Thought Leadership

Thought Leadership Corner: PEAK PARCEL PROBLEMS OR YOUR NEXT BIG OPPORTUNITY?

How healthy is the UK parcel delivery sector? To the everyday shopper, it might seem like things have never been better. More and more retailers are offering delivery choices. Reliability is increasing and prices are still low. But at the other end of the value chain, things really do look different.

Over Christmas 2017, Royal Mail handled almost 150 million parcels. That’s a lot of parcels, no matter how you stack them. Of course, there’s no way of knowing what that number will be this Christmas, but there’s no reason to expect it to be anything other than higher. The retail trade body, IMRG, regularly crunches the numbers on parcel volumes and has tracked a trend in recent years.

While the overall annual volume goes up, its rate of growth slows in the lead up to the Black Friday to New Year period. That slowdown has been slightly more pronounced this year, IMRG reckons. “Between July and August it was -7.5% (in 2017 it was -3.4%) and between August and September it was -15.1% (in 2017 it was -12%)”, the organisation says.

What that probably means is there will be a greater release of demand once the end of year peak is truly underway – a bumper Black Friday and a cracker of a Christmas, perhaps.

Running to stand still

So what does all this mean for the health of the delivery sector? Let’s take another look at Royal Mail and see if the UK’s largest postal operator can tell us something.

Well, for the first half of its current financial year parcel volumes were up while the number of letters it delivered dropped. In the UK, revenues slipped by 1% to £3.59 billion for the period. That’s not hugely significant. But profit stumbled and tripped from £233 million to £165 million. And that is significant. Especially as that’s the figure before what Royal Mail calls ‘transformation costs’ is factored in.

That’s the state of play in the UK. But how about at GLS, the international arm of Royal Mail? It’s revenue went up by 9% for the same period. Which is a bit more like it. However, its ‘adjusted operating profit’ dropped from £90 million to £77 million. Which isn’t a bit more like it at all.

Because all of this means that the busier Royal Mail gets the harder it finds it to make money.

Of course, not everyone is in the same boat as Royal Mail. Other carriers rely on self-employed drivers to keep costs down, for example. And no one else bears the burden of the universal service guarantee. But the simple fact is that delivery has been the poor relation of the extended retail family for years. While websites and apps have had huge amounts of time and money lavished on them, delivery has not. While customer acquisition and marketing have been strategic priorities, getting purchases to shoppers has not. Investing money in a service that isn’t making huge amounts of margin is, after all, a tough call to make.

But the delivery sector has been recently disrupted by rising customer expectations, which have been fuelled to some extent by the activities of some retailers and carriers; DPD with its famously-popular half-hour delivery slot notifications, or Amazon who heavily promoted the same-day delivery concept that is slowly becoming more common.

Running to keep up with DPD or Amazon or anyone else who can offer something you can’t, isn’t easy. Especially if you lack the delivery infrastructure or the resources to invest in one. It’s likely that you will become exhausted of funds or customers. Or both.

unsplash Free delivery

Call in the experts

So is it time to roll over and give up, then? No, not necessarily. Because the solution is sometimes hiding in plain sight.

Maybe you can’t offer same day delivery, or click and collect, or nominated delivery. Maybe you can’t develop an app, or build a network of warehouses and vehicles. And maybe that’s becoming a problem because other businesses can, and you’re losing sales to them.

But the thing is, there are already many key parts of every business that run on the expertise of third-party experts. From the accountant to the lawyer, from the graphic designer to the shop-fitter, every retail business is there because of the combined expertise of others. That model just needs to be extended.

If you’re not an accountant, you find someone who is. If you can’t develop an app and/or supercharge your delivery and logistics offering, find someone who can; there are almost always opportunities for you to buy into expertise. Use someone else’s storage space. Or maybe rent out your own. Put your parcels into someone else’s click and collect network. Or become part of someone else’s network.

Everyone in the retail sector relies on a web of finite, shared resources to get by. From vans to roads, from storage space to staff. Yet almost no one is operating at full capacity in all regards. If you can find ways to monetise your dead space and downtime you might crack open a whole seam of new opportunities. And maybe even help to shift all those millions and millions of parcels.

Parcelly adds: 'Rising parcel volumes and pressures on logistic margins and existing fulfilment solutions naturally trigger bottlenecks within the first- and last mile. Parcelly, as a third party service provider, helps ease these pressures by offering hyper-local PUDO hub solutions that are accessible to any retailer or carrier alike. Turning redundant space in local businesses into parcel storage capacity, we created a sustainable nationwide sharing economy platform with a technology that can be integrated in any supply chain fulfilment process. Whether the costs of a personalised delivery experience or prime convenience are absorbed by the retailer or paid for by the consumer, we believe customer satisfaction and a sustainable logistics environment are the ultimate goal and a price worth paying for.

In our latest Pick'n'Pack episode we also highlight the urgency of tackling the associated costs, desired operational efficiency and customer convenience of parcel returns, as these cost UK retailers more than £60 billion each year and also play a significant role in a consumer's purchase decision. Beyond providing retailers with real-time tracking updates through our API technology and improved transparency about their parcel returns processes, our ‘smart-drop solution’ for returns does not require any further return label or re-labelling procedures. It offers as such the most consumer friendly return process: a simple return code, printed or written on a parcel, allowing a drop-off in any of our nationwide 1,700+ PUDO locations. A truly, customer focused, easy and convenient way to enable agnostic returns and a step, we believe, towards making the rise in ecommerce efficient and more sustainable.'

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