Where did it all go right?

It turns out a year is a long time in online retail. Patrick Wall, CEO of delivery management software provider and event organiser MetaPack, told The Delivery Conference: “The industry was in a difficult position in 2014, there were issues for some carriers, poor weather, and poor preparation. In contrast, this year was an outstanding success in terms of service quality, with better planning and collaboration, and huge investments made by carrier networks, in both driver operations and sortation services.”

Better prepared, the industry coped well with an even heavier workload in 2015. Cyber Weekend started earlier than the previous year and was bigger. Sales then dipped lower than expected after Cyber Weekend but rebounded for Christmas. There was also a strong recovery of sales after Christmas. This effectively led to a Peak period with three distinct peaks. Last year Sunday deliveries were introduced and this service increased again in 2015, with a 100%+ uplift on the Sundays prior to peak.

There was a huge surge in premium delivery services in the week before Christmas, but for items bought over weekends customers chose mostly economy delivery options. Carole Woodhead (pictured), CEO of Hermes put the improved performance down to three main factors. “There was meticulous planning between carriers and retailers, with a huge amount of effort at every level, down to parcel and lorry. Also retailers were better at communicating with consumers, and the investment made by retailers and carriers made a difference.” For more on carrier innovation and investment turn to page 46.

“There has been some much needed flexibility. We have to manage streams differently, to make sure we have capacity. Volume doubled for our next day service.” Managing the customer expectation was very important to the success of Peak says Dick Stead, executive chair of Yodel. “This is important because if the consumer is happy he isn’t calling up the retailer [to complain], who in turn isn’t calling up the carrier, so we could focus on delivery.”

Dick was equally delighted with the improvement in communication between retailers and carriers. “We realised there is such a thing as finite capacity. There are still things to learn, but this was the best Peak ever. Retailers in some cases spoke to us on an hourly basis, talking about their order wells, talking about how we would deliver that in the coming days.”

Andy Harding, chief commercial officer at House of Fraser (HoF) agreed. “This year we knew it was coming. All the contingencies were ready. We weren’t so aggressive with our cutoffs. We had midnight cut off, so we softened that a lot more than previous years, we found it was easier to do that over-extend [the delivery networks].” HoF also introduced a range of new delivery services, including pre 9am services across a variety of carriers, allowing it to spread risk and load. The retailer also saw interesting developments in buy and collect, that is buy online and collect in store. It accounted for 40% of business over peak but this volume caused issues, especially as people collecting parcels tended to cluster in lunchtime slots.

Encouragingly some retailers were able to extend delivery options at the same time as coping with huge volume growth. Lana Jackson, head of customer proposition and delivery at New Look explains: “We had challenging new delivery options, but we worked closely in planning with carriers. Throughout the day we had dynamic user demand reports. So, we knew if the capacity was being reached we could change cut off times immediately instead of disappointing consumers. We were able to immediately inform consumers that cut off times changed. It was complex to manage eight delivery options, but it gave choice to consumers and put less pressure on carriers. Having a forecast in place with couriers that was realistic was key. It is important for retailers not to suddenly dump double the number of planned parcels on the carrier.”

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The shape of the peak period with its numerous and not entirely predictable crests and troughs creates difficulties for carriers and retailers. Just imagine, you’ve hired loads of staff expecting tons of orders, but one day the demand doesn’t appear. Warehouses and logistics operations literally have people sat around doing nothing. This creates cost but if service levels are to be maintained this investment has to be made. “The scale of uplift for peak is not healthy for the supply chain,” says Carole Woodhead. “With the shape of peak, it was difficult but we still made a small profit during this period.”

Yodel said some of the dips in business dropped to summer volume levels and this at a time when the sorting centres were fully staffed.

Dick Stead says: “We had people sat doing nothing at times. Taking this into consideration, we did little better than break even. This is excluding investment costs, which we see as long term.” Asked if Yodel [and other carriers] had been perceived as playing ‘contract hard ball’ with retailers after last year’s difficult Peak, Dick agreed but emphasised that carriers and retailers were in it together. “When you work together and when retailers understand what it takes to man up to these things, they realise it is not about saying no, it’s about saying when and smoothing the operation.”

Roger Morris, head of Royal Mail Parcels adds: “It is not just carriers that are hit by dramatic peaks, it is also retailers. It doesn’t help anyone to have very extreme, false peaks on one day only. Spreading the peak makes it more sustainable, warehouses are not designed to cope with 100% more volume on a given day, or days. It requires a big investment from carriers. The big question to retailers is – are you going to be with us throughout the year?”

Next year, the peak shopping period is likely to be bigger again. If the crests and troughs are more sharply defined this will increase costs for retailers and carriers. Indeed Carole Woodhead says: “Peak will be bigger next year, and we will invest in it, but my personal appeal to marketeers is – if you can spread promotions across the month of December it will be greatly appreciated by carriers.”

While UK retailers and carrier networks have succeeded in taming the beast of online retail, there is no time for complacency. As Roger Morris told the Conference: “It is important to continue to work together, we cannot assume that because it worked this year that we have it solved. We must continue to collaborate.”