Struggling to cope with e-commerce growth, Yodel to hike prices
UK parcel delivery company Yodel is risking angering its retail customers and consumers by hiking its prices for the delivery of e-commerce packages. The loss-making company said today that it will be making changes to its services and pricing so that operations could be “sustainable and profitable”.
Prices will rise, while services will be altered to a six-day-a-week service, except for the Christmas peak when deliveries will be made every day of the week.
The UK’s second largest parcel carrier after Royal Mail, Yodel is one of a number of companies that has struggled with “explosive growth” in Internet shopping volumes in recent years, particularly around Christmas.
With major retail clients like Amazon, Tesco, ASDA and Littlewoods, Yodel has found itself targeted for public criticism on the Internet and in the media in the last year.
Today, chief executive Jonathan Smith insisted his company had reviewed its performance and listened to consumers.
But, he said improvements would come at a price.
Smith said: “Inevitably these changes will come at a price and we must pass on our reasonable costs. We believe that all parties, once they recognise the benefits that this will provide, will accept the changes as a necessary shift for all involved.”
Exact price changes will be discussed with specific retailers individually, although one positive on pricing will be the removal of premium charges for weekend deliveries.
“We must pass on our reasonable costs”
In return for higher prices, promised customers it will improve its service with extended training for staff, remove premium fees for weekend delivery, and is also pledging to begin its seasonal recruitment of temporary staff for the Christmas run-up much earlier.
Email or text message alerts for consumers receiving parcels will become standard, while Yodel is also looking to expand its joint-venture network of collection outlets, known as CollectPlus, from 4,700 to 8,000 within the next three years.
Flexibility
Yodel said it needed more flexibility in its business model to cope with the fast-growing seasonal parcel volumes, which can be up to 11 times higher than normal days.
“In order to ensure best customer service while maintaining a scale of flexibility, which no other carrier is currently able to offer, we recognise the need to change the way we work and invest more in the aspects of our business that impact the consumer,” said Smith.
Yodel, formerly known as the Home Delivery Network, now delivers more than 170m parcels after taking over the domestic UK operations of DHL Express in 2010. Despite stating its need to invest millions in its network, the company has been closing dozens of depots since buying the DHL network, stating that as many as 45 were “duplicating” its existing network.
Other delivery companies in the UK have also had difficulties with the growth in e-commerce demand and the need to be flexible for the Christmas period and in dealing with more business-to-consumer business rather than just the traditional business-to-business market.
UK Mail Group said this week in a pre-close trading update that internet shopping had driven a 10% growth in its parcel volumes but it was finding it difficult to take advantage of the volume uptick.
“The change in mix towards B2C did restrict the level of revenue growth and the challenging pricing environment continued to put pressure on margins,” the firm said. Like Yodel, UK Mail Group has been closing depots this year to reduce its fixed cost base.
Hermes
“Prices will go up across the industry.”
Leeds-based home delivery company Hermes UK, which delivers around 140m items each year, said today that the parcel industry “probably needs a price increase” since rates had been going down for the last few years.
With price increases at Royal Mail and Yodel, Hermes UK commercial director Jon Tobbell said he believed the rest of the industry would be likely to follow suit.
“It’s got to an unsuitainably low level,” he said of delivery rates. “Prices, I think, will go up across the industry.”
Tobbell said there were delivery companies operating in the UK home delivery market that were profitable, such as his own firm, which grew 22% last year and saw its profits remaining at a similar proportion of turnover compared to 2010. The key, he said, was having the right model in place and not “playing on too many pitches”.
He explained that delivery companies were having to say to certain very big or very seasonal e-commerce clients that they will only take a certain volume during the busy Christmas period.
“If you take too much volume in December, and you built your network for December, it’s empty most of the rest of the year, then you can’t make any profit because you’ve got your assets unused the rest of the year,” he said.
Tobbell said Hermes was already starting its planning for this year’s peak season, and that its use of independent courier staff – “lifestyle couriers” – to provide the last mile helped his company to be more flexible than others in the market.
- See also:
Spend and Send: The Growing E-commerce Delivery Dilemma – Global Freight Solutions director Simon Veale looks at the current e-commerce delivery challenge in the UK.
