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Take 5: Challenges and Growth Opportunities

Posted by Patrick Cory on Thursday, April 13 2017 in Specialized Carriers

Patrick Cory is no stranger to going the last mile. In fact, he’s at the helm of a company that goes the last mile thousands of times a year, delivering large pieces of furniture, electronics and appliances that are too big and too heavy for the UPS or FedEx delivery systems.

Cory, the president of family-owned Cory 1st Choice Home Delivery, recently spoke with Larry Thomas, senior business editor of Home Furnishings Business, about the challenges and growth opportunities facing his company and the entire last-mile delivery segment in the Internet age.

Home Furnishings Business: Is your growth coming largely from e-commerce or brick-and-mortar retailers?
Patrick Cory: We see both. It’s sort of a hybrid model. We’re seeing a lot of growth with internet, and we’re seeing a lot of growth with brick-and-mortars. A lot of growth is being driven by traditional brick and mortars getting into internet deliveries. We also are seeing growth being driven by retailers who are going outside of their (home) regions. We’re still doing a lot of internet-only deliveries, of course, and that’s growing very rapidly, but we’re also seeing a lot of retailers who are getting better and better at having an internet store.

The smartest retailers look at the internet business entirely differently. They don’t just try and take the same product and put it online and sell it that way. Those (retailers) who create a separate company that does just internet deliveries … are very successful, and that division of their company is growing much more rapidly than their traditional brick and mortar business.
People talk about how soft the furniture business has been, but I have to tell you, from a delivery standpoint, we’re moving a lot of product.

HFB: Has your menu of services expanded because of this trend?
PC: Yes. As retailers are looking to become omnichannel, they are desperate to find what I call end-to-end solutions. Retailers are telling us, ‘Once we get the product, we want you to figure out how to get the product from our dock to the closest point where you have a building. We want you to handle the LTL. We want you to handle the warehousing, the cross-docking, the deluxing, and then contacting the customer and executing the delivery. And we just want one bill.’ That type of service has grown very rapidly because these retailers are desperate to figure out how to compete with Wayfair, how to compete with Amazon, how to be a true omnichannel retailer.

Because of that, we have to offer a wider array of services, including at some point, actually picking up the product at the port.  Some retailers are saying ‘We don’t want to even touch the product.’

HFB: How has your business been affected by the popularity of same day and next day delivery?
PC: It’s not as large a percentage of sales as people would lead you to believe. Some customers take advantage of that, but the vast majority of them don’t. It’s something that a retailer can sell that maybe a competitor doesn’t offer.

For a large retailer who has a distribution center in or near a major metropolitan area, and has a lot of inventory, it’s fairly simple for them to turn around and offer same-day or next day (delivery). They have the product very close to the market. Now, when you talk about an internet-only company, that’s a little bit different. If you want to order a lamp and want it delivered next day, you could probably do that. But if you’re ordering furniture, that’s another story. They can do it within two or three days, but realistically then don’t have the capability to do same day/next day -- even Amazon.

It’s not so easy to deliver quality assembled furniture to a consumer in that manner. Every internet company has trouble doing same day/next day with large products. It’s very difficult for them to do, and it’s incredibly expensive because of the inefficiencies you have with the loss of productivity on a truck and loss of density on a route. It creates a huge cost increase that most consumers are not willing to pay.

HFB: How has your business been affected by recent legal disputes involving trucking companies that use owner/operators – independent contractors – instead of employees?
PC: It was really a policy shift where the National Labor Relations board started to come down with these rulings … basically saying if you’re a contractor in a third-party situation like home delivery, and you are being directly controlled, you’re an employee, in their view. Trucking firms much bigger than Cory started losing these cases and they were forced into settlements. It didn’t change the model, but it forced these companies to settle with significant dollars. So, interesting things started to happen (because) retailers didn’t want to get accused to being an employer of these third-party drivers.

In some rare cases, they started setting up a requirement that you had to have employee drivers. And in other cases, they said if you’re going to use contractors, we need to know that you are doing everything that you can to protect us legally. So, the burden of proof is on the third-party companies.

That threw an element of uncertainty into the business model. But the dominant model among large and small retailers is still this third-party model. It kind of forced a little more careful approach, but it did not change the model, and it has not kept retailers from reaching out to companies like Cory to outsource.

HFB: You recently have expanded your business on the West Coast and are aggressively courting new clients there. How is that going?
PC: It provides a lot of opportunity for us. It reminds me of Florida about 20 years ago, when Florida was growing into the very competitive market that it is today. That’s what Los Angeles is right now.

Right now, we don’t have a (West Coast) distribution center, but we’re actively looking to put one up. And for us to put up a distribution center, we need an anchor client. Until we secure that client, it doesn’t make sense for us to invest in a building. But we’re actively searching for that partnership right now. And I think within this year (2017), that will happen.

HFB: Now that the economy is improving and unemployment is down, is it still difficult to find qualified drivers?
PC: I’ve been in this business since 1982, and since 1982 we’ve had trouble finding qualified drivers. (laughs). It’s a never-ending challenge.

But I will say something interesting … and I’m not trying to make a political statement here. But when you have policies that restrict immigration, there is a cascading effect. That effect may not be felt right now, but immigrants are a big portion of our labor pool -- not just Cory, but four our entire industry.

And when you have policies that restrict them coming here … the cost of labor is only going to go up. When the labor force dries up, and the cost of labor increases, that cost gets passed onto the retailer and ultimately to consumers.  In a couple of years, they will feel it.

This blog first appeared in Home Furnishings Business on March 14, 2017.

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Patrick Cory is the president of Cory 1st Choice Home Delivery, one of the oldest and largest specialized home delivery carriers in America, headquartered in Secaucus, New Jersey.