May 13, 2021
Convenient delivery has costs – but not for consumers
This blog article is part of our Germany market insight series, exploring opportunities for parcel carriers and offering insight and comparison to other parcel markets around the world. Download your free copy of our Germany market report here.
Most Germans are rarely more than 500m away from a parcel locker or PUDO shop, chiefly because almost 75% of people live in cities or metropolitan areas where there are, simply, a lot of lockers.
Yet shoppers choose home delivery as their first and favourite option. Why? Because there is little in the way of a financial stick or carrot to get them to do anything else. In the case of Hermes, which has a 15% share of the German parcel market, four attempts will be made to deliver a parcel before the customer has to make separate arrangements to get their purchases.
That desire to maintain a high level of convenience is costly to the carrier in both the short and longer-term. On top of the accumulated delivery costs to the carrier, there is an element of created inertia, too; an abundance of convenience from these multiple delivery attempts becomes a barrier, stopping customers seeing any need to try new, disruptive options.
Innovation is needed, though. While customer attitudes toward change are hesitant, change is already taking shape. Much of the growth in ecommerce and deliveries in Germany is coming via Amazon, a company not known for sitting on the side lines indefinitely. More on that, shortly. Germany also faces a number of constraints on its labour force, not least of which is the effect of modest population growth. Drivers and warehouse staff are a very finite resource and that is inflating costs.
The desire for convenience has created what one of our report contributors referred to as the phenomenon of the spoiled customer (this is reflected in German shoppers’ attitude toward returns, too.) Whether it’s deliveries or returns, endlessly pandering to a desire for convenience can be expensive – unsustainably so.
In a market where retailers want to keep the customer sweet, carriers find themselves caught between a rock and a hard place. Managing costs is a significant part of the answer to this challenge, and if carriers and retailers in partnership can, persuade customers to embrace modernity in ecommerce, they could reap significant rewards. But that will mean getting the right balance of incentives and disincentives into the market; reasons to choose something other than costly home delivery and new ways of thinking about convenience.
Generating savings with out of home deliveries
Combining publicly available pricing information and conversations with postal operators we’ve had recently, we estimate that deliveries to PUDOs are between 20% and 40% cheaper for the parcel carrier, compared to home delivery. What needs to happen to generate more PUDO adoption, then? The carrier may need to share some of that cost efficiency with the retailer, and the retailer with the consumer, in order to incentivise adoption at every stage. As German ecommerce grows and volumes increase, it’s unlikely that multiple home delivery attempts will remain an economically sustainable proposition for very long. What happens next depends on the ability of carriers to encourage out-of-home pickup adoption.
To find out how Doddle can help you to reduce the cost of delivery and offer a great out-of-home delivery proposition, get in touch today.