Tuesday 27th Sep 2016 - Logistics Manager

The new face of retail

Confidence in your carrier is key for contemporary retailers faced with the transformation of their business by online shopping resulting in an increased reliance on home delivery. Alex Whiteman examines the challenges.

For several decades there was an upswing in store growth, culminating with the move to superstores located on city peripheries rather than in city centres. But then the birth and subsequent unprecedented growth of e-tail lead consumers away from the megastores and towards their computer screens. This in turn gave rise to the need for retailers to make sure they too had an online offering, with easy delivery. And from easy delivery it has become speedy delivery.

The world’s largest retailer, Amazon is currently trialling same-day delivery in the US for its Prime customers, and it seems that UK cities will also become a trial ground for the practice. With all this coming as retailers reported problems coping with the large-scale debilitation of their systems over the Black Friday and Cyber Monday promotional period, it seems a pertinent point to look at not only the stresses and strains for home delivery services, but also their successes.

Originally published in Logistics Manager March 2015

Originally published in Logistics Manager March 2015

Paul Kelly, managing director of Kelly Turkeys, has used several couriers in the development of his business. For more than a decade. FedEx has been the farm’s courier.

“Home delivery has transformed retail,” says Kelly. “Historically, our birds have been collected from the farm, but with 82 per cent of orders placed online and sent out for delivery, it is clear which way the market is heading.”

Kelly notes that this is made even more blatant by the way young people shop: “Young people shop for everything online, and it is this generation that will make up our future customer base,” he says. “As such we realised the importance of getting a courier in that we trust.”

This upsurge in home delivery has lead to problems at times and as such is requiring both 3PLs and retailers to form ever-stronger partnerships, says Paul Doble, chief sales and marketing at DX Home Delivery.

“When communications breakdown between 3PL and retailer, the effect is felt by the consumer,” he says. “It is important to keep up-to-date with forecasts. And important to educate retailers on what the possibilities and boundaries are.

“Delivery firms have to be responsible for helping retailers pull this information together. It needs to be constant, year-round updates, and year-round communication.”

CitySprint CEO Patrick Gallagher points out that with the industry evolving so quickly, forecasting based on traditional models is becoming out-dated. He notes that for a number of years, peak delivery was creeping closer to Christmas but in 2014 CitySprint’s busiest day in December was the first of the month.

“These new peaks around occasions such as Black Friday caught many retailers and suppliers by surprise,” he says. “Managing these spikes requires an honest conversation between consumers, retailers and delivery companies. We need to manage expectations and put reputation and reliability ahead of pressure to conform to a “one-size-fits-all” model of delivery.”

Doble is not blind to the problems posed by these large-scale seasonal promotions i.e. Black Friday and Cyber Monday, and the artificial spikes they cause.

“I struggle to understand why we in the UK have adopted it,” he says. “It made sense in the US, coming the Friday after Thanksgiving and predating e-commerce. Rather than overloading the system here, retailers, consumers and 3PLs may be better served by a series of initiatives throughout the year.”

For Doble, if the retailers must continue with these schemes, he feels they may be better served relocating it to the beginning of the month.

“They could gain competitive advantage this way,” he says. “Regardless, if they continue they need to be careful because if they’re not they will suffer brand damage.”

Home delivery is about speed, price and convenience, says Martijn de Lange, operations director of Hermes UK. Customer expectations are by no means unrealistic he says, but they need to be carefully managed and it needs to be clear that there is a cost for free delivery. 

Most important

“Price is still the most important factor,” says de Lange. “Speed, though, is fast becoming as important. We’ve even started Sunday services. It’s not impossible to meet these needs, as long as it’s understood that they have a cost.”

Yodel found itself overwhelmed by traffic as a result of the Black Friday promotions, and had to delay collections from retailers for 48 hours to clear the backlog.

Executive chairman Dick Stead says that while customers have high expectations, they didn’t emerge of their own accord.

“Customer demands come from retailer promises,” says Stead. “There is a maximum capacity, and sometimes retailers make promises that exceed these limits.”

Stead says that in these situations, if the carrier fails to meet the retailer’s needs, the retailers simply change carrier.

“And if they insist on taking late orders, it will leave little room for manoeuvre. And this finite wiggle room can be absorbed by extreme volumes and extreme weather,” he says.

De Lange says that Hermes experienced a 47 per cent upturn in order quantity as a result of the Black Friday and Cyber Monday promotions. And while a lot of customers had a positive experience, there were notable failures in terms of order delivery and meeting customer expectations.

“Let it be said that these promotions are of no benefit to the delivery firms,” says de Lange. “Ultimately we just try to meet the retailers’ requirements, if they are possible.”

Doble notes the importance for delivery firms not to over commit, adding that while this may result in a short term gain, in the long term your brand will be damaged, because no matter how big your network is, every delivery firm has a peak capacity.

Click and collect systems offer delivery firms, and retailers, a more controllable model. Doble points out that while problems with holiday promotions have heaped difficulty on carriers, these blips have also seen a growth in click and collect.

“Decreased confidence among consumers with their home delivery service has coincided with a boost in click and collect,” he says. “This upswing in usage will be tempered when confidence grows.”

But is click and collect about providing the best option for consumers, or is it about providing consumers with choice?

Gallagher says that he does not believe in “best model” in the current omni-channel world. “The best model is flexibility in line with consumer expectations,” he says. “Every consumer is different and carriers should incorporate a range of different options based around their needs. Click-and-collect is just one of many options.”

That’s a sentiment backed by Nigel Doust, CEO of Blackbay: “The best delivery model to meet consumer needs is the model individual consumers want at that point in time. That is why offering a choice of delivery options is vital.”

Doust believes that click and collect is one of several delivery options that consumers need to be offered to put them in control of their delivery. And he notes that even this system isn’t flawless, with 35 per cent of consumers lodging complaints last Christmas.

“Last Christmas, 35 per cent of consumers were frustrated with lengthy queues and the lack of service,” he says. “Click and collect could just be seen as the Band Aid for the delivery market, the same issues of capacity, efficiency and rising expectation still exist.”

And these hurdles need to be overcome. Doust notes that US company Curbside offers a service that allows consumers to advise of their imminent arrival at a location (which could be the store from which they have made an online order) so that items can be waiting for them on the curb side/pavement.

Roger Sumner-Rivers, managing director of ParcelHero.com, however, believes that click and collect is not just an option but the best model to meet consumer needs.

“It is absolutely the best model for the consumer,” says Sumner-Rivers. “All that’s needed now is more pick up and drop off locations to provide greater flexibility for the consumer.”

Which seems to bring us back to the core point mentioned by all delivery firms, and spelled out by Gallagher, that retailers and distribution partners must work together to communicate limitations to consumers while addressing their wish for convenient, reasonably priced delivery.

Case study

You can’t leave a family without a turkey at Christmas

Kelly Turkeys initially started with the production of the standard white turkey before changing direction in 1983 to bring bronze turkeys back to Christmas dinner tables.

Derek Kelly bought up the last remaining flocks of the pure line bronze, and the business that has gone from strength to strength over the past four decades.

This year the farm turned over £5.2m based on more than 9,000 orders. Of this order base, 82 per cent were placed online. Orders grew by 18 per cent in 2014 compared to a year earlier, and the company expects at least ten per cent growth next year.

Derek’s son Paul, who is managing director, has achieved Guinness World Record fame for not only being the world’s fastest turkey plucker, but the fastest carver too.

Not surprisingly, the run up to Christmas is by far the most important time of year. FedEx and Kelly Turkeys have worked together for the last 12 years.

Turkeys are delivered using the Next Day delivery service and FedEx uses insulated chill boxes to ensure fresh transport. While the distribution of perishable products must always be high priority, the idea that families could be left without a turkey at Christmas is an additional pressure on the carrier.

Martin Davidian, managing director sales UK & Ireland at FedEx Express says: “We even reached one elderly customer based in one of the northern most parts of Scotland, with the courier walking the last half mile in heavy snow just to get there. This year, we will again, no matter what conditions we face, do whatever it takes to deliver.”

“It is this very example that demonstrates the unwavering dedication FedEx displays every year; an unrivalled level of commitment that has firmly secured their place as our number one choice when it comes to delivery,” says Paul Kelly.

Kelly is now looking at the US Thanksgiving market as the next logical step. Having purchased a small farm in Virginia following a trial marketing exercise in the state, he hopes to see his KellyBronze turkeys being the centrepiece of Thanksgiving tables across the country.

“The US market is enormous and we’re eager to tap into the opportunities that lie across the pond. We’re still in the early stages, but with the expertise FedEx provides, they are a big part of our plans for domestic distribution throughout the States.”

Case Study

A question of management

There are arguments for and against the use of owner-drivers. But one thing that is clear is that the push towards it is driven by retailer demands for lower delivery charges.

Roger Sumner-Rivers, managing director of ParcelHero, says: “Certainly there are compromises, however it does lower the cost. But another important factor is that when drivers are using a company owned vehicle they take less care of the vehicle, which also increases the costs further for company. Owning their own vehicle forces them to be more responsible drivers.”

Paul Doble of DX Home Delivery, argues that any problems that arise with this offering is less to do with the model and more to do with how it is managed. This point is reiterated by a spokesperson for Descartes, who notes that any delivery mechanism that is not managed by metrics and measures to meet customer needs will become damaging for the business.

“Owner-drivers are no different on this point than any other model of delivery,” adds the spokesperson. “The correct metrics, measures and management need to be applied to satisfy customers.”

Potentially, this model is damaging, says Blackbay’s Nigel Doust, but he notes that it is important to remember that all people are screened and supported. “However, owner-driver delivery services such as those delivered by lifestyle couriers could be seen as the lifeblood for deliveries,” he adds. “Especially, during peak periods. As demand increases delivery firms can take advantage of the ‘crowd’ by opening up jobs to them. More delivery drivers, means more deliveries are made. The role of the ‘crowd’ could be viewed as being key.”

Doust suggests that there is a role that regulation could play, adding that it is something that needs to be looked at. “Could standards be enforced by the EU to ensure that delivery services meet the same standards regardless of the company type?”