UK parcel carriers need to prepare for further intense volume spikes as UK retailers respond tocustomer demand for short sales promotions and next-day delivery promises, speakers told yesterday’s
MetaPack Delivery Conference in London.Several speakers described the Black Friday and Cyber Monday pre-Christmas sales promotions as “a drug” that consumers would demand again next year, even though they undermined most retailers’profits and caused parcel delivery quality to deteriorate. A “heat map” generated by multi-carrierplatform MetaPack indicated that there was an erosion of parcel-delivery quality after Black Fridayon 28 November that lasted for up to two weeks in some parts of the UK.
Retailers acknowledged that the combination of the sales promotions and continuing to offernext-day delivery had put pressure on their carrier partners, but said the competitive nature ofthe retail market meant that they needed to retain their delivery promises if their competitorscontinued to. However, they acknowledged that the intensity of the demand took everyone by surpriseand that lessons needed to be learned.
Brian McCarthy, home delivery director at the Home Retail Group, which includes the retailerArgos, said demand from eBay was up more than 100% while Argos saw a 49% spike. “None of us wasable to predict it. If we look at the lessons of the surge caused by Black Friday and Cyber Mondayand the picking and delivery challenges it created, all of these dynamics need to be taken intoaccount.”
He said collaboration was “key”, noting that carrier relations were “not just for Christmas”. Headded: “We have got to share our data with our carriers and condition our carriers to what we areexpecting.”
John Roberts, founder and CEO of “white goods” retailer AO.com, admitted that his company wasalso caught out by the demand surge, as he said all UK retailers were, although across a six-weekperiod, he did not believe there was an overall increase in demand. Nevertheless, he said therewere “some big winners, such as Google, who will probably make sure that it keeps happening. So thereality is that it is going to happen again this year.”
But while retailers had failed to accurately forecast it last year, he added: “I don’t thinkBlack Friday is going to expand by 100% again this year. So the big step change has happened, andthe task now is to respond to that.”
Asked who should take responsibility for preparing for the likely spike this year,Martijn de Lange, operations director for Hermes UK, said: “We will want to build ourcapacity, but the question is do we want to build for that spike in capacity and make sure we areready for that?”
Dwain McDonald, UK CEO of DPD and Interlink Express, responded: “I don’t think we have a choice.The issue is that providing next day delivery is what we do, so if we pull back from that, peoplewill be all over us.
“But this year we will have a lot more hub capacity, which was tight last year.” And he said thecompany would also be running “continuous working” and opening up its Interlink Express networkover the weekend, which normally pushes its weekend volumes onto the DPD network. And so withInterlink operating at weekends during peak periods and operating longer days, this wouldsignificantly increase capacity.
Dick Stead, executive chairman of parcel carrier Yodel, said: “If we look across the wholeperiod, it was about what we expected. It was just the shape.” He said some customers had deliveredvolumes as much as 100% above their forecasts following Black Friday and Cyber Monday, while theprevious weeks of November had been quiet, with consumers apparently holding back on makingpurchases until the sales promotions.
He said customers were relatively forgiving if their deliveries were delayed, but what they didnot tolerate was not getting information about when the delivery would come.
Despite the challenges of the big surges in volumes, he said the issue was about the capabilityto deliver next-day services during intense peaks in demand. “My concern is that we don’t haveenough hub capacity if people want to have 24-hour service. But how necessary is it to have 24-hourservice when there is still three or four weeks before Christmas?”
But Roberts responded: “But next day is a part of our retail offering and it is difficult to goback on that. So the thing is to make that happen, but that needs to be done collaboratively. Andif that means more investment, then maybe the customer has to do that.”
Stead said: “I think the innovation has to sit on the websites of our clients, giving peopletransparency, and if people do want to have a next-day service, that is fine, but they should needto pay a premium for that. So the innovation should be about giving customers the choice about thelevel of service and giving them clear information about the delivery service.”
De Lange said launching Sunday services had helped to smooth out Hermes’ volumes, and the optionof click and collect services and its network of parcel shops provided other capacity options. “Ithink it is about investing in your core infrastructure and also building in that seven day a weekcapability,” he said.
Other speakers said better use could be made by retailers of the various parcel shop options,which were currently under-utilised.
But one delegate at the conference, a senior executive at a UK parcel firm, said that even ifHermes and DPD each built new major hubs this year, there would still be not enough next-daycapacity to meet demand on those peak periods. The problem, he said, was that the sort process atthe carriers’ hubs for a next-day service had to take place within a limited time window eachnight, roughly between 9pm and 3am, limiting the ability to use the facilities’ full capacity.Although some improvement could be gained by segregating next-day volumes from deferred services,the overall hub capacity would still be a problem for next-day deliveries.
But Roberts insisted that there were still a lot of efficiencies to be found. He added: “Peoplecall Sunday delivery an innovation, but surely it is just blindingly obvious.” In terms of otherimprovements, he suggested taking click and collect out of carriers’ daytime delivery volumes anddoing these at night. “There are a lots of changes that we can do. Some of those will requirestructural changes, but someone will do that.”
However, other speakers acknowledged that there may be a need to incentivise different behaviourfrom customers in order to take away from next-day demand at peak periods, with one speakerobserving that even Amazon had been incentivising customers to opt for deferred delivery, evenwithin its Amazon Prime membership. “That shows you the extent of the challenge out there,” hesaid.
Roberts agreed: “Free can be a promotional thing, to smooth demand out, and peak can be notfree. But not driving innovation on the basis of not wanting to bother to be more efficient is notgood enough.”
Various retail companies speaking at the event agreed that the phenomenon of Black Friday andCyber Monday was here to stay in the UK, and that there was likely to be further peak deliveryperiods and challenges created by the introduction of new sales promotion initiatives in thefuture.
Conference moderator and MetaPack CEO Patrick Wall concluded: “It seems clear that these peaksare going to continue, and making sure that the operations are spread over seven days is going tobe part of the solution for that. It seems to me that the carriers are accepting that these are therules, and that it requires innovation.”
