Onine shoppers want to get goods fast, free, or both. So as e-retailing explodes and with peak hitting harder and faster, delivery operations are facing ever increasing challenges and costs.
The zenith of the 2012 Christmas peak, Cyber Monday, was a record breaker. The first Monday of December, usually the high point, saw online order volumes up 51 per cent on the same day last year. And according to research by Metapack the explosion in parcel traffic continued to the following Monday, which saw a further 7 per cent week on week increase in online deliveries, and beyond.
“Some of our retailers have reported as much as a 300 per cent increase in sales during this period,” said Patrick Wall, chief executive and founder of MetaPack..
So business is booming – great news. But for such a critical function, with more than its fair share of pinch points and risk factors, some would say it just translates to ever escalating pressures.
“The continued strong growth in parcel volumes generated by e-commerce has obliged carriers to consider how best to manage that huge amount of traffic. Capacity has been reduced by some while others have introduced limits on the numbers of items which they’re prepared to accept from some retailers, especially during the peak season covering November and December,” says Simon Veale, director of Global Freight Solutions.
Yodel’s chief commercial officer, Peter Fisher, says the demands on operators are about more than volumes. “Although the growth is continuing, the market conditions are toughening. Customers love the on-line shopping experience and continue to raise their expectations and demands for excellent service and carriers are required to step up to the mark with improved customer experience and innovation.”
David Smith, managing director of City Link says: “We have to accept that the face of shopping has changed dramatically over the past decade and there is a whole new generation of shoppers who simply don’t want to remain at home to receive their parcels.”
“Quite simply what customers really want is a choice. The fact that consumers now have the opportunity to order online around the clock – whether from the comfort of their own home or via a smart phone while on the move – they expect the same level of flexibility and convenience when it comes to delivery.”
Gary Winter, sales and marketing director of Hermes agrees: “Our recent survey found that four in ten consumers were now significantly influenced by the availability of a broad range of delivery options when choosing a retailer online. Internet shoppers increasingly want to be in complete control and make buying decisions based on flexible and convenient delivery, so there is an opportunity to achieve competitive advantage by providing such a solution.”
With high demand, and pressure on supply, margins should be way up. But with the home delivery business there seems to be a problem with the usual rules of supply and demand.
It is widely recognised as one of the least profitable parts of any business, and the final mile is notoriously tricky to get right, relying not only on planning, systems and staff but even to some extent the co-operation of the customer. In fact the customer, and their expectations are a large cause of the disparity between the perceived and actual value of deliveries.
“Most consumers are looking for value for money when shopping online, which means price advantage is also a key consideration for any home delivery service,” says Winter.
The jury’s out as to just how much e-shopper are prepared to pay for delivery services. Trimble reckons that 40 per cent of consumers are happy to pay for next day delivery, with more than 70 per cent see features like hourly delivery windows as key. But DPD found that 73 per cent of e-shoppers gave up on purchases because of restricted or expensive delivery.
As much as we all love the “free delivery” option, the fact is that none of these extra services will be possible for free. “Without an increase in the level of investment in the delivery experience, customer needs will fail to be met. And the market cannot afford to lose a player; it needs all the capacity currently available, “ says Fisher.
Winter points out: “As an industry, the home delivery sector is expected to broadly break even this year, which suggests that some carriers will need to adapt their pricing structure in the longer term to operate profitably. Hermes is one of the few profitable home delivery carriers in the marketplace.”
Royal Mail announced a £75 million four year investment plan for its UK parcels business Parcelforce Worldwide, including a programme of expanding and opening new depots as well as creating an extra 1,000 jobs.
DPD created nearly 1,000 full time jobs in 2012 and announced a further 1,500 from 2013. The firm is also developing its Predict service which uses GPS technology to offer precise one-hour delivery slots, to be accessible via smart phones for confirmations, updates and rearranging deliveries.
City Sprint also offers one-hour delivery windows, using retailers’ existing IT and pick and pack processes Click and Collect is popular because, while convenient for the customer, it also gets them back on the shop floor. John Lewis for example is exposing customers to a whole new shop floor by offering deliveries to Waitrose stores.
CollectPlus now offers services from more than 5,000 stores, and reckons that 87 per cent of the UK’s online shoppers are now within a mile of one of its drop off and collection points. Its Click&CollectPlus and Parcel Point services work as drop boxes for returns and online orders from retailers such as Amazon, ASOS, eBay, Littlewoods, Topshop and Virgin Media.
Amazon has plans to establish its own locker box network, and Nightline invested some 5 million euros in its Parcel Motel network last year. In December a new venture Local Letterbox launched, providing pick up and drop off points, and Hermes plans to roll out its myHermes service to some 3,000 – 4,000 Parcel Shops.
Hermes has seen an increase in click and collect services being offered and taken up. Winter says “This is still an emerging option, but the growth suggests that consumers are becoming increasingly comfortable and satisfied with this delivery channel.”
“The priority for most shoppers is speed of delivery closely followed by value for money. When they realise that high-speed options typically come with a price premium they are opting in the vast majority of cases for the lower cost service. Therefore, retailers need to focus on a highly reliable and viable delivery solution, with the added flexibility of offering premium services for those rare occasions when speed really is an issue,” says Winter.
“Technology is also a key,” says CitySprint’s chief executive Patrick Gallagher, who foresees much more investment in systems that offer clear and consistent communication with the recipients of the delivery status of their goods. “Distributors should have already ring-fenced a significant capex investment for 2013 to achieve this capability.”
Veale agrees, and says this shift was why GFS launched its enterprise carrier management products last year.
“The IT department has to build in the facility to accommodate a portfolio of delivery methods. Accounts have to cope with possibly paying a number of carrier partners when they might, in the past, have dealt with one. Marketing, warehouse and customer service personnel all have roles to play too.”
Investment in IT can serve a dual purpose. Satisfying expectations for clever delivery options is clearly the main target. But keeping the customer engaged can also be invaluable in terms of reputation. Staying in touch can give customers a confidence in the service that translates to valuable repeat custom.
City Link has invested some £5 million in its customer services, giving real time information about a parcel’s progress via the web or a helpline.
“You cannot manage what you cannot measure and taking steps to achieve optimum productivity and on-time service delivery while keeping consumers informed along the way can pay dividends when it comes to keeping your customers happy and your brand reputation intact,” says Mark Forrest, general manager at Trimble Field Service Management.
Communications black hole
Dwain McDonald, DPD’s chief executive agrees about the importance technology in customer interaction. The firm found that 23 per cent of people have already bought goods via smart phone. “Traditionally, once you’d clicked to make a purchase online you entered a communications black hole until the parcel just turned up on your doorstep, or you came home to find a card on the mat,” says McDonald.
“DPD has been working with retailers to fill that void with useful information about the delivery and giving the customer further choices about where and when to deliver.”
Conversely, sophisticated platforms for interaction will come to naught if the delivery process alienates the hard won customer. For e-retail, technology systems also constitute the basis of customer service, with equal power to decimate brand loyalty. 29 per cent of online shoppers that experience just one incorrect delivery will abandon that retailer altogether, according to a survey by voice picking system firm Voxware.
“The rise of social media such as Facebook and Twitter is enabling disgruntled customers, whether justified or not, to voice their frustration about poor service or a parcel that hasn’t arrived. We have all seen videos of questionable delivery methods go viral in recent years and this clearly demonstrates the potential damage that can be caused to an organisation’s reputation and brand,” says Skillweb’s managing director Paul Ridden.
“The home delivery sector needs to be looking at ways of embracing these online and mobile communication channels to enhance the customer experience, protect reputation and even boost revenue.”
For a business function fraught with pitfalls, balancing the challenges of rising volumes and price pressures may appear to be more of the same. But the added requirement to develop IT strategies that boost customer service, reputation as well as revenue should make 2013 a challenging year.
Case study- What you want, when you want it
Inventive delivery firm Shutl won the Innovation in Fulfilment category at the European Supply Chain Excellence Awards 2012 for its service that delivers online orders within as little as 90 minutes.
Shutl assigns delivery jobs across an aggregated pool of same day couriers, which amounts to a combined fleet of thousands of vehicles including bike couriers. Rather than going via centralised distribution centres, it fulfils orders from local stores.
Customers can use Shutl’s services to book a convenient, specified one-hour delivery slot, or for as-soon-as-possible delivery with the 90 minute option.
Its IT systems matches jobs to couriers in real time, using data about the delivery such as destination, as well as price, performance history and customer feedback about the courier.
Shutl operates a transparent market place so that carriers can compete with flexible tenders for each delivery.
Retailers already offering the service to its customers include Aurora Fashions, Maplin, and Argos. UPS has invested two million dollars in the firm to expand its engineering team, accelerate the acquisition of new retail partners, and prepare to launch its service in the US in early 2013.
Case study- Despatch automation for Bondara
Lingerie and adult toy company, Nagook, trading as Bondara, has integrated its Royal Mail Tracked Services with NetDespatch. Using the NetDespatch powered web shipping and tracking platform, Nagook now despatches tens of thousands of parcels throughout the UK without having to key in any extra data.
To despatch a parcel, the staff just scan a picking barcode, creating a label, and the required data is automatically sent to the Royal Mail systems.
Nagook needed to make the switch to Royal Mail Tracked Services when it moved to a new 40,000 sq ft warehouse containing millions of different products.
“Our business is growing fast and without the advanced automation provided by NetDespatch we would not be able to use Royal Mail. We were able to implement the whole system in just a few days,” said Nagook’s technical director, James Ratcliffe.
The integration of Nagook’s in-house developed order management system to the NetDespatch powered Royal Mail Tracked service was accomplished through the use of real time web services.
Customer orders are taken, sent to the NetDespatch system, and pooled to create a picking list for the warehouse. The items are then picked and packed. At point of despatch an internally produced barcode on the package is scanned onto a web page using NetDespatch’s “Parcel Despatch”.
The correct Royal Mail shipping label appears instantaneously on the local printer, while automatically pre-advising Royal Mail of the collection. When the collection driver arrives, the operator prints the collection manifest containing a record of only those labels used, ensuring that Royal Mail billing will be calculated correctly.
NetDespatch users can transfer parcel data and tracking status over the web, print labels from anywhere, request data downloads and review the status of all their shipments in real time.
Ratcliffe says: “Generally, all of our software development is done in-house but under the circumstances we did not have the time. The NetDespatch solution was immediate and effective and has proven extremely reliable, particularly during the busy Christmas period when our customer demand increases substantially.”