“Tight at the top, and tough at the bottom”

A new survey from Triangle Management Services shows that top tier carriers have to continuously innovate to stay ahead of the game. The 2017 edition of the ‘UK Domestic Express Parcels Distribution Survey’ published by Triangle Management Services, has found that shippers[1] are opting for single carrier usage, switching between carriers much less frequently. At the same time, shipper’s carrier recommendations showed less variation (in terms of their Net Promoter Scores), thus creating a challenge for the carriers’ future innovation to drive differentiation.

Saeed Mumtaz, Director of Research and Consultancy at Triangle, offers his views on the survey and explores how carriers can differentiate themselves in such a competitive market.

It has been an eventful year in the UK carrier industry, which has seen cyberattacks, industrial action and a series of high profile mergers. Moving forward, it will be interesting to see which carriers can adapt to gain market share.

Our survey shows shippers tend to rate carriers in two broad performance tiers. Since last year leadership positions for those in the top tier have changed, thus creating new dynamics in the market.

Key insights from this year’s reports include:

• The rate of churn dropped to 9% from last year’s 18%, which was a five year high. Loyalty (length of usage) over time was different across the performance tiers, but did not differ between B2B and B2C segments.
• Reliance on a sole single carrier increased by 9% over last year to 92%.
• Net Promoter Score (NPS) across the industry continued to drift downwards and with less differentiation.
• Overall, the shippers are not expecting any major price changes in the next 12 months.

 

Other highlights from this year’s survey include:

New dynamics emerging.

Over the last couple of years, carriers have implemented similar features through technology improvements and the addition of more delivery services, making it increasingly difficult for carriers to differentiate themselves.

For many carriers, performance levels rose and leadership positions on various attributes have changed. Service levels have increased, with more options in terms of collection and delivery, as well as increased flexibility.

Information and image new standards.

Perceived industry ratings for carrier image and provision of information have also improved.

Tracking of the parcel journey is now standard across carriers. This means whilst customer needs are being met, there is a degree of commoditisation on this point of differentiation. To stand out, carriers will need to invest in areas such as predictability and reliability.

Carrier image is an area where the industry exceeds expectations due in part to increased training, use of uniforms, and new vehicles.

Two tier market.

Over time we have seen a separation with two performance tiers emerging. The top tier works at an elevated level and is quite consistent, whilst the second tier operates at a lower level and is more inconsistent. Some carriers have remained in this tier, despite attempts to improve standards.

For top tier carriers, it is tight at the top of the performance benchmarking tables. Last year’s leaders swapped positions and reflected a highly competitive market, particularly in the B2B segment.

While some ‘tier two’ carriers are slowly improving, they still struggle to break into the top band. They have a higher churn rate and thus would need a higher sales effort or keen pricing to improve performance.

Tariff changes stay stable.

Pricing was perceived to be mostly stable, with no recent or future significant price increases reported. This is only one part their positioning and still important in both B2B and B2C segments.

If costs continue to increase, they will need to improve efficiencies to avoid customer issues outweighing their value proposition. Without this strategy or gaining market share, they would be at risk of an uneconomic service. This could lead to further consolidation in the market once the e-commerce growth slows.

Work still needed to meet shippers’ needs.

There are still areas of unmet need from the shipper’s point of view. Carriers still need to improve on customer service and quality of delivery, particularly with regards to notifications of delays, non-delivery and solving problems. This will be particularly important with regards to the B2C segment given volumes continue to increase.

The rise of the “One Stop Shop” carrier.

With shippers trending towards single carrier usage, carriers have the opportunity to promote themselves as a ‘one stop shop’. To be effective, carriers will need to offer a quality delivery service, competitive price and meet all shipping needs with an international service and all sizes and weights.

Amazon shippers are least likely to need an additional carrier. Our survey showed that Amazon leads and is competitive on many attributes, but there are areas where traditional carriers outperform Amazon.

Amazon is now expanding into B2B and we plan to reflect this in next year’s survey.

Contingency Planning.

TNT’s unfortunate disruption (due to cyberattack) showed the importance of being able to execute a contingency plan. Initially, TNT kept a degree of customer satisfaction (as measured by the NPS score) by being the most responsive carrier on the phone and dealing with customer inquiries. Time will tell if TNT can recover any lost business and keep their reputation.

Where to next?

As recommendations (NPS scores) decline and gaps between carriers narrow, the carriers will need to review their offer if they are to receive higher endorsement from their shippers. New innovations in service, such as later collections for next day delivery, more granular tracking or temperature control for food delivery could be potential points of differentiation.

Carriers will need to balance investments, capacities and efficiencies to support their value propositions. Their positioning and execution will be the key to gains in market share.

Final thoughts.

This year’s survey shows that standards have continued to increase. At the top of the table benchmarking, the customer’s ability to recommend one carrier over another has narrowed. There is a risk of commoditisation. Executing delivery, driving innovation, managing costs, and pricing will be all key to keeping leadership positions. Lower tier operators will need to continue to compete or we will see further consolidation in the UK market once e-commerce growth slows.

About the Survey.

The 2017 edition of the ‘UK Domestic Express Parcels Distribution Survey’ is available now. The 200 plus page report was the result of over 900 telephone interviews with B2B and B2C shippers which were carried out between April and July 2017.

For each market segment (B2B and B2C) the survey can pinpoint the most important performance factors against which shippers rated their delivery partners, thereby helping carriers set future strategies. It gives a unique insight into the UK Express Market and is available in various formats.

If you would like to find out more about the survey contact please contact Triangle’s Research Team on +44(0)1628 642910 or email: Saeed Mumtaz ([email protected]), Director of Research & Consultancy.

 

[1] Shippers are defined as companies, individuals or organisations that use carrier services