This article will discuss the two main delivery options for modern businesses looking to get their goods to customers—third-party delivery and in-house. You will come to understand the main differences between these two delivery options in addition to some pros and cons for each choice.
In-House and Third-Party Delivery Overview and Definition
Retailers of all sizes, ranging from Amazon to local grocery stores, increasingly recognize the importance of an excellent delivery experience for end customers. Same day delivery, custom choice of delivery time, and free delivery are all becoming more important as merchants begin to compete mostly on the quality of the customer experience they can provide.
As far back as 2015, MetaPack’s Delivering Consumer Choice report found that 96 percent of shoppers would choose the same retailer again if the delivery experience was positive. Conducting the same survey now would likely yield an even greater proportion of customers who emphasize the delivery experience.
Companies have two broad options when it comes to deciding how to get their goods to customers—in-house or third-party delivery.
In-house delivery means using your own dedicated delivery staff and your own fleet of vehicles to get orders to customers. An example of a large company that uses in-house delivery quite successfully is British multinational grocery and merchandise retailer, Tesco or pizza delivery company Domino’s.
Third-party delivery entails outsourcing your delivery operations to a third-party company and paying them a delivery fee for it. For example, a restaurant might pay a company such as Deliveroo to get food from their premises to customers who order food for delivery.
Restaurants that offer food delivery understand the importance of flawless and prompt delivery of customer orders. When people order food for delivery there is no leeway for error—the food needs to arrive hot, the order needs to be correct, and it all should come to the customer’s door exactly when they want it. Restaurants are turning to dedicated restaurant delivery software platforms such as Bringg and Zuppler to help streamline operations and improve delivery experiences, regardless of whether they opt for third party or in-house.
In-house delivery pros and cons
- In-house delivery gives you full control over the delivery experience. With the statistics highlighting how critical a good delivery experience is to customers in deciding whether to order from you again, you might view keeping full control over delivery logistics as a smart business decision.
- Choosing in-house delivery gives you the freedom and flexibility to define your own product offering and business model. Some third party services providers restrict the types of products that they are willing to deliver.
- By cutting out the middleman when getting products to customers, you reduce the potential for communication barriers to develop.
- The ability to scale your in-house delivery operations is constrained by the capital you have available. The cost of a fleet of vehicles can become expensive quite quickly.
- Being able to run a smooth in-house delivery option requires expertise that your company simply might not have. If delivery logistics aren’t a key competency of your business, you run a high risk of encountering inefficiencies that ultimately impact upon customer experience and business reputation.
- When things go wrong with in-house delivery and customers end up dissatisfied, you cannot pass the buck onto a third-party company. You take full accountability for bad experiences with this form of delivery.
Third-party Delivery Pros and Cons
- Outsourcing delivery lets you focus exclusively on the tangible things you provide to customers, whether that means an innovative gadget, stylish clothes, or delicious food. After all, customers are going to most remember the value your product adds to their lives. The administrative burden of having to handle delivery can take away focus from the end product.
- Choosing to outsource delivery can lower your fixed costs because you don’t have to pay any wages to delivery staff and you don’t need to pay insurance costs. Furthermore, capital requirements are eased because you don’t need to purchase a fleet of delivery vehicles.
- For restaurants in particular, hiring a third party delivery service has the potential to bring new business to you. Many third-party delivery operators have their own websites where they collate menus for the restaurants they work with.
- Outsourcing delivery to a third party service provider involves a loss of control over one of the most significant influencing aspects on customer experience. Your business has no control over whether the company you pay makes mistakes or delivers the experience your customers want. Inadequate staff training by third-party providers can impact your business even though you have no control over this. At least with in-house, you can train delivery staff in the exacting delivery standards your business and its customers demand.
- Third-party delivery companies often ask for a hefty chunk of the order price, sometimes up to 35 percent. This heavy commission might be unfeasible for many businesses, and even taking into account staff, wages, and vehicle costs, in-house often works out cheaper.
- Introducing a third party into the equation increases the potential for communication issues to arise that can ultimately impact end customers. With this delivery option, a technology hitch at the third party company can result in your business not receiving notifications about orders.
Both in-house and third-party delivery come with their own unique benefits and drawbacks, and it is up to your business to decide which of the options is most suitable. Regardless of what form of delivery you opt for, it is a smart choice to use some sort of delivery software so that you get transparency into delivery logistics and optimize your operations based on the data this type of software provides.