Hermes UK is launching new services, extending its parcel shop network and investing in capacity expansion as it targets continued strong growth in the next five years, CEO Carole Woodhead told CEP-Research in an interview.
Top priorities this year include the rollout of timeslot deliveries, the addition of 600 Coop stores to the parcel shop network, construction of a major new hub, and development of cross-border deliveries.
Boosted by the soaring e-commerce market, Hermes has grown by more than 15% every year over the last five years to become Britain’s second-largest consumer delivery firm with some 245 million parcels, behind clear market leader Royal Mail but ahead of Yodel, DPD and other carriers. In December 2015 volumes increased by 24% to 30.3 million parcels and customer satisfaction reached 83%.
“We’re delighted with five years of such strong growth. Over the next five years there will certainly be more growth, but I cannot say whether they will all be double-digit,” she said at The Delivery Conference in London this week. “But we’re looking at 15% sales growth this year as well.” She was optimistic that UK e-commerce could continue to grow about 12-13% again this year.
Woodhead was not overly concerned about Amazon developing into a competitor as it rolls out a local delivery operation, as Royal Mail has frequently warned over the last year. “It’s not surprising that Royal Mail is affected more than anyone else. Amazon is important for us but they are only one among a large number of retailers,” she explained.
In the first major service initiative of 2016, Hermes announced at the MetaPack event that it will introduce timeslot deliveries in response to customer demand. The Estimated Time of Arrival (ETA) service will cover Next Day and standard delivery purchases as well as returns. Following a successful trial with major retailers, Hermes will initially provide customers with a four-hour time window on the morning of their parcel delivery or collection, a timeframe that will be reduced to two hours by the end of the year.
The service has been designed to increase visibility across the supply chain, boost first time delivery rates and reduce the amount of enquiries retailers receive from online shoppers. By removing the need for customers to wait in all day for a courier, ETA helps improve the overall customer experience. Retailers deploying the new service will be able to select which parcels they would like to apply the new ETA service to and can choose how they want to communicate the time-window from a choice of Hermes Parcel Manager SMS, Email or Mobile app push.
“From research, it is clear that the vast majority of consumers want the convenience of an ETA for all of their deliveries, and not just when opting for a premium service,” Woodhead explained. “Our ETA solution provides additional choice and convenience to those online shoppers, which will reduce queries for retailers and boost their brand loyalty.
In another service enhancement, Hermes has signed a deal for 600 Coop stores to become parcel shop partners. About 20 million parcels were delivered last year through the network of 4,500 MyHermes parcel shops, including a 40% increase in December.
However, Hermes has stepped back from using parcel lockers following pilot tests. “People prefer parcel shops to lockers. It’s not a priority for us now, although we might go back to them at some point.”
A major investment this year is £18 million for 20,000 state-of-the-art handheld scanners which will be in place by peak 2016. These will enable Hermes to offer delivery options such as ‘leave in a safe place’ or ‘leave with a neighbour’, and, in 2017, ‘in-flight’ delivery changes such as diversion to a parcel shop. “We are looking for improvements in customisation and more personalisation. I think we will see that over the next 2-3 years.”
Looking further ahead, Woodhead predicted consumers could use smartphone apps in future to determine their delivery preferences. “There will be a big choice and things will get more complex.” In parallel, there could be important structural changes in e-commerce logistics. “For example, couriers could pick up directly from retailers and deliver to homes. Parcels could enter and leave the delivery chain at different stages.”
Woodhead also sees plenty of potential for cross-border B2C shipments, both from and to the UK, which are growing fast but currently only amount to a low single-digit proportion of Hermes’ overall volumes. Key clients using Hermes for international e-commerce shipments include ASOS, Next and River Island.
Outbound volumes are being boosted by high demand from international online shoppers for quality goods, with a 127% rise in December alone, she pointed out. However, B2C imports are growing even faster, she noted. In future, Hermes UK will be able to benefit from the German-owned group’s European parcel network along with the Zitra joint venture with JD.com for cross-border e-commerce with China.
The company’s other major spending this year is on the new £31 million super-hub at Rugby in central England, which will be able to process up to 1.1 million parcels every day and will increase the company’s overall parcel processing capacity by 45% when it opens in August 2017.
* Hermes picked up the award for 'Best Cross-Border Supplier' at the MetaPack Delivery Excellence Awards 2016 at The Delivery Conference in London.
