Hermes UK will again grow at a double-digit rate this year and is to introduce estimated deliverytimes to its standard service from the first quarter of 2015 along with the capability for end
customers to change their delivery preferences, in response to the rapidly changing expectations ofe-retail consumers.Carole Woodhead, CEO of Hermes UK, said the need for parcel delivery companies to innovatewas accelerating rapidly as online shoppers experienced new delivery options. Responding to aquestion from CEP-Research, she said features such as estimated delivery times had not yet become arequirement from retailers themselves “because no-one is yet offering that for their standardservices”, although it was increasingly expected of next-day or premium delivery options.
Woodhead said that increased competition, such as from Amazon’s expansion into logistics andthe move from DPD into the B2C market, was adding to the pressure on parcel companies to innovate,with competition driving the need to innovate perhaps as strongly as the need to manage costs.Nevertheless, she said the importance of competitive pricing could not be overstated, pointing tothe popularity of deliver-to-store and click-and-collect services as evidence for this. Theseoptions were popular primarily because they were offered free to customers by retailers, shesuggested.
But in terms of the competitive landscape for UK parcel companies, Woodhead toldCEP-Research that “with the growth in online retail, there is enough room for all,” in spite ofthese expansion moves into the ‘to-consumer’ market by companies such as Amazon and DPD. She saidHermes UK was on target to experience double-digit growth in 2014.
“It is the fifth year of growth at that level,” she observed. Although September had beenrelatively weak, perhaps because of the unexpectedly hot weather, “people are back shopping onlineagain”, she said.
She said Hermes UK had put in place a 20 per cent increase in its peak-season capacitycompared with last winter, including taking on 1,500 additional couriers, and boosted by theopening in May of the company’s new central hub in Warrington in northwest England, the company’slargest ever investment. The 15,000 sqm facility is able to sort up to 550,000 parcels a day and isalmost three times larger in capacity terms than the previous site in Warrington.
Woodhead said the next phase of the Warrington expansion would begin early next year,boosting the hub’s sorting capabilities by a further 450,000 parcels per day by peak season 2015.That second expansion stage is expected to take the investment to a total of £25 million (€30million).
After that, she said the company would “probably be looking in the next year at another ‘super-hub’, probably in the Midlands, or around Milton Keynes, or around Birmingham or Coventry –the Golden Triangle”.
However, she said that a large hub like that was “usually a 10 or 20 year commitment. And sowe would need to have a look at whether that is still going to be the preferred structure forretailers.” Such a decision would, therefore, be influenced by whether retailers were alsocontinuing to make commitments to large national or regional distribution centres.
She added: “I think there will be more flexibility in the future about where stock comesfrom. In the past it may have been from one distribution centre. Now I think it is moving moretowards regional distribution centres.”
She believed there would also be greater use of stores as a provider of stock for homedeliveries. “I would expect that in the future our couriers will be going into stores to pick upproducts,” she said.
Woodhead said that introducing features such as the capability for end customers to changetheir delivery preferences was essentially formalising a process that already often took placeinformally between customers and their local Hermes courier. But she said customers wanted to seethat capability reflected in the options available to them electronically.
Mark Pettit, sales and marketing director, said the investments required in innovation andnew technology were “not insignificant” compared with the company’s overall costs, but said thehandheld devices already used by couriers could be adapted to incorporate the new communicationrequirements. Woodhead said the same is also true of the devices used by the company’s 5,000 “parcel shop” consolidation points.
