Traditional service is in the bag at Target
In the first 10 weeks of its new financial year, which started in November, Target Worldwide Express won £2m ( t3m) worth of new business.
"We'll have quite a good year even though the economy's tough, " said chief executive Paul Murray. But he is not looking for business at any price.
"Average yield has been reducing for five years, but this is the year it will stabilise. It will mean price increases, but someone's got to take a stand." Even though "we don't carry a lot of low-value ex-United Carriers stuff", Murray admitted that getting the right price for the job had been an issue for Target.
Margins can be just as tight at the hi-tech end of the market, especially when companies try to exploit their size.
"We took on business we shouldn't have. But they weren't paying the rate. We've walked away from millions, but we will ask people to leave us if the profile is not as promised when we quoted, or if they don't pay." The firm stand does not appear to have hurt Target. "If you aren't providing the service you won't get the price increases. A lot of guys got greedy, then had to stop selling pre-Christmas because they had taken on too much volume, " said Murray.
"We are now being asked to quote for business by prospects we have previously had to chase. And they're still asking us to come back and talk, even though we're the highest priced." Tellingly, he does not think United will be the last victim of under-selling itself. "A number of carriers are being propped up by the banks. A large amount of capacity has already been taken out of the UK market, but I wouldn't be surprised if there's another high-profile casualty this year." Adding value is the name of the game. Target is focusing especially on three areas – international mail, international parcels and same-day – which each account for about 10% of its £140m ( t213m) turnover but will all outpace the core next-day business this year, with growth rates of 2030%.
Some catch-up will be necessary on mail after what Murray described as a "nightmare year". Target was sub-contracting bulk international mailings to specialist handlers which, it emerged, were disposing of it rather than posting it.
"You can't track and trace mail and if there's no customer response card, it can take you a while to uncover it. But it took too long, " he said.
"There can be no excuse when a customer tells you a piece of mail has been dug up by the police months after you took it – and billed for it. We offer a five-star domestic service and people expect that, no matter who you give it to." It was fortunate in rebuilding lost confidence that Target had already been planning its own mail centre from the start of last year and had brought in new management just weeks before the problems came to light.
The company has Royal Mail Duet wholesaler accreditation and also acts as an office of exchange for the Belgian post office, so the future looks encouraging, internationally.
But not yet on domestic mail, Murray emphasised. "There are so many unanswered questions about mail liberalisation, but it would be foolhardy to say we won't be in it – at some future stage we will. Talk to us in a couple of years' time." Meanwhile the NetExpress European parcel network, although it has only four stakeholders, continues to build volume and add new services.
"Bringing in new partners has been difficult. In Austria, Denmark and eastern Europe we have agents but none have developed into full partners.
Perhaps we've been selfish about it – but other networks have collapsed from too many fingers in pies, " said David Breeze, director of international services.
"We have similar product ranges and it's based on the fastest transit times between countries, with no central hubs.
We compete against DHL and TNT, not the general parcel carrier businesses.
"At a more local level, shorthaul cross-border guys are our competition, but they can't do Nice or Marseille in 48 hours.
We can, with a caged product just like our domestic system and double-manned trucks." Members share the IT platform of Gel, the German partner, but can pass pre-alerts, PODs and other information to and from each other 's domestic systems.
"Everyone has different views on who is a good partner in other markets, " said Breeze.
"It depends on how much outbound you get. We've got the core shipment-generating countries [UK, France, Germany, Spain] on the network, and although Spain would normally be some way behind, we've got Seur, its biggest domestic player." Italy would be a desirable addition, but he added: "It would take something special to find a full-service partner." NetExpress has just launched a new product, the Eurobag, in an effort to extract more value out of its international system. It is designed for shipments up to 5kg and is offered at a fixed price – £9.95 ( t15) out of the UK – for 36-hour delivery anywhere across the network.
"It's absolutely focused on delivery in traditional express delivery times. People have been using the likes of DHL [in this weight range] not for speed, but for cost.
"A domestic bag-style product reduces the cost because you get a lot in a cage – although we want it as supporting volume, not filling whole trailers, " said Breeze.
"We've got our partners to agree not to charge each other, and can give customers the same service expectation as they have with a parcel.
"The overlap of mail and courier is the market. A lot of stuff, such as technical catalogues which might weigh 2.5kg, is going priority air post, which is expensive.
"Smaller companies do encounter delivery problems, but we have a closed-loop facility."
Posted: 10/02/2003
