The recent flurry of announcements from leading players in the parcels delivery market that they will now be offering deliveries on a Sunday seems to have caused a stir. Hermes, DPD and Royal Mail have all added Sunday deliveries to their ever increasing range of services.
The growth in options is in line with the findings of the annual Hermes Parcels Delivery Usage and Attitudes survey which found that over a third of respondents wanted deliveries on a Sunday.
Putting to one side any ethical or moral stance around Sunday services, it seems clear that the increased use of high value capital equipment such as buildings, sortation equipment, IT systems and delivery vans is a no brainer. It must be galling to any Finance Director to see his expensive investments standing idle at any time of the day or week.
Given the huge increase in home delivery volumes due to online shopping, carriers have faced year on year increases in volumes, driving a year after year increase in demand for additional resources in the form of depots, vans and so on. A PwC report for the Royal Mail forecast parcels to grow by almost 80% between 2005 and 2023 and, if anything, that projection is currently being exceeded. So, for me, it comes down to the simplest of statistics - a Sunday represents an opportunity for almost 17% more volume without any additional investment in capital items. Of course, labour, fuel, additional maintenance costs, etc., will be incurred, but the existing capital assets will ‘sweat’ harder. Music to the ears of any Finance Director!
The advent of click and collect, parcel shops, drop boxes and so on all support this trend towards better use of existing assets. They all offer additional choice for the consumer while, at the same time, allowing the carrier to increase the number of parcels per delivery, reduce the likelihood of a delivery failure and, where returns are concerned, increase the number of parcels to be collected.
The challenge here relates to the limited volume per location. While 3-4 parcels a day still helps keep down the overall transport costs through consolidation, it is hardly likely to support a dedicated outlet, hence the trend towards the use of corner shops, newsagents, petrol stations and so on. DPD has even started to use its ‘arch rival’ myHermes’ Parcelshops to support its own Homecall Returns service. Parcel carriers have traditionally shunned this kind of collaboration but, if not quite embracing it, they now seem to be accepting it as a necessary evil.
This need for collaboration should support newcomer Doddle, a Network Rail/Lloyd Dorfman business that offers click and collect services at dedicated shops in and around railway stations. It is currently the only solution in the marketplace that is available to all retailers and carriers, making it highly attractive for online shoppers who can choose to have orders from any number of participating retailers delivered to a single Doddle store.
This all makes for a fascinating and dynamic market, with opportunities for growth having to be considered alongside the increasing demands from consumers whose purchasing savvy and service expectations have been sharply honed through the recession.
It strikes me that the real threat here is a risk of deflation in parcel charges driven by consumers’ expectations regarding delivery costs. Most would like deliveries to be free, a couple of quid at most, with delivery to a parcel shop being even less. The idea of a premium rate for evenings, weekends and timed deliveries is a definite no for many. After all, if my local supermarket can deliver within a one hour slot, seven days a week between 8am and 9pm for as little as £1, why can’t a professional delivery company?
Answering “but we can!” to that question is the major challenge for the UK parcels industry – getting to this position will undoubtedly give rise to even more interesting developments in the years to come.