The Return of the Small Package Delivery
A Conversation with Steve Howard; Board Member, CLDA and Florida Messenger Association and CEO of Esquire Express, Inc. and Esquire Logistics, Inc.
Steve Howard has been in the customized delivery industry since 1990 and he’s seen some major, sometimes business-threatening developments over the years. The slow-down in the economy had a dramatic impact on his business, but today it’s on the road to recovery. One of the ways he adapted to the changes in the economy was by delivering a new crop of small packages. We asked him about that and what it means to others in the industry.
Question: Your business has seen some substantial growth in small package delivery, a sector that many people believe was dying a slow death, first because of the fax and then as a result of email. What makes you see some life in this sector?
Answer: I’ve definitely seen a resurgence in this type of delivery as the economy improves. There’s no question that it was all but dead a few years ago. Small package deliveries were an important part of the growth of my company for our first 20 years. I grew my courier business by delivering small packages, mostly delivering documents and small parcels for the South Florida legal and medical communities; small packages were our lifeblood. At one point we were servicing close to 1,000 law firms. We covered all of the courthouses located in the main three counties of the South Florida. We did all the procedural things that a trained legal courier handled. I had close to 25 specialized couriers who were trained to handle things like filing writs, entering defaults etc. and a large portion of our business was document retrieval such as obtaining certified copies from the courts. These couriers were essentially performing paralegal duties. We paid them well, but we could charge decent rates for these specialized services. But, over time, much of that work went on-line. By April 2013, that business had been shut down due to e-filing. I was considering getting out of the business. Between the substantial decrease in business, technology’s ability to move documents over the web and the recession my business was down more than 50 percent.
The slowing economy also meant the large delivery business was down as well. Our large box deliveries were heavily fueled by the housing boom in South Florida. The recession had a particularly dramatic impact on that business. Houses and condos weren’t being sold; therefore no new buildings were being built. There was less call for deliveries of things like kitchen cabinets and heavy durable goods.
We had a glut of condos in the Miami area when the economy was at its hottest. It’s picked back up again and that is certainly a good thing for all of us. Today, there are over 50 high rises going up in my area alone. It has had a positive impact on all of us. My business is up 45 percent year over year in the first quarter and a lot of it has been small package deliveries supporting that growth. The small package work we’re doing includes work with contractors, builders, architects and interior designers. We are picking up samples of flooring, carpets, cabinetry and granite counter tops 10 – 15 times a day. For the first time in five years, I had to hire a customer service person in our courier division.
Question: Sounds like the definition of “small package” has shifted from documents to goods. What is today’s “small package”
Answer: A small package is something you can deliver in a smaller vehicle. We use cars, vans and even scooters to deliver them. Today, we’ve shifted from delivering legal “packages” to delivering groceries, clothing, lab samples or carpet and flooring samples. There is one paper document, though, they we still deliver: building plans. It’s a funny thing about plans - people still want them on paper. I suppose they prefer to work with them that way. Also, we still have some legal work delivering documents that are too big to email.
Question: Retail clearly falls into the small package category. Talk about that.
Answer: We’ve seen a substantial increase in retail deliveries. It’s now a significant part of our business. We’ve been involved in it for the past four years. We service all sizes of retailers. From major department stores to small boutiques. These smaller stores, especially, realize fast delivery is a great way to compete with the big retailers on the web. Many are also doing their own e-tailing. They list their products online and fulfill right from their stores. Whether it’s groceries, pharma, tools or clothing, they are selling on-line and we’re delivering it.
These small retailers see customized delivery companies as their secret weapon. Their advantage is being nimble. We built our business on being responsive and creative. Our company’s been doing that for 24 years, providing the last mile or rush on demand and home delivery. We already know how to do it professionally; it’s our secret weapon.
Question: When you’re doing more small package work what kind of adjustment do you have to make when it comes to profitability?
Answer: When you’re doing small package work, you’re dealing with a lot more customers. Maybe 400 or 500 of them. There’s a stream of income from these small package deliveries since you get a lot of smaller payments. With the small package clients we are more diversified in the industries we serve. In contrast, with the larger deliveries there are fewer, albeit, larger customers controlling the cash flow. This can be a little more difficult to manage. With the larger deliveries, we have 25 or 30 customer and 10 to 15 are the “whales” – the really big guys. Sometimes cash flow can get slowed down for various reasons and now you are sweating it out waiting for them to pay.
I’m not saying you want to build your whole business on small package deliveries. You need the incorporate the movement of larger freight to diversify your business. You want to anchor your business with larger box deliveries and add in the small package deliveries to remain balanced. The bigger customers give you density and with them you can build the smaller routes. This also allows you to expand in other markets. For many years we focused on delivering small packages in the three large counties that comprise Southeast Florida, however now that we deliver using box trucks and tractor trailers we are able to cover a significantly larger geographic area.
Question: You’ve been very forthright about the tough times your company’s been through, but it sounds like you’re seeing things pick up again. Talk about that.
Answer: There’s no question that the economy’s picked up again and our company, like many in our sector, is back to being profitable.
During the tough times we had to figure it out and the delivery of small packages is certainly a component that has helped us adapt. During the frantic years from 2000 to 2008, I had 100 couriers running small packages. Now, we’ve got closer to 50. Thankfully we are starting to see more and more opportunities in the small package segment. No matter what the economy’s doing, you have to be open to all kinds of new opportunities.
Question: How do you spot those new opportunities?
Answer: By staying in touch with what’s going on in marketplace. It’s no accident that I’m on the board of directors of both the Florida Messenger Association and the CLDA. That’s where I’ve found the smartest people in this industry. I want to stay ahead of the learning curve so I know that I have to hang out with industry leaders.
Question: What do you see as the future for customized logistics and delivery companies?
Answer: Those of us that adapted and diversified are still here. In my area, South Florida, we don’t manufacture much of anything. Our industries are mostly white collar such as banking, international business and construction. We’re consumers. As the economy improves, we’re seeing the reemergence of those businesses that practically disappeared when the recession hit.
I see another positive trend: Customers are beginning to understand that cheaper isn’t always better. Let me give you an example: We worked for a major hospital group for 21 years. Every three years they went out for competitive bids. I responded, but frankly, I didn’t worry too much about the other bids. The customer understood that I was giving them fair rates for dependable service. But, when the economy dipped, another courier came in and offered rates that were 50 percent below what we were charging and I couldn’t match that. But, here’s an interesting thing: that service didn’t last long due to quality issues. The hospital fired them and went with the next lowest bidder. That lasted seven months. That carrier couldn’t keep drivers. As a result of horrendous service they came back to us. I wasn’t offering the cheapest rates, but they knew they could depend on us. They knew if a patient was in an accident at 2 a.m. on Christmas Eve that they could count on us to deliver the blood they needed.
Now that the economy’s on something of an upswing, we’re seeing more of an understanding from customers that there’s a trade-off in going with the lowest bidder.
I see the future for this industry in diversification, an understanding of the enormous pace of change, the increasing demands of consumers for “now” and our need to read and respond to those expectations.