Local Delivery: A Fragmented Industry, Even More Fragmented Sales Efforts
Last week I was talking to the owner of a small retail store in Oakland, California. He offers TV stands and mounts, sells many of them online, and ships about a dozen a week to customers around the San Francisco Bay Area. He uses UPS for all of his national and local delivery needs because that’s the only shipping method he knows. We talked about the possibility of his using local delivery companies and couriers. There are significant advantages over UPS, FedEx, and the Post Office: a scheduled delivery time, lower packaging requirements, and, importantly, lower cost. After paying all the surcharges, he pays UPS almost 30% more for a delivery than he would pay using local delivery.
I was amazed when the owner told me that no courier had ever walked in his door, or even called him, to offer delivery services. He also wasn’t aware that couriers did deliveries that weren’t urgent, perishables, or papers or envelopes. This illustrates a major shortfall in the local delivery and courier industry: the lack of high-quality sales and brand awareness. Most of the more than 4,000 courier companies in the US are started by entrepreneurs who “carry a bag” to get established. At some point, the owner needs to focus on operations (recruiting, technology, dispatching, payroll) and moves away from sales. What happens? Sales stagnate. In addition, most local carriers are small companies, so they don’t invest much in branding and marketing. The result is that courier companies tend to stall out below $5 million in annual revenue, leaving many local delivery opportunities to less-efficient options, like UPS and FedEx, fleets, or leased vehicles, and less-than-truckload providers.
Given that local delivery is a rapidly growing $46 billion industry, it’s only a matter of time before a national brand emerges, spending on marketing and high-quality sales to establish a nationwide local delivery provider. “Startups” will gain recognition, however, they can’t perform all of the services at scale that a local delivery company can (e.g., Postmates offers a premium same-day “ASAP” delivery). To date, OnTrac in the West is the closest to achieving that status. Amazon uses them heavily, and you probably didn’t even notice. The two most likely paths for the emergence of national providers of local delivery are for a new entrant to establish a national brand or for a Wall Street-style industry consolidation (roll-up). Both paths would require investment up front in marketing, branding, and sales, but the winners would emerge as the leaders in this increasingly important industry.