DSE believes independent contractors are the way to go for home delivery.

David Latvatalo will tell you that providing home delivery services is one of the most challenging environments for trucks to operate in. He'll also tell you that if you're prepared to pay attention to the details, it can be a very profitable market niche.

“The home delivery market is a completely different animal from typical trucking applications,” says Latvatalo, division manager for Delivery Services Enterprises Inc. (DSE), which provides home delivery logistics for The Room Store and other companies. “In our case, the truck is just a tool for delivering the customer's goods. We're really a customer service company, which means a lot is riding on the skills of our drivers — skills that go beyond driving a truck and handling heavy furniture.”

Latvatalo says people skills are probably one of the most vital ingredients to his company's success in the home delivery market. “Our drivers not only need thick skin when dealing with customers, they also have to realize they have an opportunity to change the situation,” Latvatalo explains. “If they listen to the customer and provide great service, maybe they can turn the experience around. That provides a benefit to the retailer we serve.”

That's the main reason the home delivery business is so different from the typical dock-to-dock world of over-the-road freight, he says. “Apart from the driving complexities of finding the right location, maneuvering the truck in tight areas, and driving in areas where there's lots of pedestrian activity, we're dealing with consumers face to face all day long,” Latvatalo explains. “That makes this job both physically and mentally demanding to a degree not seen in typical freight operations.”

If you have a feeling of deja vu when it comes to the home delivery market, you're not alone. A century ago, home delivery was the way the American consumer received milk, groceries and laundry services, to name just a few. As late as the 1950s, the milkman on his early morning delivery route was an indelible image of American life.

By the 1990s, however, the market for home delivery services was practically extinct. Art Van Bodegraven, a partner in The Progress Group, an Atlanta-based international supply chain and logistics consulting firm, points to a variety of reasons for this change.

“In the past, home delivery was a local service where the owner knew just about everybody in the customer base,” he says. “But then rising labor costs, slimmer profit margins, the emergence of supermarkets and giant chains serving entire communities of highly mobile and often transient shoppers became the norm. These changes were followed by escalating insurance and liability costs, which made many people think twice about getting into the home delivery business.”

In recent years, however, home delivery services have become a hotbed of activity, largely as a result of the Internet. According to a study by the University of Texas and the U.S. Commerce Dept., from 1995 to 1998, e-commerce revenue climbed from $5-billion to over $301-billion, a staggering 60-fold increase. By 2003, e-commerce is expected to be a $1.3-trillion market.

Despite the demise of numerous online ventures over the past year, transporting e-commerce goods represents a huge growth market as well. According to Forrester Research, packages delivered from online sales per day will grow by more than 20% for the next few years, from 3-million in 1999 to 6.5-million in 2003. No other transportation sector is approaching this growth rate, says Forrester.

A report by Verdict, a British consulting firm, attributes increased demand for direct delivery to the “rise of the time-poor/asset-rich consumer, growth in the number of single-person households, access to the Internet, and a desire for better service on customers' terms. Not only is time a valuable commodity, but for many people shopping is a chore, especially for needs-based goods such as food and groceries. More and more people are looking for increased convenience.”

That's why a host of companies started to get involved in the home delivery market, albeit with mixed success. Online grocery companies, for instance, sprang up left and right — GroceryWorks, Homegrocer, WebVan and Peapod, to name a few. They allowed consumers to shop online for groceries and have them delivered to their doorstep. Everything from furniture makers to toy stores and laundry services wanted a piece of the home delivery action. By and large, they used different kinds of trucks to try and get it.

Take just the online grocers, for example. Texas-based GroceryWorks uses Nissan Diesel cabover straight trucks mounted with 14-ft. refrigerated bodies. Chicago-based Peapod developed insulated step vans in partnership with Ryder System that have 1,000 cu. ft. of insulated interior space. Homegrocer, located in Seattle, used an FL 60 Business Class Freightliner chassis and a refrigerated truck body. By contrast, California-based Webvan used cutaway van chassis for its fleet.

The variations continue outside the online grocery market. Furniture delivery specialist DSE operates mostly straight trucks, with bodies ranging from 24 to 26 ft. Home Direct USA, a third-party logistics subsidiary of Bekins Van Lines, also specializing in furniture delivery, uses everything from straight trucks to tractor-trailers to make deliveries, depending on the location. By contrast, dry cleaning specialist Zoots.com uses 150 modified cargo vans to pick up and deliver laundry.

While the type of truck used to serve the home delivery market does not fit any one model, the job it's expected to perform is the same: Bring “hassle-free convenience” to consumers at home, says J. J. Pellegrino, vp-marketing for Zoots.com.

“It's a great complement to our stores; bringing our services to customers' doorsteps is a logical extension of what we do,” he says. “In this case, one plus one equals more than two. Our trucks greatly enhance our ability to serve a market.”

Zoots.com, which opened its first location two-and-one-half years ago, added home delivery service last year. The company sees this as only the beginning of the demand curve for such service.

“It adds more cost to our operation,” says Pellegrino, “but it's working well in attracting new business and keeping current customers happy.”

But it can't always guarantee success. In the online grocery world, for example, both Webvan and Homegrocer have gone out of business, while Peapod was largely bought out last year by Royal Ahold, a traditional “bricks and mortar” grocery conglomerate.

The market for home delivery services is not dead — not by a long shot. According to Verdict, “So far, most online retailers are failing to satisfy consumers and are providing poor service. We believe that significant investment in back-end delivery functions will be required if the new, high-flying electronic retailers are ever to make a return on the enormous investment they have attracted.”

Verdict says that for retailers, the relationship with consumers is paramount; everything else that happens is secondary. This leads to the central question in e-retailing: whether or not to outsource the fulfillment function, i.e., the logistics end of the business.

“Clearly, building such a function from scratch is expensive and time-consuming,” the Verdict report continues. “However, since everything rests on this retailer-customer relationship, outsourcing to a third-party company carries enormous risks. Online retailers have focused the bulk of investment to date on the front-end: web site and marketing to drive traffic. Because little or no investment has gone into ensuring customers get what they want, when they want, where they want and how they want, the fulfillment process represents the real Achilles' heel of e-retailing.”

DSE believes using drivers in an owner-operator format, rather than as company drivers, is the key. “It's even harder to find the right people for the home delivery market than for trucking in general,” Latvatalo says. “When we find the professionals we need, we need to keep them. We can't afford turnover because our company's reputation rests solely on the ability of these drivers to serve consumers.

“An average DSE driver working five days a week is usually looking at a straight $40,000,” he continues. “Our trucks average 13 to 15 stops a day.” If drivers add an extra day to their schedule or make an extra delivery per day and provide great service, they get more money. The better service they provide, the more business DSE and, by extension, drivers get from the retailer. According to Latvatalo, some DSE drivers have been able to expand their operations to run two trucks and earn over $250,000 a year.

Latvatalo says that compensation is key because it's a high-stress job. “We don't get a lot of ‘atta boys’ in this business,” he says. “Our trucks and drivers bear the name and logo of the retailer we serve, so that's what the customers see, not DSE. The company tries to make up for the tough operating environment by letting drivers run their own business, map out their own routes, and hire their own helpers.

Training is an important part of a successful home delivery business, says Latvatalo. New drivers may have years of road experience, but not in the kinds of packing methods or paperwork they have to handle in home delivery.

DSE makes a big commitment up front, spending about 90 days to get ready to start serving a new retail customer. On the business side, DSE offers a range of options for its contractors to help them acquire vehicles and keep them well maintained. For drivers who want to buy their own trucks, DSE offers financing options; they also offer full-service vehicle leases through Paccar Leasing Corp.

Latvatalo points out that when it comes to home deliveries, how the vehicle looks is almost as important as how it operates. “You can be a great delivery guy, but if you look unprofessional and show up in a beat-up truck, consumers will wonder what kind of operation they're doing business with,” he says. “Clean, modern trucks are important to us and to our clients.”

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