Spring 2009

Ten years ago, there were moves on both sides of the Atlantic to launch same-day home delivery services. They died a death, and Marcia MacLeod considers whether the concept can ever be viable

Consumers have got used to next-day deliveries – and many are prepared to pay for the certainty of knowing when their order will arrive, regardless of whether they really need it tomorrow or not. But what about same-day? Will the ultimate in home delivery push the right buttons for retailers or their customers? Will anyone be happy to pay for the extra effort?

Sometimes, of course, the answer is an unequivocal yes. There are occasions when something must, simply must, be delivered as soon as possible. A contract on the sale of a house, for instance, or a part needed literally to get the car on the road. Or maybe that vital blood plasma, which could mean the difference between life and death to a hospital patient.

But are same-day services becoming more of a standard option for ordinary online shopping? Are retailers, or even manufacturers, offering a same-day delivery as part of their normal services? Is the market ready for this yet?

 

Not yet – at least not on any volume scale. 'Most of our customers do use us as a matter of course,' admits Kevin Valentine, bike and courier manager at Addison Lee, possibly the best known same-day operator. 'But these customers tend to be either companies that need something urgently, or organisations that can't afford to own and run a van themselves, but need access to one at all times.

'Our bikes are used to send small packages such as documents, tubes of artwork, car parts, CDs and medical suppliers. Our vans carry everything from material for photo shoots to room clearances, which we take to the nearest dump.'

Retailers thinking about it

However, some same-day service providers are indeed working for retailers – or are planning to. City Sprint, for example, has a couple of projects in the pipeline. 'Our core business is B2B work for customers who need a secure service with POD, whether they need the service quickly or not,' explains chief executive Andrew Bernard. 'We carry a lot of samples, for example – not just for medical clients, but for water, fuel and other industries, too.

'But retailers are now beginning to think about same-day,' he adds. The key, he says, is volume. 'Same-day can only work effectively if the retailer has sizeable volumes; otherwise it is too expensive. And the goods have to be worth over £50 or consumers won't want to bear the cost. There also has to be an element of postcode selectivity in this; you can't offer a cost-effective same-day service for the whole country, but you could for London, or another large urban area.'

Royal Mail agrees. 'We provide our same-day service for customers who need to despatch spare parts, educational material, medical equipment, financial documents and so on,' explains Gerry Farwell, head of marketing, specialist services. 'This accounts for a small, but growing proportion of business.' But he adds: 'We're also putting together a same-day package for retailers.'

Royal Mail can already offer same-day delivery to home consumers within the M25, Farwell says. 'There is a growing interest in this service, and we would consider expanding it to other urban locations if we had one or two large customers in an area who wanted to include a same-day option.'

Not all carriers share this view of the market. UK Mail Couriers, part of Business Post, runs a same-day service for mobile phone retailers, but managing director Dave Williams says it's a very narrow market driven by tight time windows. 'We've seen a decline in same-day enquiries over the last six to twelve months, and I think the decline will continue.'

Cost is the main barrier to same-day services for e-tailers. Supersonic Same-day, launched three years ago to offer a nationwide service, doesn't deal with retailers at all because, says owner Lee Salisbury, it's just too expensive.

'A lot of retailers have asked us about same-day,' agrees Dave McMillan, managing director of Speed Link, which also began operations in 2006, 'but they don't understand what they're asking for. They think same-day will be provided at the same cost as next-day, but we can't do it so cheaply. Same-day is based on a dedicated vehicle: the customer calls up with an order and we send a vehicle just for that order. Next-day services rely on shared-user vehicles.'

Different pricing models

Pricing models for same-day and next-day services are totally different. Next-day is usually charged at a flat fee, whereas same-day is based on mileage. So you could, for example, pay £19.95 plus VAT for a next-day London to Birmingham service, but £272 for a same-day delivery over the same route: a massive disparity.

As Royal Mail and City Sprint have shown, it is possible to come up with a same-day cost structure for a single metropolitan area that is acceptable to all parties. Even using a mileage-based tariff, a same-day service in London can be as little as £10.00.

But Peter Lomax, commercial director of eCourier, which only covers London, points out that most fulfilment centres are in the Midlands, which makes it too expensive to collect product and deliver in London. 'We do have a few online retailer customers – wine companies, for example – but normally the cost isn't justified.'

In addition, the vast majority of same-day courier companies only work in a small region, either a city or, say, East Anglia or the Midlands. They might offer a nationwide service – but only for customers within their region.

There are other differences between same-day and next-day, too. To deliver something overnight, it normally has to be at the courier's depot by a certain time, which could be as early as 17.00. Same-day has no cut-off time.

'We work 24-7,' says Lomax. 'Ninety-seven per cent of our business is booked online. When an order comes in, our computer finds the right courier for the job, the courier gets to the customer's as soon as possible and then delivers just that order, again as soon as possible.'

However, to help customers in these financial straightened times, eCourier has launched a new service, Crunch Buster, which offers a four-hour delivery window at a lower-than-tariff price.

The technology behind these services plays a key role in their success. If speed is of the essence, there has to be a way to not only register the collection request and booking details, but also to identify the nearest suitable courier and allocate the job accordingly.

'You need a strong despatch system,' says City Sprint's Andrew Bernard. 'You have to have total visibility of your couriers so you can allocate the job to the most appropriate person and reduce *dead' running.'

For City Sprint, which has 1,500 couriers in its network, this meant developing software in-house, or rather contracting a software company to do it for them. 'We couldn't find the right off-the-shelf software, so we work with Software Integration in Australia,' Bernard adds.

'Now we have opened the system to customers so they can track their own courier movements and receive an electronic POD within a minute of the item being delivered. We can also send a text message to the customer to say we've completed delivery.'

UK Mail Couriers has invested heavily in IT, and this company, too, went to a software partner to help write its system. 'We wanted to link in stock management, which none of the off-the-shelf packages could do,' Williams explains. 'We hold stock for some customers so we can react quickly to their needs. And we needed visibility of our 8090-plus dedicated couriers, who are separate from our parcels network.'

Nearly all same-day companies provide satnav for their couriers and GPRS communications to keep in touch. This is especially important since most companies use self-employed drivers/riders under contract to the courier firm.

Visibility

Addison Lee, which recently boosted its 140 vans, 150 bikes and over 2,000 cars by buying Premier Despatch, gives its drivers/riders an XGA smartphone. Couriers log on to the system when they begin work and access job details from the depot.

'We developed the software in-house, with a Russian partner,' explains Peter Ingram IT manager. 'The new system, introduced over the last 12 months, works in real time, which has improved customer service. We can see where drivers are at any time and communicate via GPRS. We used to rely on radios, but these didn't give the same visibility. Now the controller can see if there's a driver near a job, if a driver is on time, if he knows where he's going and so on.

'The new system has allowed us to grow without taking up controllers' time. In fact, it's freed controllers to do more management, rather than fire fighting, as before. They can see, for example, if a driver keeps getting lost and arrange further training.

'And it's all online, so if a driver or rider says they didn't get a job, we can see whether that's true. If a customer claims they called us earlier than we think they did, we can prove that, too. Or if they complain because they were charged waiting time, we can prove how long the driver was held.

'Now we want to plan bike deliveries more dynamically so the rider can be given three or four jobs at once and still deliver on time. If a bike is going right past a new customer pick-up address on his way to a delivery, why not stop and collect the item from the new booking? Ideally we'd like to do the same for vans and cars, but this may not be possible because the vehicle could be full.'

The idea of more dynamic planning could help with back loads, too, but most courier companies don't seem too bothered about this, since the customer pays a premium for a dedicated service. 'We don't worry about back loads because the driver's location is factored into the job allocation algorithm,' explains eCourier's Lomax.

'As our software can identify where the nearest driver is to any job, it also pinpoints any driver returning from a delivery, and can allocate the next geographically appropriate job to that driver.'

'We always price a job as one-way loaded, empty return,' adds McMillan of SpeedLink. 'We never offer back load rates as it would devalue our product, which is based on the fastest delivery by a dedicated courier. But if a driver returning from a delivery can be used for another pick-up, we do it.'

The need for instant response from a dedicated courier is what makes same-day services so expensive. It is also what makes same-day services unsuitable for most home delivery operations. No retailer is going to absorb even the £20, let alone the £200, it might cost for same-day delivery, and no consumer will be happy to add that fee to the cost of their goods.

So for those with large volumes of valuable orders being delivered within London or another major metropolis, same-day could be viable, but for those selling CDs or T-shirts, smaller e-tailers and companies trying to reach a nationwide consumer base, next-day will remain the ultimate in speedy delivery.