November 2000

Schemes allowing home deliveries to be dropped off for later collection are coming to fruition at last. e.logistics magazine considers how they work, and what prospects they offer

If you wanted to order something from a Web site, but weren't sure if you'd be at home to receive it, would you be happy to have it dropped off somewhere locally for you to collect? It's a question that's been exercising the minds of the e-fulfilment business for most of this year, and several organisations have decided to put the idea to the test. The first out of the gate were Dropzone1, fronted by former marketing executive Lynda Wallace, and Collectpoint, run by entrepreneur Jim Doyle. Their target drop-points were in the main convenience stores ­ and in the case of Dropzone1, also filling-station forecourts.

Since then various other comparable initiatives have been announced by organisations such as m-box and Urbandrop, and more such schemes are known to be under development. The m-box service is of course just one component in a much broader e-fulfilment package, which also includes home delivery. And now the Post Office has joined the fray. Under a trial announced in November, local post offices in the West Country will act as pick-up points for undelivered parcels. So far so good; but it's been a year in which ambitious plans have taken a long time to mature. Until lately not a single e-tailer was actually using any of these services in earnest.

This has changed at last. Both Dropzone1 and Collectpoint now have live customers using their services, albeit in very small numbers.

Meanwhile, m-box says it is in talks with "several customers" about starting to provide a service for them in the New Year, and Urbandrop, the newest kid on the block, says trials will start in January with several mail-order houses, including a member of the top three. Will these systems really work? Even Dropzone1's Lynda Wallace, who can claim to be a pioneer in this fledgling business, qualifies her enthusiasm with caution. "The e-tailers we've talked to all agree that there's real value in this kind of service," she says, "but a lot of them haven't viewed it as a priority this year."

She adds: "This is understandable, although we've been surprised at their reluctance." One reason for it, she feels, is that e-tailers have been inclined to distance themselves from delivery problems, regarding them as a carrier issue rather than their own.

As a result, Dropzone1 is now spending less time wooing e-tailers, believing this approach to be both time-consuming and, given the number of business failures among them, risky. Instead, it is putting more emphasis on partnerships with big carriers who already have e-fulfilment plans in place.

 

Collectpoint, by contrast, continues to target both e-tailers and the convenience stores that will act as drop-off points. Its philosophy is that both are an integral part of the branding operation. "E-tailers will prefer to just have one collection network in their delivery options," Jim Doyle believes.

In a sense, progress in this market looks something of a chicken-and-egg situation. E-tailers will be cautious until the concept is proved, but it never will be proved unless they start to use it in sufficient numbers. And apart from anything else, expansion will require market exposure and clear demand from consumers.

So far Collectpoint seems to have made the most progress on this front. Several of the handful of its pioneer users actually show the Collectpoint logo on their home page, including Gadgetshop.com and Escential.co.uk, and others also give it prominence.

On Dropzone1's initial trial site, Game.uk.com, the reference to Dropzone1 was initially buried on a subsidiary page, although in its question-and-answer page the company does draw enthusiastic attention to what it describes as "a new, ground-breaking service". Lynda Wallace says she is in discussions with the site operator about raising the profile it gives to the service.

If e-tailers have been hesitant to embrace the concept as quickly as expected, the drop-point operators seem to have been more enthusiastic. Several of the national chains, including Londis and Spa, are acting as agents for more than one of the contenders, and see advantages beyond the obvious one of increasing the footfall through their stores.

In the words of Roy Ford of Spar, such services are seen as helping them to trial new retailing opportunities. The prospect they open up "fits perfectly with our plans eventually to offer customer on-line access in store," he says. Kenton Lawton of Londis says he can see delivery pick-up points evolving into in-store order points. "Goods could be ordered and collected from the store or delivered however the customer desired." I

n terms of practical operation, the services all differ in detail, although the approaches adopted by Dropzone1 and Collectpoint have similarities. At the time of purchase the customer can elect to have the goods delivered to a drop-off point rather than to their home, and can specify the nearest convenient point, basing the choice on postcode or general location.

The goods are then delivered directly to that site by the e-tailer's usual carrier. The site operator has some basic equipment on hand, including a barcode scanner with communication capability, and swipes a barcode on the parcel on its arrival. The data is transmitted back to the service operator, which sends an email (or SMS message) alerting the recipient to its arrival. On collection, the customer verifies his or her identity with the credit or debit card that was originally used to make the purchase.

Urbandrop, by contrast, has adopted a different model for the service it launched in October. Like the others, it has chosen convenience stores as its drop-off points, although in this case they are all independent stores rather than members of regional or national chains. It maintains that such stores will have more incentive to make the system work.

Where it differs conspicuously is that it has entered the market from a logistics background. Its founders, led by Hitash Patel, are also shareholders in CDL Distribution, an existing fulfilment house, and in Fareway Metrofile, which specialises in high-security storage for organisations such as banks. Through its association with these companies, Urbandrop has been able to base itself in an existing 10,000 sq m warehouse at Bermondsey in south-east London. This forms the hub of the initial operation, and it is from here that deliveries will be made to a local network of convenience stores. No carrier will visit them direct. So in a sense Urbandrop aims to act as a last-mile delivery operator in its own right.

Arguably this should give the company more control over its network than some of its rivals. For instance, since its own drivers will be delivering, they will be able to use handheld terminals to capture and pass back delivery information in a standard format.

At what point will the decision be taken to use Urbandrop? The company is proposing various scenarios. An e-tailer might simply offer customers the option of using an Urbandrop (much in the vein of Dropzone1 or Collectpoint). A

lternatively, the carrier or e-tailer might decide to make Urbandrop its standard offering. Or there might be an arrangement under which failed deliveries automatically defaulted to the Urbandrop hub. Clearly the client would need to evaluate the impact on delivery times, as well as likely consumer reaction to these various options.

A fourth possibility under development is one where the end customer would simply specify an Urbandrop location for the delivery, whether or not a prior arrangement had been put into place by the e-tailer. It does appear, though, that an arrangement might then have to be set up by the e-tailer for this to work.

Dropzone1's Lynda Wallace for her part says her company has ruled out any arrangement activated unilaterally by the consumer, and in which the e-tailer is not a prior participant. "There would be no control over what kind of goods were sent, or whether the drop-point operator's insurance would cover it whilst in storage," she says.

So far it is hard to gauge is the likely impact of the Post Office's late entry into this market. However, its secure image and the extent of its 18,000-strong network of outlets seem certain to lend respectability to the concept.

Initially, customers who are not at home for a Royal Mail or Parcelforce delivery will need to contact the local depot and ask for the item to be re-delivered to their local post office. However, the aim is to give retailers the facility to offer post office branches as the consumer's first choice for delivery (back to the Dropzone1 and Collectpoint model).

The Post Office has already lined up one willing participant ­ the Cotswold Company, which specialises in home storage systems. Its managing director, Ian Vaughan, describes the service as "really good news for our customers". He adds: "Increasingly, customers expect companies such as ours to be more flexible and make shopping even more convenient."

Most of these embryonic services are starting on a regional basis. Dropzone1, for instance, is currently active only in the Reading area. Urbandrop is beginning with London, although it aims to set up discrete hubs in other major cities. The Post Office scheme is to be trialled at 1,000 branches in Bristol, Bath, Taunton, Torquay and Exeter, and if successful it will be extended nationwide.

Collectpoint differs, however, in that it is already claiming national coverage with 2,000 outlets (a figure said to be increasing by 1,000 a week). It also says it has 400 outlets in Germany, and is planning expansion to Austria, Ireland, Scandinavia and Benelux. M-box is also planning to start trials on a national basis, arguing that this is the only way to gauge the real potential.

Pricing arrangements vary among operators. Dropzone1 has said the price premium to consumers will be £1, most of which it will retain, although during initial trials this has been waived. The main benefit to the drop-point operators is considered to be the additional footfall. Collectpoint e-tailers are showing prices of £2. Urbandrop intends to reward its drop-point operators to the tune of between 50p and £1 per consignment. Its own cut will of course be somewhat more than this, since it will be offering cross-docking and delivery as part of the service.

Naturally the developers of all these schemes are convinced that their own model is the right one. But there are outstanding questions that can only be resolved once they are operating in earnest. How far, for instance, will consumers be prepared to travel to a drop-off point? Urbandrop aims to keep that journey down to 800 metres, but coverage is bound to be patchy in all the networks, especially at first. Long trips will undoubtedly put off consumers.

How ready will the individual drop-point operators be to run the systems properly? According to Lynda Wallace of Dropzone1: "They will want as little to do with the service as possible." Ironically, success in itself could bring problems, since it would mean a lack of storage capacity in the shop. The intention is to keep consignments somewhere where they're readily available, not in a back room; but space is already at a premium in many convenience stores and at garage forecourts, so finding room for consignments could become a problem.

Indeed, Collectpoint stipulates that its agents' stores must be manned by at least two people ­ which means not all stores in any given group will necessarily be eligible. But stores can temporarily "switch off" from the network if they are overwhelmed, and then re-engage when space becomes available.

One issue that may need addressing early in the life of these systems is what would happen if consumers asked for groceries to be dropped off at what might, in effect, be a grocer's shop. Clearly this will not arise if groceries are specifically excluded, but that puts an artificial constraint on to the whole concept.

However, none of this seems to have discouraged drop-point operators. Urbandrop, for example, claims it had no problem signing up its target of 400 outlets in London, and had to turn many applicants away (including, interestingly, a number of sub-post office branches, which it says it could not admit to the system).

Dropzone1 could have an answer for storage and access problems. It is now a subsidiary of a business called Pickupworks.com, which is developing an automated drop-off box system for consumer deliveries. In one scenario, banks of such boxes could be built into the outer wall of a drop-off point (rather like an array of night safes). So consumers could pick up the goods any time without any interaction with staff, and storage space would be saved.

This is not the only such system. Drop-off box developers such as Bearbox and Dynamid are also known to be investigating versions of their products for installing at collection points.

An alternative world view has been proposed by e-stop, the operation set up by Modus Properties. It aims to build a nationwide network of dedicated drive-through pick-up points for home deliveries. This is a much more ambitious plan than any of the convenience store operations, and clearly raises wide-ranging issues connected with land use planning and mobility. On the other hand, if it succeeds the rewards could be proportionately greater.

Drop-point operators are also competing with hybrid services such as that of Beck & Call, which accepts deliveries on behalf of the consumer (rather like Urbandrop), but then delivers them direct to the consumer at a chosen time.

ext year will be the real testing time for the drop-point services. While all may succeed, Lynda Wallace predicts eventual consolidation into "perhaps two or three networks". Technology, density of coverage, ease of use and service levels will no doubt all be determinants in the success of these concepts ­ and also, ultimately, acceptance by consumers.