ArcBest (Nasdaq: ARCB), a full-service logistics provider, has studied the struggles of today’s retail vendors and knows that, as peak retail season approaches, the battle for retail compliance only intensifies.
In June, ArcBest responded to that struggle by launching Retail+, a compliance initiative for vendors in an ever-tightening market. Retail+ is the culmination of a two-year collaboration between ArcBest Technologies and the ArcBest customer advisory board, a panel of vendors who openly shared challenges and brainstormed solutions.
The major obstacles the vendors discussed were chargebacks, visibility, automation and uncertainty about retailer requirements. ArcBest developed Retail+ to address those challenges, namely the chargebacks incurred when a shipper doesn’t hit the specified delivery window.
“If a vendor ships a $100,000 order to a retailer and the freight is delivered outside the delivery window, that retailer may pay the invoice short by 3% and only send $97,000 back to them, which comes off [the vendor’s] bottom line,” said Jeff Long, senior account manager in retail at ArcBest. “Our goal through Retail+ is to put that money back into their bottom line.”
Effectively tackling those types of issues has grown more complex with the explosion in online shopping. Online sales more than doubled in the past decade, from just under 4% of total retail sales in 2009 to over 10% in 2019, according to an ACT Research study. Consumers expect quick deliveries, so retailers have tightened delivery windows. If a vendor can’t meet the deadline or packaging requirements, it incurs significant penalties that undermine the relationship between vendor and retailer — a relationship that is vital for an efficient supply chain and higher margins for both parties.
“[Retail+] is a compliance measure built by other customers who go to the same retailers and have experienced the exact same problems,” said Mandi Douglas, senior account manager in retail at ArcBest.
By using Retail+ to help schedule deliveries, handle bookings, keep up with changing retailer requirements and maintain pristine records for auditing, vendors can expect fewer chargebacks and less in-house administrative work.
While the Retail+ program is not an intermediary between vendor and retailer, it equips vendors with the right information to challenge the charges themselves. Sometimes, Douglas said, vendors aren’t made aware of financial penalties until 30-90 days after the shipment, and at that point, it’s hard for them to backtrack and collect all the information they need to challenge the penalties. Retail+ customers have the data available if and when they need it.
Taryn Molina is the account services assistant manager for Bona, which manufactures and ships hardwood floor products. Molina served on the ArcBest customer advisory board after having worked with ArcBest for 10 years.
“Our biggest challenges are moving from three-day delivery windows to one-day delivery windows,” Molina said. “One of the biggest wins from the Retail+ program is how great we are performing. With one of our biggest retailers, we were performing about a 70-75% on-time accuracy. Now, we’re averaging around 90-98% accuracy with no fines. It’s been amazing.”
A further challenge is that no longer does customer satisfaction rely solely on price, brand and customer service. Consumers want the right items to be on retailers’ shelves, and when they shop online, they want those items to be in stock and delivered quickly. This shift in expectations has in turn increased retailers’ expectations for vendor compliance, especially around peak retail season.
“The fill rate has to be really high now. It used to be around 90% fill rate; now they’re requiring around 98% fill rate,” Molina said.
Vendors like Bona that use Retail+ are able to hit that higher percent fill rate when orders are shipped in-full and on-time.
“We have seen some of our customers grow their brand because anytime a vendor improves their scorecard, that improves their relationship with the retailer,” Douglas said.
Retail+ is for companies large and small. Long said ArcBest has served companies that have incurred $4,500 in chargebacks for the entire year and others that have incurred $200,000 in a month. By improving scorecards through Retail+, vendors are seeing their products find better shelf space, positioning and visibility.
“It’s fun seeing the looks on [customers’] faces and the surprise after we present Retail+,” Long said. “When they ask, ‘Can you really do this?’ we say, ‘Yes, we can.’”