Failed deliveries could be slowly killing your online store

It’s easy to consider the cost of what it takes to produce your product and get it out the door to paying customers. In fact, it’s pretty impossible to ignore. However, what’s so often overlooked are the costs that can come swinging back like wrecking balls once an order has been dispatched.

Okay, so, here’s the dream scenario: a customer comes to your website, likes what they see, orders some stuff and you ship it out to them. Their delivery arrives on time, they’re pleased with the product and everything’s just fine and dandy for everyone involved. 

But hey, when does anything run that smoothly every single time in the world of business?

The reality: Sometimes, deliveries don’t reach their desired destination, for myriad reasons we’ll explore in just a moment. Many online store owners don’t realize just how much these failed deliveries cost their businesses.

Worst case scenario: Failed deliveries could be swallowing up around 90% of your profit margin, crippling your online store. Fortunately, Bovoba has got the solution but first, let’s investigate the problem a little further.

Welcome to the new reality for online stores

If you look back to the ecommerce world of 2015/16, things were a whole lot different. Simpler, cheaper times. Making money through an online store was relatively easy. Google ad rates were low and Facebook was able to constantly direct high-quality leads to your store at a pretty reasonable price.

Those were the good old days. Now, we’re moving into an era where running a profitable online store has become quite the challenge, catalyzed by a post-Covid eCommerce tsunami and iOS 14.5. Advertising is more expensive and an increase in the number of online stores means more demand, more bids, and more competition.

So, what does this mean for online store owners? Well, it calls for a switch in gears, to focus harder on driving more repeat business and maximizing profitability as a long-term, ongoing strategy. One of the ways in which online store owners can start maximizing their profitability is by addressing the cost of failed deliveries.

Failed deliveries will be your downfall if you let them

When shipping a parcel to a customer, a store incurs various costs, whether you’re using third-party logistics (3PL) or fulfilling from your own warehouse. These costs include:

  • Picking costs (picking the right product, printing shipping label, etc)
  • Packaging costs
  • Courier delivery fees

Naturally, these costs vary from business to business, courier to courier, and even geographical location to geographical location. In the US, for example, the sum of these costs means an average online store is paying anywhere between $12 to $20 to ship a parcel to a customer.

In Europe, the costs are a little lower as courier fees tend to be less but still, this is cash flowing out of your business and every penny (cent, whatever) counts.

But wait, not every parcel reaches its final destination without a hitch. As we said in the opening of this blog post, things very rarely run that smoothly every single time in the world of ecommerce. An order might not be able to be delivered to the customer for a whole host of reasons, including:

  • Not being home at the time of delivery
  • Failure to collect from a service point
  • Customer error when inputting their shipping details
  • Unforeseen logistical problems

Whatever the reason, these failed deliveries could be the downfall of your online store—but only if you let them.

We recently conducted a poll of 38 different online store owners across 4 different countries. The results showed us that more than 63% don’t know exactly how much failed deliveries are costing them. From our experience, it’s a whole lot more than most online store owners realize and oftentimes, even more than the initial outbound shipping cost because couriers:

  1. Want to discourage this situation from occurring because 3PL would prefer to avoid the tedious manual tasks associated with it. 
  2. See a profitability opportunity when they do have to deal with arduous failed deliveries.

When an order can’t be delivered and the courier has to send it back to you, your shipment costs increase to include things like courier return fees and (often costly) ‘inspect & restock’ fees. Then, you’ll often have to reship the parcel to the customer to attempt delivery all over again, which takes you back to square one, incurring the same initial shipment costs.

This back-and-forth will most likely eat up any profit margin and push your online store into operating in the red. Plus, if this is happening with multiple orders, this can have a serious, detrimental impact on your business’s bottom line—especially when you consider we’ve not even taken other costs like customer acquisition and product manufacture into account here.

It can get worse…

A failed delivery that has to be resent to the customer can do serious damage to your profit—but that’s not actually the worst-case scenario. What about if the customer cancels the order? Reasons they might want to cancel their order after not taking receipt of it on time include:

  • Needing it for an event that has already passed (e.g. a holiday)
  • If it was a gift for somebody’s birthday that has already passed
  • When they’re just ticked off with you as a result of the delayed delivery

This is terrible news for you because at least in the initial scenario there might have been a small amount of profit margin left. However, in this case, you’re now having to swallow courier return costs and refund your customer. You’re now totally out of pocket, even after probably paying a premium to acquire the customer through Google or Facebook ads.

Annualize all of this and you could start to see some seriously scary numbers emerging. The longer you leave failed deliveries to be a problem for your online store, the more money you will lose. Plus, for big companies working towards an exit, this can also negatively impact company valuation when considering annual calculations. That’s why now’s the time to take action.

The solution? Meet Bovoba 

Okay, so, it doesn’t take a genius to work out that one of the most foolproof ways to increase profit is to reduce cost. There is a whole multitude of different spending categories that could be put under the spotlight through a cost-cutting exercise. However, one of the most effective ways to minimize what’s going out and maximize what’s coming in is to tighten up your shipment processes and address costly failed deliveries.

‘How do I do that?’, you might ask. The answer: Bovoba. An advanced shipment tracking app like ours means you can stay on top of your shipping with minimal effort to mitigate the risk (and cost) of failed deliveries. If we spot the signs of a failed delivery or an item likely to be returned due to it not reaching its recipient, we’ll notify you automatically.

For example, if an item has been delivered to a service point and hasn’t been collected for a couple of days, we’ll let you know so you can take action. Once we’ve made you aware, you can then get in touch with your customer and let them know their package is ready to be picked up and where from. We can then send you and your customer (if you choose) multiple reminders to keep this top-of-mind to prevent the parcel from having to be couriered back to you.

Worried we’re just asking you to spend even more money here and eat even further into your profits? There’s no need as the solution is far cheaper than the problem itself because Bovoba can deliver a huge return on investment—literally.

If we can save you from the expense of even two failed deliveries a month, the app has already paid for itself. Plus, smoother shipping means happier customers which, in turn, equals more repeat orders, more positive word-of-mouth, and yep you guessed it, more profit.

The best part? We’ve now launched early access to the app so you can try Bovoba out for yourself. Trust us, it’s a total no-brainer and you won’t look back.

Sign up for your free trial here.