March 29, 2021
InPost’s expansion plan doubles down on lockers. Will it work?
It’s been a big month for InPost. Off the back of their €9bn IPO earlier this year, they’ve been grabbing headlines throughout March for several big developments. QR code-driven ‘Instant Returns’ in a partnership with Missguided, plus a deal with Transport for London to launch sixty lockers across London’s tube and train stations both drew attention in the media. However, the crown jewel of their PR dominance was the news of their intention to buy Mondial Relay, who operate almost 16,000 PUDO locations across France. This acquisition was firmly hinted at in their IPO Prospectus, which also highlighted that “[InPost] expects to pursue selective acquisitions of out-of-home delivery networks and automating them through the development of a dense APM network,” – saying, in other words, that it would be sticking lockers into these parcel shops in place of the over-the-counter model they currently operate..
So that begs the question – with the world’s second biggest consumer-facing locker provider aiming to convert existing parcel shops into APMs, does that mean lockers are the ultimate out of home option? With some posts and carriers shifting focus and moving towards lockers too, should we take this news as a symbol of the viability and scalability of lockers compared to other out-of-home delivery formats?
The context of InPost
The dominance of InPost in Poland is nothing short of remarkable, where they’ve rolled out over 10,000 lockers and have helped shape the market towards out of home (30-40% of all ecommerce parcels are delivered OOH). Against a competitive landscape including DPD, UPS, FedEx and Poczta Polska’s network of post offices, they’ve earned a 45% market share through aggressive rollouts, strong retailer partnerships and changing the consumer mindset with delivery price discounts. Poland is well ahead of many European markets on incentivising OOH delivery in this way. Home delivery is priced at around €4.00 while InPost’s PUDO locations are about €2.50 – and once consumers began to understand and use lockers, they never looked back.
So why are InPost looking to acquire PUDO businesses for their expansion? Well, InPost need scale, and right now they’re the only locker business of any real scale in Europe (although SwipBox are giving it a go in the Nordics) so the only buying choices were PUDO networks. But that partly dodges the question – why acquire at all? Why not build out lockers themselves instead of trying to replace existing options, where consumers have made their choice to use a PUDO rather than a locker?
InPost’s biggest concern has got to be that consumers are choosing parcel shops and find them easy to use. Parcel shop behaviour is extremely well established in large markets like the UK, France and the Nordics. They’re taking a gamble – buying existing (and working) options and trying to change the status quo of a consumer base who have already made their choice over alternative locker options, like La Poste’s ‘Pick Up’ lockers, and Amazon’s imaginatively named “Amazon Locker” lockers, both of which are already available throughout much of France.
The Amazon precedent
Ten years ago, Amazon launched the ‘Amazon Locker’ brand in the UK and US, before rolling out into five other markets: Italy, France, Australia, Canada and Spain. Since then, they’ve diversified their OOH proposition, now offering over-the-counter options (as seen in thousands of UK convenience stores through a partnership with PayPoint) named ‘Amazon Counter,’ with both Counter and Locker tied together under the wider ‘Amazon Hub’ brand. It’s hard to find clear data on this, but in the UK it appears that Amazon has slowed down the deployment of new lockers in favour of spinning up thousands of PUDO locations.
The problem is that to turn on PUDO in a convenience store requires a handheld device and some shelf space. Deploying a locker bank involves finding a place for it to sit, potentially renting that space, and paying for power and internet connection. PUDOs are therefore far, far cheaper to scale. It took Amazon around nine years to reach 4-5,000 lockers in the UK, but within the last two years the same business has reached almost 10,000 PUDO locations. It’s not hard to see why Amazon changed their last-mile strategy; in markets with lower OOH delivery adoption in general, it makes much less economic sense to splash on massive locker rollouts, or, in the case of InPost’s European expansion, replace the existing norm.
More channels makes OOH more effective
The other reason Amazon have sought to diversify is that one channel is inherently limiting when it comes to building an OOH network – no one wants all of their eggs in one basket. Different consumers prefer different options, and choice is king. We know that for a fact: whenever we run consumer research (in the UK or overseas) there’s no overwhelming majority on PUDO preference. Some people prefer lockers, some prefer post offices and some prefer third-party locations like supermarkets. When we had our own branded Doddle stores in the UK, we got to know a lot of our customers as they were regular visitors. Many would wax lyrical about the benefits of being able to be face-to-face with a real person – it’s always more difficult to moan about an issue to a machine!
Diversification goes both ways
So why then, are major posts and carriers across the global heavily investing in lockers? The answer lies once more in consumer choice. Most of these carriers already have established PUDO locations – either parcel shops or post offices, and to diversify they need to add lockers to the mix. In Sweden, PostNord has 70% market share across 3,000 locations, but are now trialling locker pilots for the first time. Norway’s Posten Norge are aiming to increase their locker footprint from 100 to 3,000 locations in 2021 alone (against a network of 3,500 existing PUDO points). An Post in Ireland have recently trialled 20 lockers, and Poste Italiane have launched 350 lockers to compliment their post office and parcel shop network. Our partners in Australia and Japan (Australia Post and Yamato) have also built a blend of over-the-counter PUDOs and parcel lockers into their OOH networks. These carriers recognised the need to diversify from their existing offer to capture additional volume from both (i) consumers who wanted to use parcel lockers and (ii) retailers who want to offer additional options on their checkouts.
Two countries that have arguably nailed the locker rollout are Singapore and Canada – where governments have pushed federated lockers for communities. In both nations, instead of focusing on cost reduction for carriers, the governments have focused on improving the consumer experience and solving an actual issue (the inability to deliver to home if the consumer isn’t in during the day). Those countries are about as dissimilar as you could imagine Singapore has an immense density with a majority of the population living in apartment blocks and Canada has massive, largely empty landmass. Both examples involved lockers positioned ideally for communities. Singapore’s Locker Alliance targets towns which are essentially groups of high-rise buildings, and places locker banks within 250 metres of any of those buildings. In Canada, the strategy is similar albeit on a physically larger scale, positioning ‘community mailboxes’ in neighbourhoods. Despite their differences, both nations are seeing lockers as a growing solution for consumers.
Have InPost got it wrong?
Time will tell whether replacing store-format PUDOs with lockers will be an effective way for InPost to roll out into Europe, but it’s an untested strategy. If this emphasis on a single format continues, InPost would appear to be either banking on a huge shift in consumer desires around out-of-home delivery or accepting that their solution will address only a minority of shoppers who prefer lockers.
Clearly lockers will have a key part to play in building up OOH delivery options and helping carriers to maximise the convenience factor of OOH delivery. Lockers might be the cherry on top, but parcel shops and post offices are the cake. Combining a PUDO network of post offices, third-party concessions and lockers appears to be the winning formula for the dominant, market-leading carriers in every major ecommerce market, and it’s worth emphasising that the biggest carrier to have initially opened their last-mile offering with lockers (Amazon Logistics) is now moving towards parcel shops and concessions, while carriers that have long held a huge network of post offices and parcel shops are now launching pilots and networks of locker banks. InPost are certainly cutting against the grain with this plan; but that’s no guarantee of failure (nor of success.)