Wayfair: Multichannel Monetization & Competitive Positioning

This is a snippet of the transcript.Contact Salesto get full access.

You didn't handle one-man delivery.

We didn't focus on one-man delivery because the economics were against us, and the network was more specialized towards two-man deliveries. All our volume was just two-man. In the UK, anything weighing more than 31.5 kg is considered a large parcel. If it's just one box and one man above 31.5 kg, it used to be handled by XTP. We had parameters set up so that WDN wouldn't even compete for that type of parcel. For one-man multi-box deliveries, we allowed the algorithm to choose between XTP and BJS. For two-man deliveries, 80% of the volume was handled by WDN, with the remaining 20% split between Panther and BJS. Panther handled 15% and BJS 5%. We were moving away from BJS due to its high incidence rate and deteriorating relationship. It was easier to manage with one provider, especially when giving them such low volumes. Three-man deliveries were exclusively handled by Panther.

This is a snippet of the transcript.Contact Salesto get full access.

Was it because of volume, network density, or another reason that they could do it profitably and you couldn't?

I think there were two factors. One was that XTP had a high incidence rate. They used to cut corners around storage and fulfillment, and they were generally considered the least desirable partner from a customer experience point of view. However, when we did the math, taking the damage rate into consideration, it still came out cheaper. That's why we went with them. But the economics were evolving. Towards the end, they kept getting more expensive because there was a push to start charging Wayfair more.

This is a snippet of the transcript.Contact Salesto get full access.

But what about Wayfair? If you listen to their calls and investor conferences, they're all about customer experience and ensuring that goods are delivered seamlessly to the customer. From what you're telling me, it seems like it was purely an economic and financial decision. Correct me if I'm wrong, but it seems like you were okay with some transportation partners cutting corners as long as it was profitable for you.

Prioritizing too much of a good customer experience and increasing prices by £25 would completely price out all the SKUs that Wayfair has. So, it was about achieving the best customer experience at the cheapest price and fastest time possible. Quite a few times, if WDN took two or three extra days, we would go with a third party to maintain speed. Price was also not compromised because there was massive pressure on lowering costs and getting customers to convert. Eventually, the third pillar we compromised on was the damage rates. It's not like Wayfair completely disregarded damage rates and experience. They worked with XTP to improve processes and limit damages as much as possible. At some point, XTP stopped responding, and the situation deteriorated. When they started bumping up prices or adding accessorial charges and negotiating in bad faith, Wayfair decided it was enough. We were already doing requests for proposals for the one-man large parcel item space that XTP was working on, trying to figure out if WDN could fulfill these orders. Those conversations were happening when I was leaving.

This is a snippet of the transcript.Contact Salesto get full access.