Posted by: LCP Consulting Tuesday 2 February 2016 15.57

Yesterday’s Channel 4 documentary “Dispatches: Where’s My Missing Mail” took the spotlight to the home delivery industry. Using undercover film in one of the Yodel depots, plus interviews with drivers and warehouse operators, it made for uncomfortable viewing for anyone in the industry.

Throwing parcels on conveyors, into cages and vehicles, it all pointed to a total lack of care, an absence of management, and a disregard for their direct customer (the retailer) and the retailer’s customer (the consumer).

But the program also touched on a fundamental issue. We live in a world where we expect ‘free’ delivery, and fast. It reminded me of an old engineering sign:

"Fast"

"Reliable"

"Cheap"

Pick any two

Retailers have been educating customers to expect fast (next day is becoming the norm) and cheap (free is the expectation) deliveries. Based on this logic, it simply won’t be reliable.

The home delivery industry is under significant cost pressure from its customers – retailers. Cost to the retailer for a standard delivery is typically between £3.50 and £4.50 per parcel. So, whilst the consumer is being charged £2 - £3, the retailer is losing money on the transaction and therefore this puts even more pressure on carriers to reduce cost.  Against this backdrop, we expect the parcel to be picked up from a retailer’s distribution centre, transported to a hub, sorted, transported to a branch, put on a delivery vehicle and delivered to the consumer’s door; and often more than that. But, the consumer is only paying a fraction of this cost.

Retail order volumes fluctuate massively, with Black Friday the obvious example, but promotions are a standard way to drive sales without regard for the operational effects. The carriers are simply expected to be able to flex their capacity.

As a consequence, Home Delivery businesses have been ruthless about cutting costs. The program highlights staff being taken on for short term contracts. It does not give any opportunity to develop the team and create a sense of pride in what they are doing – they are simply turning up for work for a few weeks and then moving on. This lack of consistency then drives through to the management levels. The example also highlighted the use of self-employed delivery drivers. Paying a small fee (£0.60 per delivery was the amount mentioned) has removed the risk to the business, but it is substantially lower than the standard industry pay. It makes it impossible to invest in vehicles, education and systems.

There is no excuse for the events that Dispatches highlighted. But it is time to deal with the root cause: if we don’t pay for service, we should not be surprised we don’t get it. Retail is relying on carriers to represent their brand in the last mile and on the doorstep of their much valued customers, but if the carrier fails to provide a quality service, the customer often leaves the blame with the retailer.

Our Omni-channel studies have consistently highlighted that retailers need to implement a truly integrated brand experience, using the whole organisation to deliver uniformity of service. This requires a deep understanding of the customer, optimised assortment, re-aligned store operations, integrated IT systems, and (as Dispatches highlighted to us all) fulfilment excellence regardless of channel.

Perhaps this Dispatches ‘fly on the wall’ account will start a shift towards a more collaborative relationship between retailer and carrier. One that ultimately benefits all, including the consumer.  

Written by Emile Naus, Technical Partner