to the customer, and in New York, when the building may be closing or when they may be leaving work, that’s something they appreciate.”

It’s also a service BN.com may not have been able to get from a larger shipper. But with the smaller company, says Frann, “it’s a win-win for us and the customer. We have a number of stores in Manhattan, but there is limited shelf space. This way, we can offer more titles, and our customers like the ability to receive them on the same day.”

And Lasership has the ability to deliver them.

Jeff Siegel is a Dallas-based freelance writer whose articles have appeared in Forbes, American Way, and a variety of other magazines.