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UK e-commerce home delivery volumes heading for “plateau”?

Friday, February 8th, 2013

E-commerce retail body IMRG suggested yesterday that home delivery parcel volumes in the UK could level off by 2015, owing to the increasing popularity of alternative delivery points.

Andrew Starkey, the IMRG’s head of e-Logistics, said total e-commerce parcel volumes will grow from the current 1.3bn items, including returns, to about 2bn items by 2017.

But he said with the restricted capacity for home delivery among parcel carriers, and with the rise of parcel shop networks and automated parcel lockers, as well as Click and Collect through brick-and-mortar retail outlets.

Starkey said Click and Collect was growing 40% year-on-year at present, and while he predicted this growth would slow to around 25% year-on-year by 2017, he said the impact on home delivery volumes would be considerable.

“If that scenario is right, delivery to the door and homes will plateau by 2015,” he said. “Click and Collect could be between 20% and as much as 50% of parcel volumes by 2017 – but we may see delivery to home volumes peak by 2015.”

Convenience

“There has been phenomenal uptake by our customers of our ParcelShops”

UK consumers are finding the collection at stores with long opening hours convenient, particularly since many cannot be at home during the working day to receive parcels. Parcel shops also offer convenient access for returns services.

Carole Woodhead, chief executive of parcel carrier, which launched a ParcelShop network in the UK last June after success in Germany, said in just six months the 1,000-strong network was averaging 60 parcels per week per store.

“We’re going to expand our plans to have 3,000 shops live by peak 2013,” she said. “There has been phenomenal uptake by our customers of our ParcelShops. Within six months of launch, 50% of end consumers were choosing to send their parcels via ParcelShops.”

Price increases for delivery, including those under a less-regulated Royal Mail, were also factors in the dampening of growth in home delivery, Starkey suggested.

Growth in e-commerce volumes is slowing slightly within London and the South East, although that area is by far the largest market, but the North of England and Midlands are currently “taking up the slack” in driving overall national growth.

For total e-commerce sales, Starkey forecast that the current 12% year-on-year growth would cool to 11% from 2014, then 10% from 2016. Describing the UK e-commerce market as “the most sophisticated in the world”, he said Internet shoppers overseas would push cross-border parcel traffic to as much as 30% of total volumes by 2017.

UK consumers are also keen on shopping abroad, the IMRG head of e-logistics added. “Most UK consumers seem to quite like it, despite getting a good service from UK retailers, they are going to try it,” he said. “Delivery and returns are the biggest concern for them at the moment.”

Converting B2C into B2B parcels


Parcel locker terminals, like those from ByBox, are also beginning to establish a presence in the UK

Starkey and Woodhead were speaking at yesterday’s MetaPack Delivery Conference in London, on the day that UPS launched its new network of parcel shops in the UK, branded as UPS Access Points. The world’s largest package delivery company is starting with about 500 outlets, and plans to grow this to 1,500 by the summer.

Joe Mozzali, vice president of Strategy at UPS Europe, told Post&Parcel yesterday that one of the attractions of convenience stores providing parcel services is that awkward business-to-consumer parcels are effectively converted into business-to-business parcels by parcel shops – meaning a more efficient delivery model can be used.

Mozzali said launching a new parcel shop network meant driving UPS further into the business-to-consumer parcels market without having to significantly expand fleet operations. “It’s just another business-to-business stop along the way,” he said of the new UPS Access Points. “Operations are very excited about this, just coming off our successful London Olympics.”

Automated parcel locker terminal company ByBox said there was an increasing popularity of parcel lockers among carriers as well, because of the cost-savings and improved efficiency within the logistics process.

ByBox chief executive Stuart Miller said candidly that his company had got its business model “fundamentally wrong” when it entered the market in the year 2000, and had since learned that carriers in the UK won’t pay an extra charge for each parcel to deliver to parcel terminals – the key to success is offering the solution as a way to cut delivery costs.

“We completely misunderstood that the core value for the mass market in e-commerce is price,” he said. “But parcel locker networks provide a really low-cost delivery platform. You can deliver to them in the middle of the night, so there’s no congestion, and you can consolidate loads of deliveries into one locker bank, with no failed delivery.”

Parcel locker terminals are set to become more prominent in the UK with Polish company InPost now rolling out a network of 2,000 machines.

ByBox invested GBP 2m in expanding its UK network last year, and now has around 1,500 across the country. Miller said his company was now looking to introduce parcel lockers to UK town centres, and link them to local retailers by offering vouchers for nearby stores when people pick up their parcels. Along with Click and Collect, it could be another way for brick and mortar stores to draw back custom lost to the Internet.

“We’re trying to understand what happens if you encourage people back onto the High Street to pick up online shopping,” Miller said.

Source: James Cartledge, Post&Parcel

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