Spend and Send: The Growing E-commerce Delivery Dilemma

It might seem strange to turn away business in a competitive parcels market like the UK, but some delivery companies are seeing risks to their corporate reputations from the overload from surging e-commerce volumes, says GFS director Simon Veale. Of all the challenges faced by the domestic carrier industry in the last 40 years, none could be said to have had the impact of e-commerce. In the run-up to Christmas last year, parcel volumes generated by online retail increased by 15 per cent on the same period in 2010.

It could be argued that the burgeoning appeal of the internet has not only changed the way we shop but how, why and where parcels are sent around the UK and overseas.

On the basis of patterns culled from extensive research of parcel traffic, especially those seen during November and December, the most recent GFS Review, published in February, made a number of forecasts. The most notable was that pre-Christmas home deliveries would match those to businesses within five years.

In other words, an industry which had historically been almost all about shipping to companies would see an equal need to serve consumers by the end of 2016.

Such a prediction wasn’t the result of wild calculation, but observation and information from carriers themselves and their clients. In the last two months of last year, e-sales grew so feverish that some major retailers were shipping not tens but hundreds of thousands of items per night.

In the early days of online commerce, home deliveries had accounted for a second, modest spike in volumes, a month after the main push to stock high street stores in preparation for their festive ‘jingling tills’.

Last year, though, merchandise moved via the click of a mouse even surpassed numbers seen during the weather-hit season of 12 months before, with a solid month of high volumes.

Controlling the impact

Against that backdrop, you might imagine that all carriers would be expanding capacity to cope with a further increase in e-commerce packages this year. However, that isn’t exactly the case.

There is actually evidence that delivery firms are looking to manage and control the impact which e-commerce is having on their industry while doing their best to incorporate the incredible parcel volumes which it generates.

Some carriers have already announced or embarked on a programme of depot closures, potentially restricting their overall ability to process big numbers of consignments bound for the residential letterbox. Elsewhere, the prices quoted for shipments – always something of acute interest to retailers and their customers – seem to be hardening.

“Some carriers have capped the numbers of parcels they’re prepared to accept”

Furthermore, some carriers have gone so far as to introduce capping on the numbers of parcels which they’re prepared to accept from specific e-commerce operations.

It’s certainly not the case that carriers have reached pressure point, but it is an indication of the careful consideration now being given by couriers to capacity and how it is provided.

With reputations and business models long established on catering to their majority of B2B clients, no-one should expect them to exclusively chase the B2C pound. Also, as corporate entities themselves functioning in the current challenging economic climate, they need to be prudent not profligate with their own resources.

That means possibly utilising self-employed delivery staff or so-called ‘lifestyle couriers’ in order to maximise their ability to meet the delivery promise which they make to clients.

E-tailers

Just as the process is likely to produce subtle shifts in the way that carriers handle e-commerce items, there are significant potential implications for the e-tailers too – both big and small.

Over the coming years, the changing dynamic of the parcel market may well oblige them to look at their own distribution strategies. It should, without question, lead them to put more flexibility in place.

Adding contingency means not putting all their eggs in one basket – or, to update that phrase for the digital shopping age, taking purchases out of an online customer’s Basket and placing them in the hands of a single delivery firm.

Some large shippers may need a number of carrier partners to help cope with volume limits imposed by any one courier.

Smaller e-tailers, meanwhile, including those moving bespoke objects, would do well to have arrangements in place to cope should services with preferred carriers become restricted in the peak parcel season.

A noticeable increase in enquiries from companies of both kinds was behind GFS’s decision to make its multi-carrier GFS Selector software available free of charge to many businesses last year. Given the ongoing deliberations by carriers about how best to accommodate e-commerce, it is likely that more retailers are going to spend the coming months grappling with the issues of contingency that GFS Selector was designed to address.

Arguably more than ever before during their relatively short life spans, online retailers now understand how essential carrier vehicles are to the potential success of their virtual stores.

Striking solid relationships with delivery firms well before the festive shopping rush gains momentum is the only way retailers can be sure to give themselves and their customers a merry Christmas.

Simon Veale is director at West Sussex-based GFS, which provides a parcel delivery management system offering a single despatch and tracking platform for multiple carriers in the UK. GFS customers shipped over 4 million parcels last year.

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2 Comments

  1. Jules Takagishi

    We have seen recent developments where larger e-tailers have integrated postal solutions into their shipping platform and OWNING them; i.e. the posts provide the delivery service, but they don’t own the system that generates their shipping labels.

    With smaller e-tailers, the relationships may differ, but 2C is definitely growing and e-commerce should no longer be seen as a very different and novel way of shopping in OECD economies. The consumer is time poor and cash rich and wants to shop 24/7 from an unristricted selection.

    What is perhaps challenging in addition to the capacity challenge is the perception of whether shipping should be charged or not. Consumers do not factor in the price of petrol or car maintenance or train fares and add those costs to the purchase prices or take that into consideration as much when they go brick and mortar shopping. But when it comes to e-commerce, the shipping charges are very present and do influence purchase decisions…

    Of course there are ways of incorporating the shipping charges into the sales price, but that will further drive merchants to be more savvy when they pick service providers and manage costs.

  2. John Robertson

    There is a solution but it has already been done. It is to ask a local person to go to every letterbox in a mile radius as a regular job several times a week, and get to know all the practicalities of what letterbox is badly labelled and which customer excepts parcels left under the dead cat rather than taken back to the depot.

    Sadly, this option has already being done and is managed by the tail-end of a political fudge called (?) The Postal Services Act 2011. Some politicians want 6-day letter delivery and 5-day parcel delivery at a uniform public price charged to everyone in the UK, and delivered to everyone in the UK regardless of whether they are hermits living 16 minutes from the nearest other customer. This is paid-for by cross-subsidy from other services.

    Sadly, other policiticians don’t want to think about cross-subsidy. They want to divest us taxpayers of responsibility for subsidising a postal monopoly, and want to identify every service within it in order to open it up to competition. Do you want to run a sorting office for commercial advertising? Fine. Royal Mail has to deliver sorted mail for 5p a shot. Do you want to run the delivery round itself – the last bastion of monopoly? Fine. THT is testing a scheme in west London.

    These are two opposite groups of politicians, or opposite thoughts within the same politician’s head, but they have been yoked together in the postal services act and this benefits nobody. The postal round is to be priced out of the market in order to cross-subsidise every badly designed letterbox, un-necessary garden path, and remote rural customers, just because politicians have not excercised their well-paid brains and we all pay the price a second time in trying to cope.

    The courier and their e-commerce customer wants bigger letterboxes and shorter garden paths with less fuss about delivery. They want the back-up option of a postal service, for cheapness, green credentials, lighter parcels, or for peak periods.

    The existing postal operater wants to be able to show how much a delivery round helps the community by providing cheap post without subsidising naff things.

    The customer wants to avoid having to wait-in for things that Anne Robinson on Watchdog says sometimes don’t arrive. They want to pay more if they are fussy and get the cheap familiar postal option if they are not so fussed and watch daytime TV.

    Nobody benefits from the current postal act but only 78 people responsded to Ofcoms last consultation, which was held at the busiest time of the postal year when Royal Mail’s online postage service wasn’t working properly. All the ebayers and small e-commerce companies were sticking stamps, not replying to consultations.

    A brief opportunity exists to quote the last paragraph and ask for a postal round that does not cross-subsidise things that nobody wants, like bad letterboxes. Nor things that people want but don’t want to pay for, like the most rural deliveries done 6 days a week.

    http://stakeholders.ofcom.org.uk/consultations/postal-service-letters-packets/ – the consultation

    http://community.ebay.co.uk/topic/Postage-Topics/Filled-Ofcom-Consultation/1700067174?#msg1700494425 – suggested response ( ignore the gap after the photo of flower pots: that’s what delivery rounds are like)

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