True Cost of Home Delivery – Pt I of II
While retailers know quite a bit about how the activities on their floor affect sales (how many ups, closing rates, average sale, etc.), many retailers, when asked, are unaware of what they actually spend on deliveries each year. If you’re one of the few retailers still offering in-house deliveries, it’s important to understand what your true 250x Cream Chargers Delivery cost is.
Every home furnishings retailer wants to improve their bottom line and increase profitability, however, there’s a significant hole in your wallet that’s eating up your profits with each and every delivery. In all cases, your cost to deliver goes well beyond a tank of gas and the hourly wage of a couple employees.
To begin, you must identify and control your costs in three major areas as it relates to your deliveries; Labor Costs, Operational Costs and Vehicle Costs.
When considering labor costs, many retailers fail to calculate the underside of the iceberg. If a single delivery takes one hour round trip and requires two of your employees at $12.00 per hour, you just see the tip of the iceberg. However, the underside of the iceberg reveals your direct labor costs which include; FICA, unemployment, health and welfare, vacations, turnover and workmen’s comp insurance.
Take a look at one example of the direct cost for a typical employee:
Wage $12 / hr
Workmen’s comp $0.65 (6.5 %)
Pension plan $1.00 ($1.00 / hour)
Med/Social Security $0.77 (7.65%)
Personal / Sick time $0.20 (five days)
Holiday time $0.20 (five paid holidays)
Vacation time $0.40 (two week vacation)
Health insurance $3.34 (monthly cost of $550.00)
Total direct cost for this employee is $18.56 per hour, based on the above examples. With this common scenario, a one hour delivery now has a direct cost of over $35 in labor expense but doesn’t stop there. In the case of unexpected absenteeism, there is also the great expense of acquiring temp labor and providing them proper training. Often, retailers overlook the hours their management spends simply managing the entire delivery process and fail to attribute that portion of their salary to delivery cost.