Home delivery in the land where delight comes as standard

Exel Direct, a new brand launched this spring, claims half of the US's outsourced home delivery business. e.logistics Magazine hears from Exel's Paul Wyss how the market compares with the UK's; and, below, we talk to Exel America's chief executive, Bob Lake

In the UK, an effective home delivery service is seen as a key market differentiator. Years ago the situation was probably the same in the United States, but nowadays the consumer has so much choice that home delivery is seen as a necessary evil." That is the judgement of Paul Wyss, who is in a good position to know. A Briton himself, he is e-commerce strategy manager with Exel Direct, the American home delivery operation launched by Exel earlier this year. He has spent a great deal of time monitoring the American and British home delivery markets, and as he puts it: "In some ways they are remarkably similar, in some ways remarkably dissimilar."

Generally he acknowledges the truth of the UK perception that the United States has a demand-based culture, where consumers want what they want when and where they choose. "People are generally affluent, but still penny-wise. To sell to them, online retailers need to delight them."

He points out that Americans are highly car-dependent, and says this makes them more willing to take on shopping trips. "They will only use home delivery when persuaded of really high service levels. Otherwise there is no brand loyalty."

He says UK online buyers still have a long way to go to reach this point. "Over here, home shopping customers at the moment have lower service expectations. They're delighted if the goods they've ordered turn up at all." He may be speaking somewhat with tongue in cheek, but he adds: "There's a real desire on the consumers' part to make Internet shopping succeed." However, he says this attitude will not last long. "Expectations will certainly increase."

Exel Direct has focused on the difficult end of home deliveries "not items you could put through a letterbox." Typical traffic consists of furniture and domestic electrical appliances, and the sales proposition includes installation and commissioning.

Wyss says this means drivers have to offer a range of skills. "The driver needs to be knowledgeable about the transaction. There's almost a sales pitch in there. To claim that 'I'm only the driver' won't get anyone very far in this game." Geography is the biggest single factor differentiating the American market from the UK's, Wyss says. "So consistency is always a challenge. There can be regional variations in legislation. Rules governing access to urban areas vary from state to state. Disseminating this kind of information to staff is a challenge in itself."

However, in some ways the geographical dimension is not so significant. Exel claims that 14 of its 350 American bases are within reach of 85 per cent of the entire American population. That means they are within a 100-mile radius of their customers a distance which is considered acceptable for a home delivery operation. "So although the geographical difference seems huge, the population focus scales it down."

Wyss identifies a variety of what he terms "disconnect points", or danger points where home delivery service levels are at risk of being compromised. Among them are instances where retailers offer service-level parameters "which are outside the capabilities of Exel to provide." Often, he says, such promises are not documented. "Responding to them creates added demands and pressures, and probably results in a higher level of returned goods."

Returns, inevitably, are seen as one of the scourges of an operation such as Exel Direct's. "It's where most difficulties arise," Paul Wyss admits. "There are all sorts of reasons for them. Customers may not be in. They may not accept a cash on delivery arrangement. They may not like the product they've bought. The delivery may have been attempted outside the agreed time window. Or there may be damage."

The majority of Exel Direct's home delivery operations are handled on a dedicated basis, and involve the use of vehicles in customer livery. Customers include some of the biggest names on the American scene companies such as JC Penney, IKEA, Sears, Wards, Maytag and Home Depot.

However, the company is now keen to expand its networked operations. Demand for shared warehousing and delivery networks will grow as existing retailers expand to compete with the "pure-play" e-tailers, Wyss believes although he acknowledges that it is not always easy to get them to "buy in" to the shared concept.

The main interest of established retailers is likely to lie in the scaleability and functionality of a home delivery proposition, Wyss suggests. Pure-play contenders, by contrast, put more emphasis on speed of implementation, and are attracted by what he calls "disposable walk-away solutions". In either case, he feels that increasing margin pressure will prompt users to focus their dedicated deliveries on tighter geographical areas and busier times of day, and rely on shared solutions for more distant locations and off-peak services.

Turning to the UK, Paul Wyss believes the fulfilment market as a whole still has a long way to go to rival the American model. "Where is the network of the future? Where is the support for delivering valuable goods? How many carriers are offering outside hours and weekend deliveries?"

Exel is planning to extend its home delivery service to the UK, so if it can meet some of these challenges it should be well-placed to scoop up a lot of emerging business. But Paul Wyss is not arrogant enough to suggest it can simply superimpose US practices here. "Take home delivery of groceries, for instance. In America, most deliveries are made to drop boxes or on fixed days at fixed times. You can't use that model extensively in the UK."

However, there are clearly other lessons that Exel can apply, so its plans should not be underestimated. Even if it captures only a fraction of the fledgling UK market, it could shake up a business that still relies largely on in-house operations or local third-party carriers.

Home deliveries part of the logistics mainstream Exel America's chief executive, Bob Lake, explains to e.logistics Magazine why home deliveries are seen as a core business sector "We want to draw home deliveries into the logistics mainstream, and identify them with the parent company." That is how Bob Lake, who is taking over the role of chairman of Exel America, sums up the rationale behind the rebranding of Exel's Merchants Home Delivery Service, which has now become simply Exel Direct. The company's growing interest in this sector is evident from the fact that Merchants was once grouped with the organisation's moving services operations; but when NFC sold off Pickfords last year, it held on to the Merchants business. Lake, an American who joined NFC five years ago, had previous experience in both logistics and home delivery sectors, having worked for North American Van Lines and later Ryder (on its logistics side). When Exel last reorganised itself he gained the title of chief operating officer a global role. Under the enlarged organisation (now merged with MSAS) he has changed title again. Lake admits that abandoning the familiar Merchants brand has raised cultural issues, especially internally, but points out that to the public at large the name was not particularly familiar. "Most of our deliveries are done on a dedicated basis with vans in customer livery, so our vehicles are seen as belonging to the suppliers." Lake sees no imminent change in this dedicated approach to home deliveries, but wants to put more resource into developing the alternative strategy of networked deliveries. The shared-user approach means the branding of the carrier becomes much more significant. "And if we're going to start building up a brand perception for ourselves, it makes sense that the brand should be Exel." What are the circumstances in which a networked operation would make sense? Bob Lake identifies two key factors. "It can work where the customer base simply isn't dense enough to justify a dedicated operation, and also where there is more than one compatible customer." Why is Exel intent on building up its business in a sector which it admits to being difficult and highly demanding? Lake says it is for the very reason that the sector is difficult. "You've got to create customer value in order to create shareholder value." "We are threshold-crossers," he says, "and that's very different from delivering to the front door, in the way a parcel carrier might do. It takes special abilities, and that's where we score." He says success depends on attention to detail. "It's a game of inches and tenths. Profitability can depend on squeezing the extra drop on a trip." As an example, he points out that the company attaches a lot of attention to effective routing and scheduling software, which is a mix of in-house systems and customer packages. Much of Exel Direct's work involves next-day deliveries, but Bob Lake has reservations about the prospects for same-day operations. On grocery home deliveries, however, he is more open-minded. "We're not in that market yet, but we might learn from UK experience." He says Exel has held discussions about running distribution centres for some of the biggest American direct-delivery grocery operators. "Nothing came of them, but in future it might." He says there might even be occasions when groceries could be combined with other commodities a prospect that is perhaps more feasible with the big American home delivery trucks than with those typically used in the UK.