Spring 2006

Many novel ideas have come and gone, but far from falling into terminal decline, the market for unattended and deferred home deliveries looks set to expand, says Peter Rowlands

You've found an online shopping site with the product you want at the price you were looking for. They have it in stock, and you're ready to click the "Order now" button. But wait a minute - when will they deliver? They won't commit themselves. So how do you know if you'll be around to receive the goods? Basically you don't.

It's a familiar story for anyone who buys regularly online. Despite the many and varied attempts of entrepreneurs to find viable solutions, generally speaking the final delivery element of home shopping can often be just as troublesome now as it was at the turn of the decade.

The situation is not helped by the fact that so many promising final delivery solutions have fallen by the wayside. Only last year we lost two services that had appeared to have the necessary staying power - Beck & Call and Collectpoint. And these were just the latest in a line of good ideas that turned sour.

Beck & Call offered a redelivery service, mainly in west central London. You directed your goods to their depot instead of your house, and they delivered at a time to suit you, arranged by phone or email. But it was simply too expensive for the volumes of goods that it attracted. To offset costs, the company started up operating a local franchise for a national parcel carrier, but this fell through, and a major contract with a wine distributor came to an end; and that was that.

Collectpoint operated pickup points at convenience stores and filling station forecourts, but failed to achieve the brand exposure it needed, despite support from a growing list of suppliers (mostly pure-play etailers). It later expanded into the business-to-business market, handling delivery of spare parts to field service staff, but although this produced some promising results, again the volumes were simply not sufficient to keep the company afloat.

We have also had trouble contacting Homeport, whose system uses removable boxes tethered by a stout metal cable to an electronically-controlled anchor point outside the recipient's house. The company's web site was still live when we closed for press, but its phone numbers were unobtainable, and no one was answering emails or online form submissions.

Some names from the early days of the dotcom boom do survive - for instance BearBox, the company that arguably established the original electronic lock-up box concept in the UK. The goods are placed in a box in your garden instead of in your house, and access for the carrier is provided by some clever electronics and communications technology.

However, the company has survived largely by taking the same route as Collectpoint, though more successfully. Its primary business is now the field service market, in which it has become firmly established. It is now even teaming up with one of the smaller specialist carriers to create its own delivery network.

ByBox, whose speciality is banks of interconnected boxes in public places, has gone down a similar route, and has already set up a substantial depot network and started running its own delivery services. Rival ParcelXchange, which has not so far targeted the B2C market, also now runs its own in-house field service delivery network to deliver to its box banks (but more on this later). And RelayStar, which only dabbled in the B2C market in its early days, quickly dropped it for the B2B market.

You might think from all this that unattended and deferred B2C delivery solutions were fading away, and suppliers had simply abandoned the market as a lost cause. But if so, you'd be wrong. New B2C solutions are now emerging, and on present evidence they appear to be better conceived, better funded and more likely to succeed than most of their predecessors. Indeed, the prospects for a range of coherent, workable solutions arguably look better now than they've looked since the boom began. You could almost say we're about to enter phase two of the home delivery revolution.

So where is the evidence for this? Well, for a start, consider a new system called MyParcel, which is the brainchild of Hugo Rose, a one-time director of Lay & Wheeler's mail-order wine business. He has hit on the imaginative idea of setting up collection points at self-storage depots: ideal in many ways, since these tend to be very strongly-branded, and to convey an air of security and respectability. They also tend to have on-site car parking - another potential problem for anyone visiting high-street convenience stores.

Five SafeStore depots in London figure in the initial MyParcel trial, which is under way now, and Rose aims to roll the scheme out to 25 of them fairly quickly, and to expand to other parts of the country by next year.

The fee for having a consignment directed to a MyParcel point is at least £4.50 - much more than was charged for the early drop-off services. That might seem a deterrent for lower-value goods, but Rose acknowledges that this is a "boutique" service, and believes it will appeal to people buying higher-value products, who could be attracted by the convenience of being able to control the delivery process.

A little further down the track, but offering an equally convincing proposition for users, is a B2C pickup point scheme now in preparation by Business Direct, the company behind ParcelXchange. Hitherto its box banks have been positioned mostly in filling station forecourts, which are considered acceptable to field service engineers; but sales director Wayne Crewe admits that these have limited appeal for consumers.

"So we've been in negotiation with the supermarket companies, and are now putting box banks outside supermarkets." Already, he says, there are plans for large numbers of box banks (over a hundred in each case) to be positioned outside Tesco, Somerfield and B&Q stores, and the company is now in discussions with Sainsbury's as well.

Again, supermarkets offer the benefit of an upmarket, respectable "feel", as well as guaranteed on-site parking. And many consumers probably make regular visits to them already, so it would be less of a hardship to pick up home deliveries at the same time.

While ParcelXchange box banks are already appearing at these sites, Crewe says the consumer service as such is at least a year and a half away. This is partly because the company aims to build in extra refinements not seen in previous systems. For instance, the system will include a card-swipe facility on the boxes; this will not only confirm the recipient's identity in order to authorise collection, but will also allow credit-card payment for use of the service.

There is a certain irony in the choice of supermarkets as sites for drop-off boxes, since early box systems were designed partially to cater for home deliveries of groceries by those very same companies. Under this scheme, theoretically you could find a supermarket making a "home" delivery from the store straight into a box outside its own premises.

Clearly this is not the primary intention, although it undeniably conjures up an interesting picture. But what the scheme really does is draw a clear distinction between deliveries of groceries and deliveries of other, probably higher-value but less bulky items. Early unattended solutions tried to cater for both - which may in retrospect have been a mistake.

Falling somewhere between the BearBox and ByBox approaches to the field service market is the Canadian eBox system, which was launched in the UK last year by Business Post. This uses a single lockable box, similar in appearance to a BearBox, outside delivery premises or at a suitable third-party site.

We were told at launch time that while the business market was its primary target, this might also eventually have appeal in the consumer market. But at the moment we are told that the company is making some changes in the operation, and the outcome won't be known for a few weeks. When we hear more, we'll bring you an update.

Meanwhile, pickup points at high-street convenience stores may not have disappeared for long. Although Collectpoint has gone, a new contender is waiting in the wings. Kiala, which was founded in Belgium at the turn of the decade, has gone on record as planning to move into the UK and Germany, and word on the grapevine is that this could be sooner rather than later.

Like Collectpoint, Kiala uses outlets such as convenience stores as drop-off points, but it appears to have succeeded where Collectpoint could not. It already covers Belgium, France, Luxembourg and the Netherlands, and has won support from many of the major catalogue shopping companies there, as well as investment from La Poste and TNT. It claims to have 4,500 outlets so far.

It remains to be seen whether its success to date is owed mainly to the cultural habits of the places where it is established, or to its operational and systems expertise; but clearly there is a market opening for such a proposition, and a well-funded and carefully-pitched proposition could finally give it the head of steam it needs.

One other drop-off scheme needs to be mentioned here: the Local Collect service offered by Royal Mail and Parcelforce Worldwide. In terms of market penetration and coverage, it eclipses all other systems, since it's already available through thousands of post offices, and has reportedly been used by millions of people.

There are several implementations of Local Collect. A retailer can offer it as an option to a standard home delivery, or the item can be redirected to a post office if the consumer is not in to receive it (in which case there is a 50p fee). In the case of Parcelforce, there is no fee.

Local Collect appears to be a success, and since Royal Mail handles a significant proportion of all home deliveries, arguably it answers many of the problems of this market. But it is limited to consignments delivered by the two host carriers; understandably, it doesn't attempt to address the problems of third-party carriers, who arguably encounter the majority of home delivery issues. So in some ways it's a "niche" solution, albeit occupying a very large niche.

While pickup points clearly have their merits, for many consumers there is no substitute for having home shopping actually delivered to the home. The good news is that there are still options to cater for this requirement too. Perhaps significantly, the true survivors in the consumer-owned box market are Giraffe Marketing (of Hippo Box fame) and ParcelEater - both of which offer plain mechanical boxes with no complex communications, no electronics and no supplier integration. They have outlasted many more ambitious solutions, and seem to have carved a niche for their products.

There are detail differences between the two systems. Most notably, ParcelEater has a one-way interlocking door system, reminiscent in concept of some continental post boxes. This means a box can accept deliveries from more than one carrier on the same day; but it also makes the system more expensive to manufacture, and means that size for size, the box has less capacity than a comparable Hippo Box.

However, director Nick Swift says he is exploring the possibility of having the boxes manufactured in China instead of the UK, which would bring the unit price down. He is also considering using robust plastics instead of steel for the main casing - an approach proved in the past by suppliers such as BearBox and Deleport.

The Hippo Box is basically a steel case like a safe with a hinged door on the front: simple but effective, and it has reportedly produced sales that now run into thousands. Founder and director Charles Gallichan attributes his survival to his fundamental tenacity (actually he expresses this somewhat less delicately). "People in this market originally thought it was a route to getting rich quick," he says. "I never deluded myself that it would be a quick win."

Gallichan has always argued that the key to wider success is to win the support of retailers, and more recently he has been proving this point by establishing affiliate links with selected suppliers. Basically they put a click-through link to his web site on theirs, perhaps with a sentence or two pointing out that this could be a solution to consumers with delivery problems. In theory the result is extra sales for both.

"Lately I've been signing up retailers at a rate of about two a week," he says. "I never would have predicted it a year ago, but within another year I can easily see us having at least a hundred affiliates." Early names include Cosyfeet, Walktall and Hawkins Bazaar. "Initially the links only generated a few enquiries," Gallichan says, "but it's all about critical mass."

ParcelEater has not so far progressed quite so far down this route, but Nick Swift says the company has tried circulating despatch inserts with some home delivery suppliers, and achieved qualified success with them.

Meanwhile, Charles Gallichan has found a novel additional use for his boxes. Royal Mail has been trialling a scheme in which a few boxes are positioned at key points on postal delivery rounds (usually in friendly participants' gardens). They're not for home delivery, though; the organisation is using them for its own operations. It drops off pre-sorted sacks of mail into them for postmen to collect as they walk past, ready for delivery further along their round.

Gallichan explains: "As mail gets heavier and legislation limits the weight a postman or woman can carry, this is an ideal solution to save them returning to the depot as soon as they've emptied their original sack."

Alongside pickup points and drop-off boxes, there is one other familiar solution in the unattended armoury - secure access to the delivery premises. This concept was championed in the early 2000s by another would-be contender, Home Delivery Access, which failed before it could achieve adequate momentum. Now, however, the idea is finding new momentum.

A novel take on the concept is that of Ahome4It, the teasingly-named company that first floated its concept five years ago, but finally seems to be getting it to market under the guiding hand of Andy Holding. At the heart of it is an inexpensive little keysafe that is mounted discreetly outside the delivery premises. This may not sound novel in itself, but behind it is some rather ingenious patented technology.

Cleverly, the system needs no communications links or even an external electrical source (it has a long-life battery), yet the company is able to issue one-off access codes that are valid on a given day only. So a delivery driver can telephone the company from the doorstep, obtain the necessary code, open the box and extract a physical key, and gain access to the house itself or to an outhouse or garage. On completion of the delivery, the driver simply returns the key to the box.

This is possible because each device is unique, and incorporates its own electronically-stored codes, which are mirrored in a database held at the company's headquarters. It's a look-up encryption system - elegantly simple, but virtually impossible for a thief to crack.

Currently a batch of units is on extended trial, and we understand wider applications could be on the way. A significant factor in its appeal is its low price compared with other systems; we're not certain about the eventual retail price, but figures well under £50 have been quoted in the past.

What might be termed a more conventional electronically-activated access system has been developed by BearBox, and could see the company returning to its B2C heartland. As John Hale puts it: "Essentially it contains the guts of the control system we used in the BearBox, but instead of opening a box, this opens a door to the premises themselves."

This means access is controlled via the BearBox Management Centre, and authorisation is transmitted directly to the electronic box.

The company obtained a SMART grant from the Government to support the development of this system, which is known as the Logistics Lock. Initially it is being used in the B2B market; DHL is reported to have taken over sixty early units to provide secure access to depots for overnight delivery drivers. The device is also now sold as an own-brand product by various established security system specialists (a route also being explored by Ahome4it).

However, John Hale says he can also see appeal in this system for the B2C market - indeed, more than there is in the company's original box system. "We've brought down the cost per unit, and the technology is more mature. The potential is considerable."

BearBox also has another new product for the consumer market - essentially a mini-box bank, with doors "about six inches high" (there are 13 doors in a standard bank). The idea of this is to handle deliveries of smaller packages - consignments too big to go through a letterbox, but not big enough to need a full-sized BearBox.

"We've already got some out in sites such as libraries, universities and military establishments," John Hale says. "We see this as a way to get the market moving."

Given all the new systems coming on to this market, is it about to reach the elusive tipping point that will bring unattended solutions into the mainstream? It's probably too early to say, but Stuart Miller of ByBox has some sound wisdom to share on that point. "Are we about to see a breakthrough in the market?" he says. "I doubt it."

But he goes on: "Will there be a viable, working solution to the last-mile problem in my lifetime? Certainly. I don't think we can say exactly when that will be, but it will come."

When it does, we look forward to reporting it.

Critical mass

Most suppliers of shared delivery solutions (drop-off points or box banks) seem agreed on one fundamental point: success demands a large network, so that there will be a suitable pickup point within reach of most target consumers.

Wayne Crewe of Business Direct (the company behind ParcelXchange box banks) draws an important contrast with field service operations. "We have 300 locations for field service staff at the moment, and aim to have 350 by the middle of the year. We'll probably peak at about 400."

He adds: "That may be fine for the B2B market, but it simply wouldn't work for consumers. They will expect to find a location within easy reach, wherever they are. We'd have to be talking about many hundreds more locations - perhaps even thousands - to achieve adequate coverage." Hence the company's target of installing box banks at hundreds of supermarket locations (nearly 400 of these are already planned).

Stuart Miller of ByBox makes a similar point. "Our 700 sites can serve 15,000 field engineers very effectively. That sounds a lot of people, but it's a tiny number in consumer terms. Think how many locations you'd need to serve the whole community adequately."

Interestingly, ByBox does have an active and successful B2C operation on the island of Jersey, "but the population there can be served from just a handful of box banks," Miller points out. "It's a very controlled environment."

However, the company does have an opportunity to prove itself in the wider world. Currently it is involved in B2C trials with La Poste in France, which are being headed by Miller's partner Dan Turner, who once offered another box system through his own former company, Dynamid. "It's looking promising," Miller told us.

Deutsche Post and DHL have been developing a network of such systems in Germany with a broadly similar system for some years, reportedly with some success. Their supplier is Austrian manufacturer Keba. And in France, e-box (no connection with the similarly-named Canadian system) continues to promote the concept of installing box banks at selected public locations (dedicated shops or railway stations and so on).

Real success for the current UK contenders could of course raise the perennial problem that besets any market made up of rival proprietary technologies - potential incompatibility between broadly comparable systems, both electronic and physical.

Most suppliers would probably argue that this is far too distant a prospect to be of present concern, but unless one supplier is eventually to emerge as all-dominant in this market, it may need to be addressed eventually.

Already, long before the formal launch of its B2C service, Business Direct is having to wrestle with the question of how to offer external carriers access to its ParcelXchange network. In its existing B2B operation, only its own in-house courier network delivers into the boxes, but a consumer service will probably require access by all-comers.

Stuart Miller of ByBox speculates that standards might eventually need to thrashed out for the industry, providing some degree of interoperability between, say, rival box bank networks. Then consumers could order a box-bank delivery online without concern for which company actually operated the target box bank.

A nice question for someone to wrestle with.

Where did they all go?

Box systems: Deleport, Dynamid, EleTrunk, PodBox, Storedrop, Secure Storage Systems - all withdrawn (but Podsystem is thriving as a tracking and telematics company, and Dynamid merged with ByBox)

Drop-off systems: Collectpoint, dropzone1, e-zpoint, e-stop, Pickup@pub, Urbandrop - all withdrawn; e-stop planned 35 drive-through pickup stations by 2002; Pickup@Pub was a short-lived experiment by Bass, which came and went in 2001

Other systems: Beck & Call (redelivery at a time to suit consumers) - closed down in 2005; Pickupworks, vertical carousel-style self-service collection points - got as far as planning one location in Newcastle; Home Delivery Access (electronic keypad + comms giving access to premises) - wthdrawn

Timed deliveries

Despite the continuing availability of unattended and deferred delivery solutions, arguably reliable timed home deliveries are the solution everyone really wants. That means two things - relatively tight delivery slots, which consumers can select well in advance with assurance that they really will be observed; and the availability of early-morning, evening and weekend deliveries.

Royal Mail famously dropped its evening delivery operation the year before last, having found that takers were not prepared to pay the price. We're told there are no plans as yet to revive it. However, other carriers such as Amtrak do offer evening deliveries, and report brisk demand for them.

Two potential problems are price and the need to resource the delivery network for out-of-hours operation. And the viability of the service may depend on whether consumers recognise the added value of having their goods delivered at a time to suit them. Retailers are notoriously nervous of inflating their prices by offering complex delivery options, and there is plenty of market research to show that price is the most important element in online consumers' buying decisions.

However, arguably not enough research has been done into consumers' readiness to differentiate between the net cost of an item and the price they might have to pay for it to be delivered when they want it. Anecdotal evidence suggests that many do recognise timed delivery as a premium option, and it is perhaps surprising that more retailers are not prepared to experiment with offering this facility as an add-on.