Spring 2008

'No one at home' delivery failures are a blight on the home shopping landscape, but a mix of old and new solutions could at last be set to make a real impact. Peter Rowlands reports

According to research conducted on behalf of IMRG, the internet retailers' representative organisation, consumers consider delivery issues to be the single most contentious aspect of home shopping.

Yet when IMRG's own retailer members were recently putting together a list of their own action priorities, we understand that delivery came nowhere near the top of their agenda.

This disconnect sums up a problem that has dogged the otherwise irrepressible internet shopping market since its earliest days. Despite their best efforts in other respects, retailers have still not fully acknowledged that delivery is not just an add-on to home shopping, but is actually part of the process; and that failed deliveries are a major turn-off for consumers.

And that, in a nutshell, is why the many solutions that have been put forward over the years to solve the not-at-home delivery problem have so far failed to gain momentum.

Ask yourself a simple question: at face value, who stands to gain most from improving the reliability of home deliveries? The answer is consumers and carriers. Then ask who appears to be likely to have to pay to make these improvements. The answer is retailers.

No wonder so many are reluctant to do much to improve matters.

You might think this would mean that organisations proposing unattended and deferred delivery solutions would have retreated long ago and given up the unequal struggle.

new developments

Not so! Here at Fulfilment & e.logistics we're aware of several quite exciting new developments in this market - some from existing players, some from newcomers who haven't even made their move yet. At this stage we're not allowed to tell you everything we know, but even what we can talk about should give reason for at least guarded optimism.

Perhaps the most straightforward approach to unattended delivery is for consumers to put a big, secure delivery box outside their own front door. While many would-be suppliers have been disappointed by the market response (see panel on this page), happily there are still some who take a more upbeat view of market demand. Both Giraffe Marketing (the Hippo Box firm) and Parcel Safe report growing interest in their products - not just from consumers, but also among major retailers. Parcel Safe is already listed by Amazon, and has just secured the support of the Next retail chain, which is now also listing the system.

Eddy Riby, Parcel Safe founder, hesitates to say the market for these systems has actually turned the corner, 'but it's beginning to.' His system is sold through numerous online retailers, and is also on the point of breaking into some of the big out-of-town DIY and garden supply companies. Already his output is measured in thousands of units a year, and he sees no reason why the figure should not grow.

His main concern at the moment is the rising cost of raw materials from the Far East. 'We may have to increase our prices, but we are aware that this market is very price-sensitive already.'

Currently his recommended retail price is £49.99, though some major resellers offer his products for less. 'They realise that the boxes actually bring them a benefit in terms of the efficiency of their own home deliveries.'

Charles Gallichan, the man behind the Hippo Box range, admits that the box market 'is still a hard sell,' but feels that the day of the unattended delivery solution is likely to come, and could come soon. 'Once the spectacular growth in home shopping starts to tail off, retailers will realise they can't rest on their laurels. They'll need to be best in class to attract and retain online customers, and that will mean getting the delivery right.'

An advantage of these fundamentally simple delivery boxes is that no integration is required with retailers' web sites. They are just like giant letterboxes. But just how easy is it in practice to get delivery drivers to use them?

According to Royal Mail, there is nothing to stop postmen from delivering into drop-boxes if their own judgement suggests they are appropriate; but equally there is no standard way for consumers to request them to when ordering goods.

If retailers have signed up to Royal Mail's Safe Place system, where buyers can specify an alternative delivery point when ordering, a drop-box can be cited as the specified location; but currently retailers only qualify for the Safe Place scheme if they also use the Royal Mail Tracked delivery system. About twenty have opted for Safe Place so far - not exactly a rush, but the organisation is to launch a new push to attract more takers during this year.

Parcelforce Worldwide has meanwhile introduced something broadly similar to SafePlace, but on a less formal basis. If a recipient is not a home when a driver attempts a home delivery, he or she will automatically try to make the delivery to a neighbour. Since Parcelforce has only 50 collection depots, compared with Royal Mail's 1,400, this has potential benefits both for the company and for consumers who might otherwise have to travel some way to the nearest depot to pick up their goods.

arrays of shared boxes

While suppliers of individual boxes outside the door are still hanging on in the battle for the hearts and minds of internet shoppers, an alternative that seems to be coming strongly back into favour is the box-bank system, where arrays of shared boxes are positioned at high-profile public locations, and can be used on a one-off basis for dropping off home shopping consignments for collection by consumers. The recipient is usually alerted about the delivery by email or SMS.

There are two main UK operators of this type of system, ByBox and Business Direct. Both systems are currently used mainly for overnight parts deliveries to field service engineers and similar users, but both companies have recently made it clear that they are also determined to move into the B2C space.

ByBox has had consumer box banks in use in the Channel Islands for some years, and more recently has set up consumer box banks in France in association with La Poste. Business Direct has just set up ParcelXchange consumer box-banks at three locations in Helsinki and surrounding area, which are being run under licence by major Finnish carrier Itella.

Business Direct managing director Paul Carvell says several postal organisations around the world are also considering adopting the technology. 'The potential demand is huge.'

An attraction of the ParcelXchange system is that the existing box banks already incorporate bank-style ATM technology such as credit-card swipe capabilities. For the UK, Carvell says the idea if possible is to allow consumers to identify themselves with their credit card when picking up their goods. 'People are already comfortable doing this when collecting cinema and airline tickets,' he points out.

However, for the Finnish trial the company was requested to add a manually-entered PIN code identification capability, and Carvell says that this approach could now also be incorporated in UK versions.

When it comes to accessibility, Carvell says the company's current locations are already within 15 minutes' drive time (equated to 3.4 miles) of 94 per cent of the UK population. If more are added, they will be intended to increase network capacity and granularity, rather than change the basic premise of the system.

ByBox's chief executive, Stuart Miller, offers a somewhat different take on the market. 'We don't think it makes sense to address the whole population all at once,' he says. 'We prefer the idea of offering a B2C service to specific *communities' of users, and gradually extending it from there.'

Since ByBox already has a box-bank network at least as extensive as Business Direct's, this view is clearly prompted not by any constraints in the existing system, but by the philosophy behind the initiative.

So what constitutes a 'community' in Miller's terms? Well, he has told us what he means in confidence, but he has asked us not to tell you - at least not until the concept is up and running. All we can say is that the plans for the UK that are currently under way at the company are very exciting and in some cases quite radical. If even one of several concepts now being developed really takes off, it promises to pick up momentum very quickly. And Miller says up to three new initiatives could be up and running in time for the next Christmas retailing peak.

As to the question of where the boxes might be located, Miller is currently keeping that to himself. Rival ParcelXchange's box banks are mostly situated in Tesco and similar supermarket car parks (ideal for access and car parking, Paul Carvell points out), and in petrol station forecourts. More will be added as and when required - probably in similar locations.

more varied box sizes

Additional ParcelXchange box banks may also differ slightly from existing installations. In particular, they will probably include boxes with at least some smaller compartments. 'Boxes for field engineers need to be quite big. Generally speaking, consumer boxes only need to hold product weight a couple of kilos or so.' We understand future consumer ByBox installations would probably also include smaller boxes.

ByBox, like Business Direct, is currently looking for further opportunities abroad. The company missed out when Deutsche Post was allocating contracts for its now widely-used network of 1,000 PackStation consumer delivery box banks, losing the deal to Austrian ATM manufacturer Keba. But Stuart Miller says it is now bidding for a contract to supply up to 1,500 more box banks, which should put over 90 per cent of the population within a ten-minute reach of one of the locations.

On one point Miller is adamant. 'The box-bank solution is now proven. It's been tried and tested in real-world operations. There's no need for any more trial operations. That may have been the view of retailers over the past seven or eight years, but we've moved beyond that now. We know the concept works.'

drop points

While box-bank systems provide an unattended location for dropping off goods, an alternative is to position the drop point in an attended location such as a shop. This was the concept pioneered by CollectPoint, which was active in the early 2000s but has since dropped out of the consumer market. A similar idea was also taken up by various other contenders, though one by one, they have fallen by the wayside.

However, the mantle has since been picked up by Kiala, a Belgian-based business that has become a byword for home shopping there and in France and other continental markets, and is still expanding. The company has been trialling the concept in the North West of England for the past year, and has recently extended its launch contract with Next, which will now run until the end of this year.

Unlike previous drop-off point solutions, Kiala will do more than merely set up the drop-points; it also plans to run the delivery and collection system, using an appointed carrier partner. It is already working with a UK carrier on its trial phase, which mainly involves returns rather than outgoing consignments, but is currently in talks with various carrier partners about its full UK roll-out.

Steve Bolton, the retail consultant who is helping to push forward the project over here, says there is a programme to recruit up to 1,250 drop-off points over a nine-month setup phase. 'We've developed an algorithm to work out the ideal location on the basis of distance travelled by consumers and access.'

Kiala may have a head of steam behind it, but it might not remain the only solution in the attended drop-off market. This year a would-be new contender has emerged in the form of Parcels4you, which has taken the almost heretical approach of starting with just one base near Chelmsford. In this case, anyone can deliver to the location, which is a bespoke office setup specifically for this purpose.

Founder Darren Stevens says there is enormous pent-up demand from small businesses as well as consumers in his area. He is confident that local promotion will quickly raise awareness, and hopes to extend the service regionally and then nationally via a franchise model.

Another service using attended locations is MyParcel, which has been offering a drop-off service at a small network of self-storage depots in London for the past couple of years. If you go to its web site at the moment you will find the service has been suspended, but managing director Hugo Rose is keen to make the point that this is only temporary. 'We're still very much in business,' he says.

He explains that the company has been ploughing significant resource into something that could be a key to this whole subject - software to integrate unattended solutions with retail web sites. It has even won a regional development grant specifically for proof-of-concept testing. 'The idea is to keep the system as simple as possible, using modern technology such as web services. We know we need to minimise disruption for retailers.'

Rose says the company was recently close to signing a deal that would have increased its drop-point network dramatically at a stroke, and he is hopeful of further progress on this front soon. If all goes according to plan, the company will be embarking on a drive to recruit retailers in the summer.

And even that is not the end of the possibilities in this corner of the market. We are aware of at least one other initiative that is gathering momentum, though we are sworn to secrecy until there is something concrete to talk about. Watch this space!

massive head's start

When it comes to drop-off systems, one carrier of course has a massive head's start on everyone else - Royal Mail. Its main solution for failed or problematic home deliveries, Local Collect, is offered by both Royal Mail itself and Parcelforce Worldwide. Consumers receiving a 'yellow card' denoting a failed delivery attempt can ask for the item to be taken to their local post office for collection there - an option that costs them 50p. Retailers can also offer the facility at the point of sale, in which case the service is free to users, while the retailers pay a modest £300 annual subscription.

Despite the apparent attraction of specifying a post office during the purchase process, spokesman James Eadie says take-up by retailers has so far been limited, though again, a marketing push for this option is planned. However, redirection to post offices by consumers is apparently commonplace now, and has been used for 'millions' of deliveries since the system's launch nearly three years ago.

Something like Local Collect might have even more appeal if other carriers could use it as well, not just Royal Mail and Parcelforce Worldwide. But the organisation has reaffirmed to us that this is not currently allowed under the franchise terms for sub-post offices.

There have been moves by various organisations to harness the resources of post offices scheduled for closure under the current round of proposed cuts, and establish them as parcel collection points for the market as a whole. Carrier TNT was one of the first to float this proposal, and a similar idea was also proposed eighteen months ago by an organisation called Postmasternet, which was run by a sub-postmaster, Gary Coyle.

The difficulty with all these endeavours is that post offices are bound by quite rigid contractual obligations to Royal Mail. It is inevitably difficult for external organisations to court existing sub-postmasters, who are likely to be preoccupied with intensive rearguard action to maintain their status quo within Royal Mail.

Once they have been disenfranchised, they are no longer part of a coordinated network, and are therefore likely to be harder to galvanise. Moreover, it appears that they are contractually bound not to enter into rival activities for a period after their post office franchise is terminated, and could stand to lose out on compensation if they flout this requirement.

Whilst such challenges continue to affect otherwise adventurous initiatives, it's clear that there is still enough of a head of steam behind the delivery solutions market as a whole to keep the concept well and truly alive.

The solutions on offer are still highly divergent, and no single approach has emerged yet to drive the market, so it's probably too early, even after all these years, to predict how the landscape will look by the end of the decade. What seems clear, though, is that there's no shortage of ideas, and some seem on the point of emerging into the mainstream at last.

BOX: Where did they go?

Some of the surviving companies that started out addressing unattended home deliveries continue to find more lucrative markets elsewhere. BearBox, for instance, has majored for some years on deliveries to field service staff rather than consumers; so has ByBox (but see main article for new B2C moves by the company).

Now Ahome4it, which provides a rather clever coded access system to let delivery people into porches and outhouses, is also turning increasingly to commercial markets. As managing director Andy Holding told us: 'To be honest, we're finding that we're picking up more interest with applications such as securing remote locations and mobile assets.'

He adds, however, that the consumer version of the system is still very much available, pointing out that trial users have almost all been impressed it.

ParcelEater, one of the handful of companies selling robust delivery boxes for positioning outside your front door, has simply pulled out of the market. 'There just wasn't any demand,' says founder Nick Swift. Perhaps the biggest disappointment here is that Parcel Eater was possibly the only system of its kind that could accept more than one delivery in a day. It used a one-way flip-top mechanism broadly similar to that seen in some continental post boxes and bank deposit boxes.

We're not clear if Nick Swift would be prepared to pass on this technology to other suppliers, but if any want to enquire about it, we will be happy to put them in touch with him.

BOX: Who delivers?

Until now, most unattended delivery systems have been carrier-agnostic - meaning that any carrier can deliver to them. The only notable exception is the Local Collect scheme run by Royal Mail and Parcelforce, which only those organisations are allowed to use.

However, the landscape is changing. Kiala, which is building up a drop-point service, runs its own consolidation and delivery service to the drop points, working with a contracted carrier.

Steve Bolton, who is helping set up the UK operation, emphasises that the price charged is 'ex hub', which means retailers' existing carriers can still deliver into the system. 'But customers do need to stream parcels destined for this route,' he adds, and he accepts that as a consequence, some might find it more logical to use the company for the whole movement.

Kiala is not alone here. Both ByBox and Business Direct currently use their own carrier networks to deliver to their B2B intelligent box networks, and might want to maintain this model in the B2C market. However, Business Direct for one has said it is not intractable on this point, and in fact it has already allowed Parcelforce Worldwide to deliver to its boxes in a newly-announced a B2B project (News Update, page 10).

As managing director Paul Carvell points out, 'Our cost model is built round box occupancy, not the delivery operation as such.'

Although none of these services is being promoted primarily as a delivery service, they all see attractions in something they could well end up having in common - a listing as a potential delivery option in the MetaPack carrier selection system.

This increasingly popular system already allows retail users' delivery management systems to make selections automatically from a range of carriers according to the size, weight, value, delivery geography and other characteristics of each consignment. It would be logical for unattended delivery solutions to be included among these options - keyed to the choices made by consumers further back in the shopping process

BOX: Delivery failures: prevention better than cure

While unattended delivery solutions can play an indispensable role in smoothing the home delivery process, clearly it is better to be able to prevent a delivery failure before it happens.

Among various solutions, sending text messages to alert consumers of an impending delivery is beginning to emerge as a valuable option. According to WIN plc, a communications specialist and SMS gateway operator, there is good evidence that even a simple one-way message to the recipient can help ensure that there is someone at home to receive the goods. The company's Jeremy Cornwall says that carriers using the system have typically reduced their 'carded' (failed delivery) rate by 35 to 40 per cent.

While retailers can install such a system on their own behalf, so far carriers and home delivery companies have been the main takers. 'The system needs integration with carriers, so it's logical that they would take the lead,' Cornwall says. He says they are then able to offer it to retailers, either as a free service or as a paid option.

The point at which the alert is sent can be selected by the carrier, is would typically be related to a trigger point in the supply chain such as loading on to a van.

Although the company asked us not to name them, we can confirm that several big-name carriers are already using this system. For at least one, WIN has provided a two-way service, in which consumers can reply to the initial text alert, either accepting the proposed delivery time or selecting an alternative day or time from several other options.

When carriers attempt a delivery in all good faith, perhaps even after agreeing it with the consumer, sometimes there is still a problem. In this case an advanced proof of delivery system can be invaluable. Various delivery management companies now of sophisticated systems; one is Codegate, whose director Terran Churcher points out: 'With GPS technology to record exact location and GPRS to pass the information back in real time, the delivery driver can use a handheld device to photograph the premises and capture a time- and date-stamped image to prove service-level agreements were upheld.'