The Small Retailer’s Survival Guide – Part 5 – Home Delivery Costs

The Small Retailer’s Survival Guide – Part 5 – Home Delivery Costs

As part of a series of articles on how to survive as a small retailer, this article and the article that will follow are about how a small retailer can set up a home delivery service

Home delivery was once the preserve of large department stores and some small local retailers. Now, thanks to the internet and improved global logistics, virtually anything can be delivered   Cream Chargers Delivery to anywhere. Does the fact that home delivery is now commonplace mean that small retailers should not bother with it? Well, of course, most small retailers didn’t deliver in the first place, so will they be jumping on a band wagon that is already overloaded? Possibly. However, the costs of setting up home delivery may not be as overbearing as you may at first think. It may be worth at least considering the idea.

Perhaps, if you never made home deliveries in the past, you should consider making them now. And if you have always delivered, I would recommend that you try to continue the service. The fact that many others are doing it does not mean you should stop. They are doing it because there is obviously a demand for it. If others are offering home delivery then, if it is viable, so should you. Many small retailers are certainly on the ropes these days, but when it comes to delivery then I believe that the best form of defense is attack. The fact that others are doing it means you need to at least consider competing. The next article in this series looks at the benefits – and the pitfalls – of home delivery. This article considers the costs of setting up such a scheme.

Analyzing the Costs and Benefits: The decision of starting (or continuing) a delivery service must, like all business decisions, be made using a proper cost/benefit analysis. What are the capital and revenue costs involved? What are the benefits? The costs calculation may be fairly straight forward but the benefits less so. If you cannot arrive at a reasonable estimate then you may need to carry out a trial.

Costs: Firstly consider the outlay and running costs for the vehicle. Do you need to purchase or lease a vehicle to do the job? If you do you might have trouble justifying the project. After 5 or 6 years a delivery van will start to cost you serious money in maintenance and repairs. Even though it can be a capital cost, think of vehicles as more of a revenue cost, a week to week drain. Just amortize the purchase cost over 5 years to work out the true revenue cost of purchasing a van. If you intend to lease, then this aspect is already worked out. Add to this the running costs, which for a vehicle can be considerable. I will make a rough and ready prediction here and now: if you purchase or lease a vehicle for the sole purpose of making customer deliveries then it will not pay. Think of another way. What you must try to do is sweat your assets. A delivery vehicle that gets a run out, say once per day, is not earning you money for the rest of its time. It’s like taking on a new staff member on a full time wage, but only having them work 12 hours per week. There are various ways of making fuller use of a vehicle:

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