Hermes Germany might increase parcel prices this year, is tightening up on subcontractors and is looking into alternative delivery concepts after partnering with startup Pakadoo to deliver B2C parcels to customer workplaces.
CEO Frank Rausch told the Hamburger Abendblatt newspaper just before Christmas that the company wants to increase prices for home delivery of parcels. “The individual delivery to the front door must become more expensive. We need at least 50 cents more per parcel. In Germany, we have the best and most reliable logistics in the world, and at the same time, parcel prices are the lowest in Europe,” he declared.
He stressed that parcel companies are constantly investing in new services and offers, progress and digitalisation. “This costs a lot of money. In addition, the wages for parcel deliverers must rise.”
Rausch had previously told business magazine WirtschaftsWoche about plans to introduce a Christmas surcharge for parcels in 2018 thus making online retailers and consumers pay more for their parcels. He said that it will be determined after Christmas 2017 how high the surcharge will be and when it will be introduced.
The Hermes chief said this measure would be the first step towards adjusting prices to the ever-increasing demand. "We are observing the prevalence of a dangerous ‘zero shipping costs mentality’. The price that the retailers are willing to pay for a parcel is simply not enough.”
Rausch also warned that the parcel industry “is reaching its capacity limits in view of the parcel flood caused by the booming online trade" and highlighted a lack of delivery staff.
"It's getting harder and harder to find deliverers who are ready to take on this important but low-valued job. Even the parcel centres are reaching their limits. During the current Christmas season, we defined quantity limits on parcels for the first time. That means we have fixed quotas with our customers. If they want to ship more parcels than announced, they have to pay higher prices.”
Meanwhile, the Hamburg-based company is also improving its internal standards. In December, it announced that it has intensified a review of its 400 subcontractors, after investigations were initiated against some of its service partners due to smuggling in foreigners and falsification of documents. The company already ended its cooperation with two subcontracted companies in North Rhine-Westphalia.
Hermes will also implement new standards by autumn 2018. These include exclusive co-operation with service partners that have a legal domicile in Germany, continuous review of residence permits of non-EU employees and a gradual tightening of the externally supported auditing system introduced in 2012 across the entire organisation.
Separately, the company is developing new delivery options. In November, it started a pilot test with the startup German office delivery service Pakadoo. Employees can now receive private parcels at their workplace and handle return shipments from there. This way, Hermes wants to bundle private and business shipments, save costs and reduce emissions.
“With the help of Pakadoo, employees can receive their private parcels directly at the office. Thus, every employee saves time while parcel operators such as Hermes can reduce their multiple tours and also relieve the city centres," Markus Ziegler, business unit manager of Pakadoo, said.
Hermes is also reviewing other alternative delivery ideas, Roger Hillen-Pasedag, Area Director Strategy, Innovation & CR at Hermes Germany, said in a recent in-house interview published online.
“I am convinced that especially in urban areas where almost 70% of our deliveries are made, the logistics operations need to be restructured. City hubs or micro depots, from which the delivery staff distribute parcels, for example via electric bicycles, are an exciting option. We have already tested a whole series of electrically powered cargo bikes – this works well! But the adjustments in inner-city logistics cannot be just the task of companies. This requires a new infrastructure, such as micro depots on the one hand, but also charging stations for electric vehicles on the other hand. And in this respect, we need the support of the municipalities, e.g. in the provision of space.”
In terms of new delivery methods such as self-driving vehicles and robots, Hillen-Pasedag mentioned the pilot tests with Starship robots and said that they are currently not transporting enough volumes to justify a standard delivery option.
“We've gained valuable experience testing the Starship robots, which we now use to better evaluate the success factors of alternative delivery forms. It will be decisive how much additional value such or similar solutions bring to the end customer. Only then will we be able to make new delivery methods attractive to our customers. The Starship robot test has shown that the end-user benefits are still too low to regularly use such a service as an alternative delivery method. But parcel logistics is a mass business. It therefore needs more scalable solutions based on more attractive customer journeys.”
He mentioned that the majority of parcels are still delivered to customers’ homes even though the majority of the recipients are not at home most of the time. “The question that we need to address even more intensively in the medium term is therefore: How can delivery be integrated as optimally as possible into the everyday life of the consumer? Home address, shopping centres, workplaces, public transport hubs, etc. are central hotspots in the daily lives of our customers.”
“Whether the traditional home delivery can still be maintained as a standard service, is questionable in my view. In addition to the opportunities offered by technological developments to increase the convenience for customers when it comes to receiving parcels, a re-thinking must take place among customers. Increasing deliveries to parcel shops or other pick-up points are solutions that we are discussing,” he said
He highlighted the growth potential of new mobility concepts such as mobile pick-up stations which are located at flexible places at certain times of the day and are currently being tested in the USA.
