By David Upton, Managing Director of DA Systems.
Retailing and logistics are starting to develop a negative, inverse relationship, which is not good. As e-commerce levels continue to grow, volumes of parcels delivered right first time have been dropping steadily. According to recent figures released by IMRG, 940m parcels are expected to be sent by carriers working for retailers this year, exceeding initial expectations by roughly a 10% margin. This places a huge strain on operations, which are already stretched to capacity.
When parcels are not delivered right first time, two problems arise. Firstly, the customer experiences dissatisfaction with the retailer and secondly, the carrier bears the brunt of the cost. Estimates by IMRG suggest that the cost of missing a delivery is £23. Take into account that margins for the carrier are already very low, probably no more than 50p a drop, missing a single delivery can mean no profit is made on the next 40 deliveries to absorb the extra cost. It’s a situation carriers cannot afford to be in, so something needs to be done about improving reliability rates. Even taking into account that pay rates will be higher at the weekend, the arrival of Sunday deliveries presents an excellent opportunity to achieve this and at the same time, increase the number of drops possible in a day, because roads will inevitably be less congested.
According to the IMRG UK Consumer Home Delivery Review 2013, almost 50% of customers don’t expect to be in to receive a parcel personally. This is another potentially costly statistic, because it significantly increases the opportunity for fraud, whereby a parcel is left without delivery confirmation and the customer denies receipt. B2C parcel fraud happens all the time and without a signature or other evidence to prove a delivery has taken place successfully, there is very little a retailer or carrier can do, besides sending out another item.
Sunday deliveries also make sense given that e-commerce is a 24/7 operation anyway. If you can order goods anytime, anywhere, it’s incongruous to then have to wait for a delivery during business hours between Monday and Friday. That’s when people are usually out.
In terms of timing, launching Sunday delivery services now, in the summer months, provides a perfect window in which to fine tune operational details to ensure that right first time rates are being achieved at least 95% of the time and retailers are perfecting what we describe as the ‘doorstep experience’. For many consumers, this aspect of their purchase is the only ‘physical’ contact they will have with a retailer, and it’s through a third party. So careful management is needed, to ensure they have the most positive experience possible.
Although deliveries on a Sunday (and Saturday) mean more people are likely to be home to physically receive their parcels, without providing a tight timeframe in which to expect the goods creates a separate issue. It’s especially unrealistic to expect customers to wait in all day at a weekend for their parcels, so using messaging systems to provide an ETA window is an essential part of the strategy to improving the overall service.
In addition to increasing right first time rates, using proof of delivery technology to support Sunday deliveries creates huge scope to up-sell related services and retailers could potentially offer a commission, dependant upon success rates. It could be delivered very seamlessly, for example, the mobile device being used by the delivery agent could potentially alert and automatically offer a relevant after care service relating to the parcel being received. If the customer is getting some new suitcases for instance, they could be offered travel insurance and led through a series of screens to provide the right level of cover. The same applies for white goods, and offering a final chance to take extended warranty or damage protection.
There are other opportunities. Postal operators are already working with market research companies to provide local surveying of different postcodes – verifying the most popular cars in different neighbourhoods for example. They could also offer audience polling, similar to the online services that YouGov offers, whereby consumers are segmented by gender, approximate age and postcode, then asked their opinions on one or two questions. It would be a great way to gather data cost effectively and consumers could potentially opt in to be part of an audience in the same way as they agree to participate in a YouGov omnibus survey. In addition to offering commercial research services, it would be equally viable to conduct immediate community research on behalf of the local authority or council.
In summary, offering Sunday deliveries, especially when enhanced with mobile proof of delivery technology, clearly offers multiple benefits. For the retailer, it means providing a better doorstep experience, so the consumer has a positive brand association and reduced losses from fraud. For the consumer, it means greater convenience and a true round the clock shopping opportunity. But perhaps the biggest winners are the carriers themselves with a significant opportunity to avoid the cost of missed deliveries and at the same time, increase profits. This is achieved in a number of ways. Obviously, when parcels are more likely to be delivered right first time, it reduces the frequency of the £23 cost being incurred. But Sunday operations also mean less congestion, translating into lower fuel consumption and more drops possible per shift worked. That’s potentially a massive saving for a large carrier, for whom fuel bills and labour costs are the biggest variable expenditures. However, the icing on the cake is the opportunity to generate new revenue streams by selling additional services for either the retailer themselves or other commercial partners. Technology will make it happen and really the only limiting factor is having enough good ideas.