Autumn 2008

Consolidation, acquisition and expansion have made Parcelnet one of the UK's biggest courier-based home delivery companies. Peter Rowlands finds out more about it from managing director Carole Woodhead

Catalogue retail may have been eclipsed by the internet revolution, but it has given the industry one resource that has proved remarkably robust and well-suited to the modern home delivery landscape: the 'lifestyle courier' delivery concept.

At one time several of the then-dominant catalogue retailers used these self-employed, locally-based people to handle deliveries for them. More recently, following progressive consolidation in the catalogue market, they have become concentrated among an ever-smaller number of leading home delivery specialists.

Ten years ago, few would have predicted that one of those companies would be Parcelnet, a subsidiary of the German Otto catalogue retail giant. Parcelnet as such didn't even exist then; it was created in 2000 from several component delivery operations within the Otto group.

 

Now, following two recent acquisitions (the UK home delivery arm of Redcats and then some postal operations of TNT), it has call on around 7,000 lifestyle couriers, which makes it probably the biggest company in its field.

The significance of these couriers in terms of Parcelnet's operations can't be exaggerated. They're not just an added resource to help its deliveries run smoothly; they are it. If you despatch your parcels through Parcelnet, a self-employed lifestyle courier will do the doorstep delivery.

'They're a fantastically flexible resource,' says Carole Woodhead, Parcelnet's managing director. 'They know their area really well, they often know their customers, and they know how to avoid the failed deliveries that would be typical of ordinary parcel delivery drivers.'

Originally, like most such services, the Parcelnet operation was developed to meet the delivery needs of its parent group's catalogue retail operations. However, it has expanded rapidly in the past few years, and now has a significant and growing portfolio of third-party customers. They include names such as Boden, Damart, Lakeland, Mothercare, Next Directory and Reader's Digest.

When Parcelnet took over the Redcats network two years ago, working time was one of the integration issues that had to be addressed. 'Redcats couriers worked a five-day week, and we had to initiate them into a six-day system,' Carole Woodhead says. 'Inevitably some left.' However, most stayed the course. 'Overall, the integration worked fantastically well,' she says.

This was no small accomplishment, considering that the two operations were very different in size. 'It was a huge exercise,' Carole Woodhead recalls. 'There were changes in the way we covered most postcodes.' The company also opened three new depots, only one of which had been planned before the takeover came along.

Despite the integration challenge, Woodhead describes the Redcats operation as 'a perfect fit' with Parcelnet's. 'They ran couriers, but no core infrastructure. They were using Lynx's resources, and were planning to develop the business into what they were calling Lynx@Home.'

Much has changed since then. Lynx was bought by UPS, and Redcats sold the courier operation to Parcelnet, which was able to provide a ready-made infrastructure. From Parcelnet's point of view, taking on the extra couriers enabled it to increase the capacity and granularity of its own network.

The TNT integration was on a larger scale, but the experience gained with Redcats meant that it went more smoothly, Woodhead says. 'We'd already built in extra capacity for expansion. This development just meant it was used up quickly.' She acknowledges that because of the scale of the takeover, about 100 TNT people left. 'But all the same, we completed the change in just three months.'

The TNT operation originated with another catalogue retail group, N Brown, and had been acquired by TNT only two years before. Reportedly TNT found its inherited commitments to N Brown were something of a challenge. We wondered how it was that Parcelnet apparently took things in its stride.

'You'd have to ask TNT why they took this decision,' Carole Woodhead says. 'As far as we were concerned, the issues presented no surprises to us.' She adds: 'Making these things work can be partly a question of scale. We had our existing infrastructure and a long history of doing courier-based deliveries.'

The big appeal of using couriers, of course, is that they often get to know their customers individually, and work out localised strategies to avoid delivery failures. 'For instance, sometimes they will go to the school gates, where they know they can deliver to several mums at the same time.'

They also learn when to go back and attempt a redelivery. The basic Parcelnet service includes three delivery attempts on different days – 'and unlike parcels companies, couriers don't have to take goods all the way back to a depot, only to their own homes.'

'At some point you have to call it a day and return undelivered goods to the depot,' Woodhead says, but she points out that the couriers have considerable freedom to decide how to make the delivery work. 'For instance, sometimes they will phone the supplier's own customer service department to ask for the recipient's phone number, and will then phone the recipient to agree a delivery time.'

This of course assumes that the supplier will be willing to divulge the recipient's details, which not all will do. Yet in most cases the benefits would seem to outweigh any misplaced concerns about confidentiality.

Like most delivery companies, Parcelnet discourages clients where possible from insisting on obtaining signatures for deliveries, which is often a major stumbling block to a successful delivery. 'There are some goods you simply wouldn't want left in a greenhouse,' Carole Woodhead admits, but she says the company's 'safe place' delivery concept usually does the trick. This might be a neighbour's house or somewhere on the recipient's premises.

Although signatures may not always be guaranteed, in practice Woodhead says the company does succeed in obtaining signatures for a high proportion of all deliveries (up to 70 per cent), whether they're a contractual requirement or not. And it can of course offer a full signature-only service if clients demand it. 'It's a case of fine-tuning the service to customer demands,' Woodhead says.

For some customers (among them Next Directory and Parcelnet's parent Otto) the company offers the opportunity for consumers to pick a morning or afternoon delivery slot. It can even cope with deliveries specified for a future date – 'although holding product in the warehouse for forward delivery does cause commercial and planning issues,' Woodhead says. She feels it's preferable in this situation for the retailer or supplier to hold the goods until they are required, then release them into the delivery chain at that point.

Back in the early 2000s, under the aegis of its Hermes General Service business, Otto Group attempted to launch itself into full-service e-fulfilment in the UK, basing its operation at the former Freemans catalogue base in south London. When this unit was later wound down, parts of the initiative were rolled into the emerging Parcelnet operation, but stock management has not really been developed. 'Our core expertise is home deliveries,' Carole Woodhead says, 'and we tend to focus on that.'

One of the key attractions of the courier delivery model is the reliability, she maintains. 'Our aim is to carry through the same high-quality customer service that a retailer offers in-store to the delivery service.'

She adds: 'It's all about certainty – and that in turn is often a question of how you describe the service. It's important to be open and honest about what you're offering, and to set the right level of expectation.'

BOX: The delivery process – and how the couriers fit in

At the upstream end of the delivery operation, Parcelnet works in much the same way as more typical parcel delivery services. Goods are brought to two major sorting hubs – at Bradford, the heartland of the traditional catalogue world, and Peterborough – and here they are loaded on to large trunk vehicles for despatch to twenty regional depots, typically of 20,000 to 30,000 sq ft.

A radial fleet of Parcelnet delivery vehicles, mostly box vans of between 7.5 and 12 tonnes, delivers the product within the regions, and this is where the operation diverges from the classic parcel industry model. Rather than delivering direct to consumers, these vans take the goods to the couriers, who then handle the last-mile operation. Just over half of the consignments are taken directly to the couriers' homes, while the rest are offloaded at small sub-depots run by outside contractors. Couriers themselves collect from these depots.

Why the difference? 'Some couriers run slightly bigger operations,' Carole Whitehead explains, 'so it makes more sense for them to collect.' These couriers, mostly still only family businesses, might run small vans, though the vast majority of Parcelnet's couriers use their own cars.

There are about 8,000 courier delivery rounds altogether, and generally couriers notch up about 45 to 50 deliveries a day each. This is a lower figure than achieved by some parcel vans, but couriers don't necessarily work such long shifts. They do provide a six-day service as standard, though – something that can be a strong selling point for the company.

How easy is it to attract people to the lifestyle courier business? Carole Woodhead says it remains a popular job. Recruiting is easier in the north of Britain than the south, she says – a divide that has always been present – but Parcelnet makes life easier for itself by avoiding insistence that the couriers work for the company exclusively. 'We find it can actually be a benefit if they work for more than one network,' she explains. 'They get a more consistent volume of goods to deliver, and they're not dependent on one source of income.'

Recruitment and training are among the tasks of a team of around 100 field managers – home-based staff who each cover their own region. Interestingly, although nominally based at specific depots, they operate independently of the depot management teams. 'They work in collaboration with the depots, but are able to mediate between them and the couriers.'

BOX: Bradford base, global perspective

Parcelnet is based in Bradford, the epicentre of the traditional catalogue retail industry, and managing director Carole Woodhead herself is Bradford born and bred. She joined in 2001, a year after the company was created from the merger of two group transport operations, Speedlink and Direct Line.

Previously she had worked on the warehousing side at Grattan, one of the main UK catalogue businesses in the Otto group, obtaining an MBA (at Bradford University, of course) while she was there. Her special project was a strategic review of Parcelnet operations.

Her initial role at Parcelnet was as general manager, operations, and since then she has presided over the company's expansion into third-party fulfilment and home delivery.

Her horizons have been significantly raised this year in a move by the company to expand into cross-border fulfilment. 'We did some market research, and noted that 70 per cent of home shopping activity is in the UK, Germany and France – three markets where Otto has a strong presence. We realised we could take advantage of this presence to create a unique resource.'

Historically, the amount of home delivery goods moving between countries has been limited, but Woodhead says there is increasing interest among retailers in selling across borders. 'We think the pace will gather fast.'

Already Parcelnet is doing UK deliveries for several German-based retailers, and this autumn the company plans to launch a UK-Germany operation.

It is probably significant that Carole Woodhead is now reporting to a new boss, whose title is head of European logistics for the group – and also that he was previously its head of home shopping. When the group says it is looking for logistics expansion, clearly it means business.