Wayfair Final Mile Delivery: Operations & Economics

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This may sound like a basic question, but I want to understand why it's not financially feasible to deliver directly to the end customer instead of going through Norton.

Firstly, LTL carriers do not perform final mile delivery. Paying an LTL carrier for a final mile delivery is more expensive than shipping through Norton because of the additional charges, as it's not a service they typically provide. It's an added fee on top. So, we pay LTL to Norton and extra for the final mile delivery. Additionally, LTL carriers do not meet the service levels that Wayfair requires. For instance, if you order a mattress with white glove service, we would come in, unbox, assemble, and remove debris. Most LTL carriers do not offer this, so we cannot provide the same service level if we go LTL direct. If you're a customer ordering a bedroom set, and Wayfair doesn't offer white glove assembly, but Restoration Hardware does, you'd likely choose Restoration Hardware over Wayfair.

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But before Wayfair developed its final mile deliveries, someone was handling it, right? Who was?

Once an order is scanned by a Wayfair employee, they handle routing, considering customer needs. In contrast, a 3PL might prioritize profit. We care more about preventing order damage, whereas a 3PL might not, as it's not their order. We built our delivery network to enhance the customer experience.

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Why doesn't Wayfair offer this service to other retailers then? You're using a third-party carrier because it's not feasible to have a last mile hub in certain areas. What if Wayfair starts offering this service, leveraging its logistics and transportation network to fulfill and deliver orders not sold on Wayfair?

That has been discussed, but I think the main holdup is Wayfair's concern. For example, Wayfair has invested a significant amount of money in the customer experience, perfecting what we consider the gold standard of home delivery. Now, we are essentially giving our competition the playbook on how to achieve a gold standard delivery. We are basically saying to Restoration Hardware that they will receive the same excellent customer experience that a Wayfair customer does. Now, with Restoration Hardware customers having a great delivery experience, the likelihood of them not ordering from Restoration Hardware again and trying Wayfair is reduced because we have just provided our competition with a great delivery experience.

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