CarParts.com revs up in-house last-mile delivery for cost, speed benefits

Dive Brief:

CarParts.com's internal last-mile network delivered more than 6,000 packages in the quarter that ended Oct. 3 as the company pursues reduced shipping costs, according to a Q3 earnings announcement.
The 6,000 deliveries roughly doubled the number of parcels the automotive parts and accessories seller delivered in Q2, CEO David Meniane said on an Oct. 29 earnings call. "The medium-term target is 300,000 packages annually, approximately 5% of our total outbound volume, and the ramp is tracking to plan," he added.
During a May earnings call, Meniane said CarParts.com aimed to reach the 300,000 mark in the next 12 to 24 months. The focus of the last-mile network is on big and bulky parts, which get dinged with higher outbound carrier costs.

Dive Insight:

The economics of an in-house delivery network are compelling for CarParts.com, given the cost and speed benefits, Meniane said on the October call. The cost savings opportunity will be "substantial" as the company scales the capability to 300,000 packages delivered, he added.

"Every package we route through our own network rather than a national carrier is a package where we control the cost, the timing and the customer experience," Meniane said.

CarParts.com's push to trim delivery costs in an era of fast-rising shipping rates is already benefiting its bottom line. CarParts.com’s Q3 gross margin increased about 30 basis point year over year, driven primarily by lower freight rates spurred by the company's last-mile initiatives and carrier diversification, interim CFO Mark DiSiena said.

The focus on large items for in-house deliveries adds to the savings upside. Delivering bulky orders via FedEx, UPS and other third-party carriers can trigger surcharges and strain shippers’ transportation budgets. Similar to CarParts.com, Tractor Supply is delivering more large-item orders itself to reduce its cost to serve customers.

Beyond delivery savings, CarParts.com is also working to boost its shipping speeds. Three of its four distribution centers — Dallas; Jacksonville, Florida; and Las Vegas — are running next-day delivery. The capability is slated to launch at the company's Chicago distribution center in Q4, Meniane added.

The company currently offers overnight and two-day shipping for most small- and medium-sized packages, per its website. Otherwise, orders typically take several days to reach their destination, with bulkier items sometimes taking longer due to preparation and packaging requirements.