This Company Saw a 30% Spike In Revenues Thanks To Same Day Delivery

When a craving for something sweet hits, there isn’t much else that can scratch that itch. A healthy snack might tamp down those hunger pangs, but nothing is quite as emotionally satisfying as a sugary treat.

That realization hit Kristen Tomlan, the founder of New York-based cookie dough bakery DŌ, after she found herself turning away too many potential customers due to a business model that focused only on completing online orders.

“In the beginning, we never made anything more than we needed,” says Tomlan. “For every order that came to our website, we scheduled it, made it, packaged it, and that was it. We started getting foot traffic and people asked ‘What can I buy?’ We had to turn them away.”

Tomlan realized that by making extra cookie dough every time they produced a flavor, DŌ could capitalize on the sudden urges of hungry locals to the tune of 30% of their total revenue. For an even more efficient use of her cookie dough freezers, she now enlists the help of third-party same-day delivery services—mainly businesses like DoorDash and Postmates—to fill local orders that would otherwise have meant lost business.

Willing to Pivot

DŌ launched in December 2014 as an online-only business that Tomlan ran in her spare time while she and her husband both worked full-time jobs. Thanks to a delicious product, an eye for branding, and her commitment to a personal touch, this passion project soon required her full attention.

“We didn’t expect it to grow as quickly as we did. At the time of launch, we were using the lowest cost shipping carrier, not necessarily the most reliable. Our packaging wasn’t fully figured out—in fact, we were hand cutting out labels and putting them on containers. I was running to Costco to get ingredients every few days because we had no storage and were getting up at 5 a.m. to put together packages out of my apartment,” says Tomlan.

Tomlan’s original dream was to have a brick-and-mortar store, and the company’s explosive success—578% growth within three months of launching—allowed for that expansion. But the company’s model lagged behind, and they soon found themselves turning down new business.

“When we moved into our space in Manhattan, it was only listed as a pick-up location and all orders had to go through our site,” says Tomlan. “We made only what was ordered. We ended up getting a lot of people stopping by to purchase items, but we literally had nothing to sell them.”

“We started making a select number of extras to have a few on hand for people to purchase. Now, it’s a huge part of our business.”

Not only can passersby buy some Fluffernutter or Chocolate Dream cookie dough if they’re in the neighborhood, but anyone in Manhattan south of 110th Street can get their order delivered to them that same day. And same-day delivery is a burgeoning space set to explode over the next few years, thanks to the advent of the sharing economy and improved logistics.

Recognizing the Need

There’s a reason why supermarkets leave a smattering of affordable products by the cash register: they know humans are highly susceptible to buying on impulse. It’s said that “two-thirds of the entire economy“ is based off on impulse buys, which tells you how eager businesses should be to capitalize on the whims of consumers. If you’ve got a customer’s attention, you don’t want to let them go until they’ve agreed to a purchase.

Another reality about shopping is that many of us do it at the last minute before holidays, birthdays, or other gift-giving events. The majority of shoppers purchase their Christmas gifts in the week leading up to December 25th, rather than on Black Friday or another major sale day. And as online shopping becomes the primary method for buying gifts and goods, consumers increasingly expect their experience to mirror that of shopping at brick-and-mortar stores—where they can have that product in hand by the end of the day, or at most within a couple of days. (This is becoming more common thanks to the widespread use of Amazon Prime.)

And while price is still largely the biggest determinant for what kind of shipping customers choose at checkout, the amount of money people are spending on same-day delivery merchandise and shipping fees has grown rapidly and is predicted to reach $3.35 billion in the United States alone in 2017—up from just $100 million in 2014. In fact, the U.S. lags behind other global regions in same-day delivery.

As the popularity of same-day shipping grows, small businesses will start to recognize the opportunity cost of not having an immediate delivery option. Not only are 61% of customers willing to pay more for this luxury, but 26% of online shoppers abandon their order altogether when faced with overly long shipping times.

Teaming Up with Delivery Partners

If you own a small business, however, you probably don’t deal in the kind of bulk that lets monster retailers like Amazon and Best Buy offer low-cost expedited shipping. So how can a small producer of cookie dough enter this space without spending on too much on coordinating logistics? Simple: Engage third-party delivery services, which are increasingly powered by the sharing economy. That’s how Tomlan began offering same-day delivery without having to drastically overhaul her business model.

It’s simple: engage third-party delivery services that are increasingly powered by the sharing economy. That’s how Tomlan began offering same-day delivery without having to drastically overhaul her business model.

“Our same-day ordering requests are extremely important, and it’s opened up the opportunity to have partnerships with Postmates, DoorDash, and Uber,” says Tomlan. “We have our menu on their platforms for people to order or request immediately. We get notifications from the vendor and we treat it just like a regular delivery order. When we run out of something, we contact the vendor and let them know, though now we know how well things sell and are usually able to keep things in stock.”

For businesses looking to explore similar options, other popular services include Instacart, Deliv, and Shutl. In all, on-demand socially networked delivery services—where freelancers deliver the product to the customer—are expected to perform 90% of same-day deliveries by 2018. Small businesses won’t necessarily have to produce on the same scale as their big-box brethren, nor will they need to invest in full-fledged delivery services, in order to reach customers as quickly and effectively. And to the extent that they have to invest more in having more product on hand, Tomlan finds that making cookie dough available to customers anytime they want pays for itself.

“We get so many requests for our product that it offsets the cost of making and storing so much cookie dough,” she says.

Tomlan has also experimented with emerging platforms like UberEATS, which offers a set menu for users to order from and provides the benefit of bulk purchases upfront.

“We’ve been featured on EATS many times—we deliver them 500 or 600 units the day before, and then the next day people can order it for lunch in certain areas and get it within 10 minutes,” she says. She adds that Uber’s upcoming Marketplace app will make certain food items available anytime for delivery, which could be a boon for participating eateries.

Tomlan notes that her business requires more attention to detail than other retail companies might because of the perishable nature of her product. She’s making the move to using DoorDash for all deliveries, since they specialize in food, unlike other typical courier services. Having a third-party dedicated to handling this aspect of the business is helpful for small business owners who find themselves getting distracted from why they started their company in the first place.

“They deal with the ordering, the processing fee, everything. When I started this business I just loved baking and wanted to share that with others. Now that it’s a business, I find that I’m really I’m in the logistics industry, and it’s a whole other thing to actually get the product to the customer,” says Tomlan.

The Bottom Line

Many small business owners know the struggle of growing their company without losing the little things that made them successful in the first place. This was a major point of emphasis for Tomlan as her company saw increased exposure and success.

“My background is in branding, and whenever we would work to reinvent or innovate a brand, a lot of times personal touches got value-engineered out because they’re too inefficient. But it’s those little things that make the customer experience better,” says Tomlan. “For me it’s a matter of how to maintain those aspects, which is what made it so special to begin with.”

In Tomlan’s case, this means continuing to handwrite the flavors on each shipment of cookie dough and taking the time to correspond with each and every customer. Having a third-party take care of same-day deliveries is what gives her the space to act like a local bakery—while operating like a major cookie dough distributor.

Whether you’re selling food, handmade jewelry, or boutique clothing, you might want to consider adding your business to delivery platforms to help bring your business to the next level, without compromising what makes you great. Tomlan proves that expanding your business doesn’t have to mean abandoning why you started it in the beginning. 

The post This Company Saw a 30% Spike In Revenues Thanks To Same Day Delivery appeared first on Fundera Ledger.

from Fundera Ledger https://www.fundera.com/blog/2016/02/24/revenue-spike-same-day-delivery/