Collaboration conundrum dominates The Delivery Conference

MetaPack’s Delivery Conference is one of the highlights of the retail calendar and coming so soon after a pre-Christmas peak that many retailers found challenging meant the recent event was more keenly anticipated than ever.

MetaPack CEO Patrick Wall said: “Consumers are asking for more and we are collectively challenged to provide for these ever increasing demands, with the intensity of the peak getting greater. This conference is about trying to square the circle and resolve this.”

During the course of discussions several ‘answers’ were debated and perhaps the one with greatest promise is retailers and fulfillment partners dropping a sometimes adversarial approach to business and collaborating more.

Argos director of delivery Brian McCarthy said: “Collaboration is absolutely key, companies have got to share plans more openly. Carrier relationships are not just for Christmas, we need to share intelligence, there may be sensitivities but we all have all the capability to share.

“We share our promotions with carriers, because without it the spike in demand can create poor service. It’s got to be about long term relationships and not battering people when things go wrong.”

There was no one I saw at the Delivery Conference, and it was attended by more than 1,000 retail industry movers and shakers, that disagreed with this but John Roberts, founder of AO.com outlined how difficult it is to achieve.

“Black Friday is a drug. And the drug of low rates [throughout the year] is difficult for retailers to wean themselves off,” he said: “At Christmas everyone knows there needs to be more collaboration but by March, your partner’s competitor offers a discount and collaboration floats out of the window. It’s then a race to the bottom. And so the pattern repeats – it’s a kind of collective amnesia or perhaps the definition of insanity.”

Roberts suggested that a way round this could be retailers offering carriers more generous rates, but with the caveat that if a carrier fails to deliver to standard, there would be substantial penalties.

Collaboration was not the only solution put forward to cope with the tsunami of peak time orders. Yodel CEO Dick Stead argued that retailers and carriers should manage deliveries to spread the load, suggesting 48 and 72 hour services become the standard during peak periods with next day deliveries available only at a premium price. 

“How necessary is next day delivery?” Dick asked. “Our customers are more interested in knowing when the parcel will arrive rather than it having to be next day.

“We should invest more in getting customers to choose the service they want, not just defaulting to the 24 hour option.”

Andrew Starkey, the chairman of IMRG – the industry association for online retail – sees signs of hope when he looks at the statistics on customer delivery desires.

“What do consumers want? We find that 60% are happy with an economy service offering 2/3 day delivery.

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“When we hear retailers talk about customer demand for next day delivery, when push comes to shove it is not the ultimate driver for consumers. It is more important for them to know when it is going to come.

“Can we afford to keep delivering under pressure? We need to be smarter about anticipating what the customer really wants.”

Indeed Amazon is incentivising its customers by crediting money to a user’s account if they select No-Rush Delivery (3-5 working days). Incentives will be a key counter to the now overwhelming weight of the marketing machine screaming ‘get it free tomorrow!’ The whole idea of Omni-channel is about reacting to the customer, so it makes sense for the customer at the point of order to have a full range of delivery options to choose from.

Pushing the boundaries of delivery time slots was also seen as a way to avoid a future fulfillment blockage.

AO.com’s John Roberts encouraged the attendees to be bold.

“It’s strange how Sunday deliveries are called innovation. I call it blindlingly obvious – all that unused resource, all those open roads…”

DPD CEO Dwayne McDonald agreed the company would have been in a ‘tight spot’ without Sunday deliveries and was ‘glad we made that call last year’. 

He added that DPD aimed to have more hub capacity next year. At the moment, the hubs experience a lot of downtime, and he wants to keep hubs running longer on a ‘continuous wave’ and open 100% over weekends.

Yodel’s Dick Stead added: “My view is there isn’t sufficient 24 hour hub capacity for next day delivery. If everything is sold on next day, we must build hub capacity, which at the moment still runs on limited time, at best half day utilisation.”

The answer for retailers insistent on following the American trend for festive shopping days such as Black Friday may be the development of a variety of bespoke delivery options, says DX director Paul Doble.

But he adds: “Even a close consideration of how significant spikes in demand could be dealt with is not a sure-fire way of avoiding parcel congestion. Delivery vans, drivers and warehouses come in finite quantities and will never be able to expand and contract at the same rate as virtual sales environments.”

He suggests a more cautious approach to spread the load where retailers take the focus away from US sales days and instead target offers at loyal customers over a variety of days.

“The pre-Christmas period will always be a high pressure time for retailers, but a more subtle approach may help to avoid the more damaging aspects of the retail stampede,” he says.

If Sunday deliveries were the new weapon in the arsenal that helped prevent a Christmas rout, then surely Click & Collect was the cavalry.

Certainly, Dino Rocos, operations director at John Lewis holds the delivery method in high regard. And so he should, when Click & Collect proved the delivery option of choice for John Lewis customers with 56% of online orders being collected in shops over Christmas.

Rocos told The Delivery Conference: “If Click & Collect had not materialised, we would have burst the carrier network several years ago.”

Andrew Starkey of IMRG sees excess capacity in third party Click & Collect networks and thinks this has the potential to act as a safety valve for Christmas 2015.

MetaPack carrier account director Simon Croft adds there is still capacity in this network because while most retailers have embraced Click & Collect via their own stores, they have traditionally been less enthusiastic about third party.

“There is lots of opportunity for this network once it is embedded. Retailers should embrace it.

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“We are integrating all of the pick-up, drop-off (PUDO) providers into the MetaPack system, which will make it easier for retailers to switch between them.”

It is not a given that online retail will develop as a sustainable business. There is a danger that retailers could over-promise and under-deliver, creating a sour taste for UK consumers and pushing the market towards a low cost, high risk model.

It is perhaps telling that one of the online retail success stories – John Lewis – remains grounded despite consistent growth.

Dino Rocos explains: ”[Click & Collect] has given us a respite, which gives us a window to think again about what we can do. There needs to be further innovation.

“We are all setting higher budgets for sales and we see customer shopping patterns change dramatically. We have had people shop 11 different times with us in a day. This is a valuable customer but difficult to support. We would rather it was one visit with 11 purchases. But if that’s what customer wants we need to accept it.”

It is this customer-driven thinking that flies in the face of the understandable desire of carriers to spread the delivery load. Certainly retailers and carriers will be wise to nudge consumers towards more manageable fulfillment schedules, but fundamentally, like it or not, the consumer will dictate the tempo.

Dino Rocos again: “It’s a big challenge. but we can’t dial back, the customer wants it and we need to find a way to deal with it.”