Hermes UK fosters growth in a struggling economy

Despite a “sea of doom and gloom” in the UK economy at the moment, UK parcel courier specialists Hermes says the rising popularity of online shopping means continuing growth for its business. After posting a 6% increase in sales in the last year, the Leeds-based company is predicting that its growth is now moving well into the double digits.

After adding a new hub in Warrington and three new depots around the country this year, plans are now being put in place to open four new depots in 2012 to cope with the growth in volumes.

This will include new and expanded sites, opening up “considerable” new capacity.

Hermes UK chief executive Carole Woodhead (pictured right) says the UK economy is perhaps struggling more now than it was even during the global recession, but parcels are still a growth business, particularly in London and the south-east of England.

“Thankfully we’re in an industry that is growing, and that gives us the confidence to keep investing in capacity,” she says.

Hermes, which operates as a network of 7,500 self employed couriers and handles around 140m deliveries each year for online and catalogue brands including Next Directory, Readers Digest, ASOS and Lakeland Ltd, is not just sitting back and waiting for the e-commerce market to grow. The company is actively working with its clients to foster additional growth through innovations to its delivery services.

Recent innovations have included later cut-off times for retailers to access next-day deliveries, the launch of PIN-protected proof-of-delivery systems for high-value goods, and the launch of a new returns service through the myHermes.co.uk website.

Some of the intelligence behind its service innovations comes from the company’s annual surveys of consumer attitudes on the ecommerce and associated shipping process.

This year’s Parcel Deliveries Usage and Attitude Survey, in which more than 1,500 consumers were polled, revealed fresh insight into expected areas of concern including a desire for more convenience in delivery, better returns services and more effective tracking systems accessible on the move.

Jon Tobbell, the Hermes commercial director, says a particular difference in consumer attitudes uncovered in this year’s survey, no doubt linked to the slow UK economy, has been a major shift in the need for deliveries to be quick. Shipping cost is now a much more important issue for ecommerce buyers.

“The importance of next-day delivery has come down,” says Jon Tobbell, the Hermes commercial director. “We believe that’s the recession factor – consumers are saying times are tighter, they would rather keep a few pounds and wait a little longer for their purchase. It’s one of the biggest changes in the survey this year.”

Improving convenience

Hermes UK commercial director Jon Tobbell says making product deliveries more convenient will attract more people to shop online

One of the most interesting components of the company’s latest annual survey has been its first-ever questioning of people who do not yet shop via the internet.

The survey found the anticipated doubts about technology and payment security, and the desire by offline stalwarts to see and touch the goods they are purchasing, but it also found concerns about the delivery process were significant obstacles to people starting to shop online.

“Over 50% of people (who do not shop online) are saying deliveries are causing me not to shop online,” says Tobbell, who explains that major worries for those not shopping online include difficulty in arranging delivery, the possibility that goods would get lost in the logistics chain, and concerns about deliveries being made at a convenient time or place.

Although Hermes is proud of its claimed 94% first-time hit rate for parcel deliveries, the result of locally-based couriers knowing where householders want items delivered when they are not at home, it is following up on the consumer desire for even more convenience in delivery.

As well as looking at rolling out parcel shops, the company will trial evening deliveries from early next year, starting out within the Greater London area before a decision is made to roll out across the UK.

Tobbell says 93% of those surveyed who were in full-time employment found that evening deliveries would be attractive, so the company will trial the idea to see if the economics work.

“This represents a challenge to our industry, because at the moment the whole of the courier market is set up to deliver during the day,” he says, “but if the consumer wants to do it, that’s one of the things we’re going to have to look at as we move forward.”

Another surprise within this year’s survey has been a “massive acceptance” on the part of British consumers for the concept of parcel shops.

Parcel shops are well used in continental Europe, including the 14,000 provided by sister company Hermes Germany, but they are not used so much in the UK.

“The whole idea of parcel shops means they can get their parcel when they want by making a detour via a local store,” Tobbell explains, adding that consumers would find it convenient to use parcel shops for returns, as well as collections.

Hermes will be following up on this particular consumer demand. Back in June, the company revealed that it plans to begin deploying a nationwide network of parcel shops from the end of 2011. However, its executives are not yet ready to discuss detailed plans with Post&Parcel in this interview.

Returns

Another significant concern for offline shoppers revealed in the survey is that it might be difficult to return unwanted goods if purchased online.

Tobbell says consumers are “screaming” for better returns services for online purchases.

Earlier this year, Hermes launched a new consumer-to-business returns service via its myHermes.co.uk website, which the company admits has been relatively slow to take off, though in the last few months has suddenly caught on with six big retailers.

The service is proving popular because it allows consumers to easily log on and register their returns, and allows either the retailer or consumer to pay for the shipping depending on the particular retailer’s returns policy.

“Retailers sometimes don’t want to be first, and now that we’ve got a number onboard, it’s going really, really well,” says the Hermes commercial director. “We think it will really start to take off next year.”

The new returns service also includes tracking, something that Tobbell says his company has recognised as being something very much wanted by consumers.

“One of the things we’ve done well has been tracking a delivery to the door,” he says, “but one of the things we haven’t done well – and I think the whole industry is in this position – is tracking back a return if that’s needed.”

Future outlook

Hermes has seen its business growing by 6% in the most recent financial year, with profits growing a massive 75% thanks to its continuing innovation and investment in its logistics systems and capacity.

Going forward, having won a number of new clients, the company is forecasting its sales to increase by as much as 20% this year.

Woodhead says there is “huge scope” for growth in ecommerce volumes in the UK since online retail accounts for just 10% of retail sales at present, with particular dramatic growth in web-based sales of items like clothing and household goods.

“We think the customers like the service offer we have,” she says. “Even though the economy is really struggling, I think online is one of the gems of positive news in a sea of doom and gloom.”