Autumn 2009

Helping promote better home deliveries

Parcels carriers are the public face of home shopping deliveries. Criticised in the past for not being proactive enough, they have changed their tune, says Peter Rowlands, and are getting increasingly innovative in their approach to right-first-time deliveries

By the time you read this article on the parcels business you will know whether the Royal Mail workers' dispute is ongoing or has been resolved. When we were writing it, strike action was clearly inevitable, and we can only hope a glimmer of reason has prevailed.

However, we scheduled our article long before the dispute gained momentum. Our objective was not to pick over the potential impact of the issue, but to update you on recent positive developments in the market as a whole, and on what sort of innovations you can look for.

 

There's no getting away from the fact that Royal Mail is a key player in the home delivery market. And being realistic, it will remain so after the dust has settled on the current dispute. It's too big a player not to have a role. But it's worth remembering that many millions of home deliveries are handled by other carriers.

One of them is none other than its sister-company Parcelforce Worldwide, and it should be said that this business was not (at the time of writing) affected by the dispute in any way. Happily for Parcelforce, it seems that clients are quite capable of differentiating between the two organisations. Sales and marketing director Dick Stead told us: 'We've found through research that the majority of our target customers don't see us as part of Royal Mail group. We can go in and bid for business as an independent.'

So what is new in the parcels game? Well, it's hard to ignore one development that has been prompted by the Royal Mail dispute: the early announcement by Home Delivery Network of a three-day delivery service for packages of under 2kg – something that puts it in direct competition with the second-class postal service.

The service was not due for formal launch until January, but apparently is already up and running. The looming Royal Mail strike action simply spurred HDN into going public with it ahead of schedule. Big customers such as The Book People and Findel are reportedly putting large volumes through the service already, and it seems likely that more will follow suit, whatever the outcome of the dispute.

The company says it is aimed squarely at businesses in the home delivery sector. HDN chief executive Brian Gaunt talks about offering retailers 'the widest range of options for their customer deliveries', and the implication is clear: here is an alternative to Royal Mail.

Beyond this highly topical development, arguably the single most important theme in the parcels market at the moment is the very fact that carriers increasingly see home delivery as a market they need to be in. Ten years ago, few of them treated it seriously, apart from a handful of specialists; home deliveries were too complex, and suffered too many issues – notably the problem of recipients not being at home to receive their goods.

Now increasing numbers of carriers that previously focused on B2B operations are refining their B2C offer. Robbie Burns, chairman of Nightfreight, probably speaks for many in his position when he says: 'Home deliveries are now a very important part of our business. They represent a growing proportion of our one-man deliveries.'

SHIFTS in the market

With its focus on large and awkward consignments, Nightfreight doesn't aim to compete with the mainstream carriers, but it's significant that its one-man service is already handling between 4,000 and 5,000 home delivery consignments a night.

UK Mail's John Middleton tells a similar growth story. 'We're doing more and more B2C work. It's the way the market has shifted.' And Jon Barber, national sales and marketing director at APC, also reports growth here. 'Home delivery is now a significant part of our business,' he says, adding: 'We might not have seen ourselves in that light in the past, but the world is changing.'

Parcelforce Worldwide is of course firmly entrenched in this market. Dick Stead told us home deliveries accounted for about half of its volumes. But he is not resting on his laurels. 'We're determined to get better at it,' he says. 'We've focused massively on customer service. We weren't always the world's best at recovery when things went wrong, but we've improved our performance by leaps and bounds.'

What this increasing focus has done is to concentrate minds on how to ensure successful first-time delivery. Parcelforce Worldwide, for instance, has just extended the Local Collect service, which previously enabled consumers to have non-delivered items taken to their nearest post office for collection later.

Now consumers can also request to have items delivered to a post office in the first place. This logical step puts the service on more of a level playing field with drop-off services such as the Collect+ system recently launched by Home Delivery Network and PayPoint.

'If you offer consumers choice, you can push the first-time delivery rate up to ninety-nine per cent,' Stead maintains, adding that delivery to a 'safe place' or to a neighbour are other options on the table.

Designated safe place

Whilst delivering to a neighbour has always been seen as an unofficial fallback solution to delivery problems, Parcelforce is not the only parcels company to make a virtue of it. UK Mail is willing to deliver to 'a designated safe place; Nightfreight actively incentivises its drivers to find a neighbour willing to accept consignments; and now DPD has formalised deliveries to a neighbour as one of its service options. Consumers can be given the option to choose this facility on ordering, though it seems they don't actually have to specify which neighbour; a card is left, detailing where the item is and who signed for it.

DPD chief executive Dwain McDonald comments: 'It is essential to have home delivery services which match the convenience of the online shopping experience.'

Some carriers feel they have an edge on the market because of the local knowledge of their drivers. One is APC, which is made up of a network of independent carriers using a coordinated trunking system and a shared central hub. As Jon Middleton, himself an experienced courier operator, puts it: 'The local contact is very important. It really is all about personal service.'

The big carriers with catalogue shopping roots are past masters at the local connection, of course. Carole Woodhead, chief executive of Hermes (formerly Parcelnet), points out that her company's lifestyle couriers leave their own phone number when they can't delivery a parcel. 'So the recipient can ring up an individual on a local number, not some faceless contact centre,' she says.

It's a benefit few other carriers can claim, though of course Home Delivery Network, with its parallel catalogue retail origins, is one of them.

Text alerting

Another way of ensuring a first-time delivery is to alert the consumer of the impending delivery in advance. Various third-party texting services have emerged in recent years, and carriers are increasingly specifying the texting as in integral component of their own IT systems.

DPD was an early adopter of this concept, and other carriers such as UK Mail have also introduced it. APC's Jon Barber says his company too is now also looking at the concept – a development that underlines just how far this carrier has already moved on from its roots in the B2B market.

Parcelforce Worldwide's Dick Stead describes his company's work on email and text alerting as 'a three-year journey', adding: 'One of the first things we had to understand was when would be the best time in the delivery cycle to send the alert.'

Originally, he says, the company texted the recipient when the parcel was first picked up, but it found there were too many imponderables that could disrupt the delivery process further down the track. Then it tried the time when the parcel hit the hub depot, and later it moved the message again to 8am on the morning of the delivery. 'But if recipients aren't expecting a delivery that day, they often find 8am is too late to change their plans.'

The retail client can decide on these matters, but Stead says his own preference is to email the recipient the evening before a delivery is due, then send a confirming text the following morning.

Rearranging deliveries

Generally, texting systems merely tell the recipient when a parcel is due; the communication is one-way only. However, some carriers are now bringing in two-way texting, in which the recipient can respond to a delivery alert by requesting a different delivery day or time.

First off the block was HDN, which announced a system along these lines earlier this year, coinciding with the introduction of user-selectable am/pm delivery slots. IT director Chris Airey describes the two-way texting as 'a fantastic opportunity for retailers to improve the customer experience, while at the same time reducing costs'. Now DPD has announced a broadly similar system, again in pursuit of better right-first-time performance.

Interestingly, HDN says the price of its service should be quite modest if the deliveries in question require a signature, since the result should be fewer returns – and hence an overall cost saving.

Next-day delivery

Another way to reduce the problem of dealing with deliveries that are not expected is to provide delivery the day after the order is placed. Some carriers such as UK Mail handle most of their home deliveries in this way; others are gradually increasing the proportion of next-day deliveries.

This includes Hermes, which has steadily improved its offer over the years. It has already introduced national next-day deliveries for in-house customers, and the opening of its new southern hub at Nuneaton has made it possible for the company to launch a next-day service to 'the bulk of our clients,' says Carole Woodhead.

Another trend highlighted by Woodhead among others is the demand from retailers for ever-later order cut-off times for delivery within the agreed time span. 'Barely a week goes past without another customer wanting a later cut-off time.' She adds that the new Hermes hub should help here, too.

Often there is more consumer appeal in delivering a parcel on a specific day than delivering it the following day. Until recently, most parcels carriers regarded day-definite deliveries as being the responsibility of the retailer to organise, since they don't necessarily have storage capacity to defer delivery of items already in their system.

However, the carriers are slowly recognising that increasing numbers of retailers will expect this as a matter of course. UK Mail's Jonathan Middleton, for instance, comments: 'Yes, we would consider offering this. We do have some storage facilities in our group.' He says the key is to understand the needs of retail clients.

Parcelforce Worldwide, with its extensive estate of resources, could have a formal deferred delivery product to sell within a year, says Dick Stead, though he warns: 'Once you've taken an item out of the normal delivery process, you're adding cost.'

But he says he accepts that demand could force the issue. 'We understand that some retailers want this.' He says Parcelforce sees it as an opportunity for market differentiation here, and adds: 'We will make it an attractive option.'

Incidentally, there is a roundabout way in which consumers can obtain a day-definite delivery even when it is not an advertised option. It arises when a delivery has failed and a consignment is recovered to the carrier's local depot. Most carriers probably attempt to redeliver the item the following day, but some offer the consumer the chance to select another day. City Link is an example; by default it will try to re-deliver the next day, but the recipient can call up and request a different day instead.

What about same-day home deliveries? Often dismissed out of hand as unachievable and far too expensive, they have finally crept in as a home delivery option, and are offered by a handful of retailers such as Amazon and now ASOS.com – currently on a limited geographical basis.

Whilst same-day seems unlikely to enter the home delivery mainstream in the near future, the market is certainly capable of doing it, assuming recipients are willing to pay. 'We'd be foolish to rule it out,' says UK Mail's Middleton. 'The issue is really how important it is for the recipient to have the goods immediately.'

Parcelforce has something to offer here, too. Not only does it have access to Royal Mail's Sameday service, a nationwide courier operation; Dick Stead says it is also looking in the longer term about how to configure a 'local-to-local' same-day delivery service.

One might speculate that carriers such as APC, with roots in the courier market and a national network of members with courier capabilities, would also be ideally placed to pursue this market. Any company that attempts it on a national basis, of course, would probably have to rely on having access to multiple stockholding points at strategic locations: not something any retailer would contemplate lightly.

Nevertheless, the point is made: instant gratification is still part of the home delivery agenda; and the continued growth of the home shopping market should see that parcel carriers continue to vie with each other as more and more of them enter the market. Which has to be encouraging for the industry as a whole.

The rise and rise of C2C parcel services

If you're a consumer selling on eBay, or a small business with an occasional handful of parcels to despatch, how do you go find a suitable carrier? In the past, Royal Mail and Parcelforce Worldwide were your only obvious options, but that's all changing.

Early to recognise the market opportunity was Parcel2Go.com, the online parcel delivery specialist, which courted eBay 'power sellers' right from the early days of the online revolution, and is now firmly established as the carrier of choice for many online auction users.

If you take a look at the Parcel2Go web site, it's easy to see why. It has won awards for user-friendliness, and is clearly designed to appeal to non-specialists. It can provide automatic eBay integration for users who register, and offers a discount to those who display the company logo along with their auction details. It even supplies the basic HTML code for users to enter in order to put the logo in place.

More recently, the more traditional parcels companies have realised there is a market opportunity beckoning. One of the first to get up and running with its consumer-to-consumer (C2C) service was Hermes (formerly Parcelnet). The myHermes system was launched in May, and chief executive Carole Woodhead says it is going well. The service has been growing at a rate of 10 per cent a week, she says, 'and we're picking up lots of repeat business.'

Users can order and pay online, and the goods are usually picked up next day. 'Customers can even leave the item in the shed for collection.'

Currently the service is from door to door, but Hermes is also looking at the possibility of developing 'parcel shops', possibly located in existing convenience stores. These could function as drop-off points for people who are not at home to take deliveries, but might also figure in the B2C service. In Germany, Hermes operates 14,000 such locations. 'One of our team has been out there to see how they do it.'

Home Delivery Network already has an established and growing 'parcel shop' offshoot company, Collect+, which was launched earlier this year in association with PayPoint, and is said to have grown to over three thousand outlets so far.

It started off providing locations for handling returned goods, but it will also be providing alternative delivery locations for people buying online but not at home to receive their goods. And additionally, managing director Walter Blackwood tells us a C2C service is now fully up and running.

Like Hermes, he sees eBay and other online auction sellers as prime targets for this service. Unlike Hermes, which started as a door-to-door operation, this one started on a shop-to-shop basis, though home deliveries and collections via HDN will be offered eventually.

DHL Express already operates its Servicepoint system through high street stationery stores. So far it says it has set up 400 of these in WH Smith shops, as well as others in Staples shops (the whole network), selected Cartridge World shops and various other selected stores including Rymans. It also uses DHL depots.

We typed our London postcode into its web site, and found a remarkable three outlets within walking distance and twenty in west London – though only a handful could deal with incoming as well as outgoing consignments.

UK Mail is another major carrier developing a C2C service. 'It reflects the way the market has shifted,' says director Jonathan Middleton. 'It's important to make it as easy as possible for the sender.' He says the company has been working on a solution of benefit to both shippers and recipients, and aims to come up with 'a cost effective, flexible and convenient service in terms of delivery experience'.

As if this was not enough, other new ways are also emerging for despatching C2C goods. Among the most intriguing is a service called Anyvan.com, launched this autumn, which offers individuals and small businesses the opportunity to find carriers for their goods by inviting bids through a form of online freight exchange.

It aims to tap into the bargaining spirit that underpins auction retail sites themselves – extending the concept to the delivery function. You might have to be quite immersed in the bidding mentality in order to be tempted to use it, but if you are, it looks a logical extension of the selling process, and could have a lot of appeal.

These new services clearly offer great promise, and some may seem to have an apparent advantage over established players such as Parcel2Go.com in terms of their high street presence, but they also have a long way to go to rival Parcel2Go's established presence in key auction markets. They could also learn something from its highly consumer-friendly web site, which promotes delivery in much the same way as other consumer services.

It's clear that for low-volume shippers, the carrier market has never before offered such a range of options. The development of C2C services now looks solid and permanent, and any continuation of the dispute at Royal Mail can only play further into the hands of their operators.