Hot topics in home delivery for 2011
Insight by Patrick Wall, MetaPack, CEO
Delivery is now recognized as an essential part of online retailing, not just part of the messy, dirty backend process. It’s a critical part of the retailer proposition, shaping the customer relationship along with the look and feel of the website and quality and price of the product itself. This article looks specifically at delivery and explains what are the hot topics for 2011, which carriers are innovating in what areas and as a retailer how to make sure you provide the most competitive delivery offering: whether your focus is economy or premium, tracked or non-tracked, UK or international.
In summary, expect to see a continued shift to “premium”, where premium means more tracked next day and increasing use of time slots. Expect to see fuller and better integration of systems, from the web-front end through the warehouse and carriers and finishing with customer care. Typically this will be achieved with multi-carrier management systems. This end-to-end joined up approach applies to pure-plays, and multi-channel retailers, as well as extended supplier networks that are shipping direct to the final customer. Finally, there will be continued growth in international delivery and improvements in the services surrounding returns.
Internet retailing is becoming security conscious and quality led. There has been quite a dramtic shift in the use of premium services over the last three years to the extent that the use of non-tracked and other economy services now make up the minority of despatches according to a survey of MetaPack’s etracker 100. There are still many retailers providing free delivery, especially to encourage or reward larger shopping basked size, but the stronger, contrary trend is to use tracked next day services. This is part supply: competing with established next day services such as Parcelforce, UPS, Fed Ex and CityLink, Yodel* now offers a competitive tracked next day and Royal Mail has just added their own next day tracked product; part push as retailers reduce levels of fraud through parcel tracking and POD (proof of delivery) and it is also demand as shopping basket values continue to increase and customers want security of delivery. (*The new name for HDN and DHL in the UK).
Part of the increase in premium services has been due to DPD’s new Predict service. This has been the most successful new product launch in 2010 and is likely to gain more traction in 2011. The service predicts the hour of delivery for a next day service while providing the recipient the opportunity, if necessary, to change the delivery day. Yodel has recently introduced a competing service. Both companies are pushing the market forward by adding additional features to existing services i.e. not increasing their prices but providing the additional benefits. In 2011 we would also expect to see more take up of same day delivery, e.g. using CitySprint and recent to the market, Shutl, which provides 90 minute time window delivery from the stores.
With all these changes taking place in the market it can be a challenge to manage existing and new carriers in the warehouse and back end. Traditionally retailers integrated to the carriers themselves. The first integration can be bearable, subsequent ones rarely are, so most retailers will use a multi-carrier system to manage carrier availability, selection, labels, integration and customer care. This provides high levels of flexibility to stay in touch with market innovation.
Competition is also intense in the smaller weight and size segment of the market, where again new features are being added within existing prices. Hermes are the market leader for smaller parcel e.g. 1 to 4kg and have enhanced their service by adding tracking; Yodel are competing here up to 2kg with their new Lite product and UK Mail’s Packet Plus is an interesting hybrid, which tracks parcels into the Royal Mail network. This market is also supported by InterLink, CityLink and UK Mail who provide sized pouches for managing the delivery of smaller products. Royal Mail have unparalleled strength for letter box delivery and has added.
The UK market is quite particular in two respects: relatively more deliveries are made to unoccupied homes than any other large market, and the market is very competitive. This has created two alternative delivery solutions to the home and both will come of age in 2011. Collect+ already offers a strong returns network through its 1000s of PayPoint enabled shops and increasingly this is being taken up as a delivery and collection network. ByBox offers lock boxes, widely distributed amongst shopping centres and increasingly in 2011 available at or near train stations.
During the last 12 months International sales have really blossomed with some pure play customers now selling over 30% of their goods overseas. The UK is regarded as a leader in eCommerce, with greater online shopping per person than anywhere in the world. With a strong retail and design heritage, the UK is attracting significant sales, not only from Europe, but anywhere from the US to Australia, so more retailers will looking for increased international growth in 2011. For Europe its just a question of applying the right label. DPD, Parcelforce, DHL and Royal Mail are popular choices. For international outside of the EU, retailers need to gather more information: country of origin; an internationally recognized harmonization code; content at an item level and value.
By now, anyone planning for 2011 may be getting overwhelmed by choice. That is one of the extraordinary benefits of working in the UK market. The trick is to make it simple for the customer. The challenge is not all services are available to all postcodes and where they are, they may not meet the same service standard, e.g. in some parts of the country a next day service may be two day and a same day may not be available at all. In other cases a large product might need a specialist two man carrier like Nightfreight and the service needs to be booked. Traditionally retailers have offered all services to their customers regardless of product size (and weight) and regardless of where the delivery is to be made i.e. static delivery options. Increasingly this is an unsatisfactory approach, as these “exceptional” cases are actually large in number, increasing in volume and driving much of the customer support cost. The alternative is to offer dynamic delivery options where a real time call is made to a database (perhaps from the multi-carrier system provider). The call itemises the delivery address and particular parcel attributes e.g. delicate, high value or large and the response only describes delivery services and that can be made in these set of circumstances. This ensures that customers’ expectations are appropriately managed, first time delivery success is far more likely and satisfied customers come back for more.
So 2011 looks like being a busy year and that’s not even mentioning the structural changes that carriers and IT are bringing about: higher quality multi-channel offerings; more supplier home delivery and improved returns systems. All of this will lead to greater empowerment for the shopper, whether it be choosing a suitable service; tracking on line; changing a delivery before it is made or picking up parcels on the way home. That’s why delivery is increasingly recognized as a central part of the retail proposition.