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Progress report

November 25, 2014

In November and December the delivery industry will see capacities stretched to the limit by parcel volumes swollen by another rise in online shopping. This year’s peak season also marks the anniversary of a challenge by Brussels that could determine the nature of how the European sector handles e-commerce shipments in the future.

In the midst of the pre-Christmas rush in 2013, the European Commission (EC) published a ‘road map’ designed to fix what it described as “market failures” in cross-border deliveries. Vice president Michel Barnier added that he expected rapid results, warning that if it didn’t appear that the industry was making progress within the 18-month timeframe allowed, “additional measures” might be needed.

The threat of regulatory intervention appeared even more acute for UK operators. Three weeks before the EC’s pronouncement, the Consumer Affairs Minister, Jo Swinson, chaired a summit on surcharges and unreliable deliveries experienced by consumers in rural and remote parts of the UK.

Annual review
Werner Stengg’s vocal cords have been severely tested in the year since those twin developments. Head of the EC’s Online and Postal Services unit, he has been engaged in constant discussion with delivery, retail and technology companies trying to establish progress.

 

Right: Werner Stengg, head of Online and Postal Services, European Commission

 

“I’m probably a bit more confident about our ability to achieve our objective than I was this time last year but we are not there yet,”
he comments. “In fact, measuring what progress might have been made is a challenge in its own right.

“Our road map was addressed to the entire e-commerce industry and a lot of those interests are
not organized or cannot talk to us in a representative manner. That means that next year we will
need to have broad consultation
to ask everyone involved whether
things really have improved.

“What we have been able to follow more easily is the commitment by national postal operators. They are well on track and that’s very positive, particularly when you consider that in the beginning they said they already had everything under control and didn’t need our involvement.

“We have the impression that none of them questions what we are doing anymore. Overall, I think we’re moving in the right direction.”

Robert Hammond, director of postal policy and regulation at the UK’s Citizens Advice organization, shares Stengg’s sentiments. He and his colleagues compiled the report ‘Signed, Sealed…Delivered?’, which attracted ministerial attention in November 2013.

Preliminary momentum was accelerated by the publication in July 2014 of a ‘UK Statement of Principles for parcel deliveries’, in which Swinson decried “ridiculous delivery charges” faced by consumers.

“When I think back to when these difficulties first came to light, there was simply no conversation about parcel deliveries and the consumer experience,” explains Hammond. “Now, companies are prepared to explain and share their understanding of the market and discuss innovative products they are developing – whether they are major retailers, delivery firms or the companies that create the sort of software that links the two.”

 

Left: Robert Hammond, director of postal policy and regulation, Citizens Advice

 

The shift registered by Hammond chimes with what Brussels describes as “anecdotal evidence” of a delivery sector responding to the charge that it wasn’t doing enough to support the continuing e-commerce boom. “You see change not only in that people are talking about this all the time,” comments Stengg, “but there is a lot of innovation devoted to addressing the growing needs of e-tailers.

“The national posts and the IPC are making changes that will even be extended outside Europe to the USA, Canada and Australia. However, it’s not enough just to implement a development. When it is brought to market, will it be considered successful by those who need it? 

“For instance, SMEs are probably the critical part of our project. Larger e-commerce retailers are big enough to negotiate deals. They may have their own logistics department and the sort of volumes that get good deals. It’s right that they should benefit, but what about the smaller companies which don’t have that capacity?

“What they want is a single contact point – an intermediary – that takes care of all their logistics problems and can negotiate rates on their behalf. That is probably the only way for smaller companies to deal with that complexity.”

Mini revolution
The reputation that UK-based Global Freight Solutions (GFS) has forged over more than a decade for providing just such a service has been burnished by its involvement with e-commerce in the past few years. According to Neil Cotty, the firm’s managing director, roughly three-quarters of retail clients handled by the parcel and carrier manager are the kind of SMEs whose case is now being vigorously argued by Brussels.

 

Right: Neil Cotty, managing director, GFS

 

This autumn, the company unveiled GFS Checkout, a product aimed at “democratizing” the shipping process by giving smaller retailers easy access to the same sort of delivery portfolio as their much larger competitors.

Cotty describes it as “a mini-revolution” in how vendors, their customers and carrier partners interact. “We set out to develop something that would allow SME e-tailers to present, simply, a broad range of delivery options, including even premium services, which they might not otherwise
be able to do.

“It’s more than just about giving consumers a bigger menu of services from which to pick. Shoppers often have the kind of negative experiences that both the EC and the UK government have become aware of, either because they can’t choose a method or speed of delivery that they want or they’re not sure about how much it will cost.

“By making that part of the e-commerce process more straightforward, more transparent, we’re able to effectively nullify those concerns in a way that also prevents them ditching intended purchases.”

This kind of initiative is a step forward, according to Stengg. “This is really the type of implementation that we want to see to address the concerns of SMEs and consumers.

“We would like to see deliveries controlled by the consumer in a way that can change from day to day. That is part of the ultimate objective of giving them control over the last mile, over how and when they get their parcels,” he adds.

Customer control
It’s a concept that DPD, one of the UK’s biggest parcel carriers, has also done its best to grapple with since becoming the first firm in the country to introduce timed delivery slots in 2009. The company has gone even further, enabling consumers to track the driver carrying their package on his rounds.

CEO Dwain McDonald believes that certainty is key. “Retailers and businesses can’t afford to just shove their parcels out into the ether. A delivery that customers can control via their smartphone is much more in keeping with their lifestyle and provides a much improved customer experience.”

Among those also buying into the idea of tailored deliveries is Royal Mail, which has announced a package of options to support e-commerce, including limited Sunday deliveries and allowing consumers to pick up goods bought online at their local post offices.

News of such progress cheers Robert Hammond, who dismisses suggestions that the time and effort invested by the delivery industry into finding the sort of solutions to keep shoppers and officialdom happy could check the appeal of providing e-commerce services. “A frequent theme of our discussions has been the difficulty in selling ideas to retailers once they’re developed.

“Yes, it can cost a lot to come up with new products but if you have the right idea and the principles behind it are sound, you might well generate revenue from it. It is surely not beyond the wit of man to come up with a proposal that makes good commercial sense and provides a sufficiently wide range of delivery options to keep consumers happy.”

Political influence
Time is running out for the delivery sector to comment and comply with the goals of the EC’s road map. Hammond is also aware that efforts to overcome Britain’s e-commerce headaches may be undone by a general election in the spring of 2015.

Jo Swinson, who has taken issue with the parcel carriers, is a Liberal Democrat MP who could lose her ministerial brief if the coalition with the Conservative majority party is not extended for a second term.

Hammond is confident, though, that the current process will not peter out. “This is not a party-political issue. A party of any persuasion is going to want to be in touch with the population. E-commerce accounted for 18% of UK business turnover in 2012, and the kind of delivery issues we have raised are of great interest across the country, especially in rural areas. Getting this right is in everyone’s interest.”

Stengg appreciates the uncertainty introduced by a change of administration but argues that, far from being disrupted, the EC’s road map has been re-energized by the new team led by Commission President Jean-Claude Juncker, which took charge at the start of November.

Juncker even placed creating “a digital single market for consumers and businesses” at the top of a list of priorities published in advance of his taking the reins of the continent’s bureaucracy.

While Stengg welcomes the support, even he is unsure when politicians, consumers, carriers and retailers will arrive at the intended destination of the road map.

“By the time the 18 months we specified last December have elapsed, I expect there will be tangible improvements. My only question is how systematic they will be. I don’t think it’s realistic to expect progress at the same speed and the same level everywhere.

“It’s almost certain that there will be a need for additional activity, but what that will be and when, I don’t yet have a clue.” 

Road map summary
The European Commission’s parcel delivery road map was launched in December 2013 by the internal market and services commissioner, Michel Barnier. It was, in part, the product
of extensive consultation conducted after the publication 12 months earlier of a green paper on “an integrated parcel delivery market for the growth of e-commerce in the EU”.

Designed to help the kind of confidence in delivery services needed to facilitate greater online sales, the road map addresses those issues that the Commission believes could block further progress, including a lack of information on choice and cost for consumers, especially those in “less advanced or accessible regions” and the cooperation between parcel carriers.

Having given the retail and delivery industries 18 months to respond and take action, the Commission is due to consider whether “further action” – possibly going as far as regulation of e-commerce deliveries – is necessary.

  • This article was first published in the January 2015 issue of Postal Technology International magazine

November 25, 2014

 

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