The High Cost of Invalid Shipping Addresses

Once a process used for postage discounts, address validation is now standard operating procedure for e-commerce parcel shippers. In our current pandemic situation, receiving goods via parcel shipping is more commonplace. Post COVID-19, it will be much more common and perhaps preferred.

Online shopping and shipping have an immediacy factor. The big meeting is Friday, I ordered a new shirt on Monday, it has to be here Thursday, but Wednesday would be better. The first step in fulfilling this request is verifying the address actually exists and it is validated so the package shippers can read it. A barcode which represents the delivery point is only as good as the data that created the barcode.

Address validation and standardization plays an important role in a number of places in your e-commerce shipping workflow. A customer provides their address, but that doesn’t necessarily mean it meets the standards of common carriers such as the USPS, UPS and FedEx. Additionally, Americans move at an astounding rate, so the address stored in the shopping cart may not be current.

Bad Shipping Addresses: The Costs

Factor 1: Hard Costs
A parcel with an invalid address complicates delivery up to and including the point of loss or return. Your undeliverable packages have a number of calculable costs.

1. Labor Cost: Three Times. You get an order. Your fulfillment crew boxes the item, applies the address, moves the package to the loading dock, and ships it. A bad address returns the parcel to the loading dock. The box goes back to your packing area and the return reason is investigated. You correct the problem, re-address the parcel, possibly re-box it (another cost), and again send the package to the dock. Your Cost of Goods Sold calculation is inaccurate. The formula didn’t account for all this extra labor.
2. Shipping Cost: Three Times. Consider the order above from a different perspective. The parcel makes it from your warehouse in Sarasota to Duluth. Once there, the carrier cannot deliver to the invalid address. The carrier returns the package to your warehouse along with a charge, something like $17 – $20 from FedEx and UPS. Your employees fix the problem and re-process the merchandise, incurring a new shipping charge. Your out-of-pocket shipping cost just increased by a factor of three or more.
3. Perishable Merchandise Cost: 100% Loss. If your company sells perishable or seasonal items, failing to deliver your packages to the intended party racks up all the costs listed above, PLUS the cost of the merchandise itself. By the time an address error is discovered, items such as food, flowers, or medicine probably can’t be returned. Your only choice is writing off the spoiled or wilted product and re-shipping the order or refunding the purchase amount. The same holds true for items like holiday gifts or decorations. They have no value once the holiday has passed. No one wants to inventory assorted chocolates from last year’s Valentines Day or “Happy New Year 2021” banners after the event is over. After a certain point, the cost to return seasonal items frequently exceeds their value.

Factor 2: Customer Costs
Customers place an urgency and value to the merchandise they ordered. What is the customer’s sentiment if a package arrives late or perhaps never at all? The possible consequences you suffer when a customer does not receive their item is monumental.

1. Order cancelled – lost revenue for that transaction.
2. Customer leaves – lifetime customer value lost.
3. Negative review and social media posts – influences potential customers.

Factor 3: Costs to Save a Customer
When an angry shopper calls because they did not receive their package, they speak with a call center agent. The agent’s time is not free. The call is escalated to a manager. Their time is not free either. In an effort to save the customer, the manager elects to send out a replacement product using overnight shipping. A new box, packing labor, and expedited shipping options are not free.

How Does This Happen?

Address inaccuracies can infiltrate a database at any point in the acquisition, editing, or updating process. There are at least a dozen common address problems including multiple addresses found, ZIP Code™, State, or address missing, and invalid address components. Most address problems happen when they first enter the company database, such as when a new customer places an order.

There are 3 common address data entry points:

1. Website Entry: – A customer keys in their own address. If a shopper types their own address, it’s mostly correct. But people may forget designators such as ST, DR, or AVE. Carriers need complete, accurate addresses. Being “just a little off” doesn’t work.
2. Call Center: – An agent keys in a verbal address. For two humans, possibly on opposite sides of the earth, spoken language is a challenge. One party attempting to complete the transaction is sitting in a call center far away, the other is on a cell phone, a perfect opportunity to enter an inaccurate address.
3. Data Entry: – An agent types information from a paper order form. While professional data entry services have business rules in place, human error and fatigue creep in and cause address inaccuracies.

How to Fix It
Validate shipping addresses at data entry and on a regular schedule thereafter. The best time to get good data is when the customer is interacting with you. Use CASS™ (Coding Accuracy Support System) certified address quality software to confirm the address to the actual delivery point. Complete addresses are crucial. Missing or incorrect apartment or suite numbers make the difference between delivery and delay.

Real-Time Address Cleansing
Use real-time address cleansing software tools at the point of data entry:

1. If the customer is entering their address into your website, validate the address in real time with address validation software integrated into your company website. Ask the customer to confirm the validated address.
2. If the customer calls in their order via the telephone, have your call center agent validate the address in real time with address correction software integrated into the CRM system.
3. If the customer mails in a paper order form, have the data entry clerk standardize the address in real time with address standardization software integrated into the order management system.

Batch Address Cleansing
Use batch address cleansing software tools before shipping. These applications show which records are good, which are suspect, and which are not deliverable. The software will also correct many common address errors.

You wouldn’t mail a letter without spell-checking it or dial a phone number without confirming the number first. The same quality control applies to shipping addresses which have greater cost consequences. Maintain accurate customer address data to deliver superior customer service.