What we learned from using Royal Mail’s Parcel Collect service

We saw Royal Mail release Parcel Collect with some fanfare in October 2020. It’s a cool concept and one that runs counter to some market trends, so we thought it was worth going through the journey and investigating what’s good and what’s not working.

What is Parcel Collect?

Parcel Collect was launched in October 2020 and passed 1 million parcels handled in March 2021.

Here’s what Royal Mail’s CCO Nick Landon had to say about it:

 “Royal Mail Parcel Collect is a fantastic step forward for all of our customers. It makes it easier to use our services than ever before. Whether you’re up against time and working from home, making a return, selling online or sending a gift to make someone’s day, Royal Mail Parcel Collect is here to help.”

I wanted to try the service for myself and get a sense of how it works, what it does well, and what might be missing. Is there a future for home collections in the UK?

Why are they doing it?

Carriers picking up returns (or parcels in general) from consumers’ homes isn’t a new concept– 95% of returns in India are processed that way, as are the majority of return parcels in South Korea and a handful of Middle Eastern nations. In Japan, our partner Yamato has a long history of providing a white-glove home collection service.

However, in the UK we’ve actually seen a move away from this service. The likes of Yodel and Hermes used to promote ‘home-pick-up’ as a big part of their consumer returns proposition, but both have been deprioritised in the last few years. Its pure conjecture, but our hypothesis is that the reasons are twofold: consumers don’t really like the uncertainty of a carrier coming to pick up an item between 7am and 7pm (which was typically the proposition offered) and, secondly, consumers have tens of thousands of locations where they can drop off a return, which they can do in their own time – which was providing a convenient enough returns proposition.

From Royal Mail’s perspective, they have posties on their rounds and they want to maximise the value of that labour force. Adding a handful of parcels to pick up at the same time as dropping some letters in the mailbox shouldn’t create too much additional work, but it makes the post more useful to consumers and SMEs. We’ve seen posts across the world look to add new utility to existing postal routes for years, and Parcel Collect is definitely part of that tradition.

What does the journey look like?

  1. Buy something online and decide to return it
  2. Search Parcel Collect on the search engine of your choice
    1. Check that you have a Royal Mail return label from your retailer. If you don’t, you’ll need to buy postage at the same time as booking your collection. You can print this at home and stick it to the package.
  3. Follow the steps on the website to book a Collection by selecting an address and a date – you’ll receive an email confirmation after checking out, as well as a receipt – the service is currently free but the default price is 72p + postage, or 60p for prepaid return labels.
  4. The postie will use a handheld to scan the barcode on the label when they arrive on their round and take the parcel with them. Again, you’ll receive an email confirming the parcel has been picked up.

How well is it working?

In my test run of Royal Mail’s Parcel Collect service, the postman who arrived at my door told me “I’ve not done it much yet” when I chatted to him about the relatively new collections offering. That simple admission holds a lot more information that perhaps he initially intended. I live in Clapham, the epicenter of twenty-something graduates who have descended on London post university. Major retailers, especially those in the high-returns fashion and apparel categories, do substantial volume here, with ecommerce giants like ASOS, Missguided and Boohoo occupying a lot of delivery van space.

Despite all that, it sounds like fast fashion consumers – most now working from home – are not widely adopting the Parcel Collect service as a returns proposition. Lockdown seemed the perfect time to launch, as young consumers were initially faced with the prospect of difficulty when returning their parcels. Stores weren’t open, ecommerce has been booming, and the queues stretched down the road outside the local Post Offices. And yet – “I’ve not done it much yet.”

The service is currently free (as a promotional strategy), and you could argue that it’s in its infancy, as Royal Mail slowly collects data on how and why users want to send their parcels. The difficulty with that is that it is almost impossible to collect data if you’re not interacting with consumers, and with the announcement that the service had handled a million parcels by mid-March, it does not seem that there is a huge weight of volume to generate that essential data. Those million parcels happened during a time period which included the biggest Black Friday and Christmas peaks ever seen in ecommerce, plus two national lockdowns, suggesting that uptake hasn’t been spectacular.  In addition, the volume that does exist is likely to be weighted towards C2X shipments from the growing mass of ‘powersellers’ operating on Depop, eBay, Vinted and the like and from SMEs now delighted at not having to venture to the Post Office with 8 parcels a day.

What does the future hold for Parcel Collect?

Maybe the biggest reason for the limited consumer adoption is that Royal Mail hasn’t run dedicated promotions for the service. It appeared in an ad in the run-up to Christmas shopping, but it was mentioned for perhaps 3 seconds of screen time, and not visually illustrated. I knew about the service because it’s literally my job to know about last-mile delivery and returns – but my ASOS-mad housemate is probably a better representative of the average UK shopper. She’s certainly more representative of the target demographic for an ecommerce returns solution, judging by the ASOS bags that pile up at our door. She doesn’t, however, read the trade publications and was shocked when she realised what the service offered. Royal Mail have launched a proposition that could service a consumer need, but may not have fully educated the consumers most likely to use it. The aims of offering more utility and driving additional volume into mail delivery routes make total sense – but the opportunity depends on getting consumers on board.

I believe Royal Mail’s venture will eventually be a success if priced correctly – after all, the postal worker is still working the mail routes and the service will almost certainly be used by marketplace sellers and consumers returning parcels. How Royal Mail shape the product in the next few months will be key. There are still teething issues – I couldn’t put my full address into the pick-up system (as the RM addressing system will have been built on front-door letterboxes and not apartments) and they didn’t provide me with a time window of arrival (which is crucial to align with consumers’ busy lives, particularly when working from home.)

The main issue as I see it is with adoption, which is a factor of awareness – the PR push has leaned more towards the industry, and I’m sure their retail partners are aware of the new product. But consumer awareness appears to be lacking, judging from our (admittedly limited!) anecdotal evidence and the surprisingly low volumes amid the biggest boom in online returns ever. Even the return labels inside the parcels don’t mention the new service; consumers have to actively seek out the journey on Royal Mail’s website and treat their return similarly to the normal PUDO journey – but with more steps!

Ultimately, these are teething issues which Royal Mail should be able to resolve. They’ve obviously made good progress with SMEs; the consumer journey works well (although providing clearer updates throughout would be even better); and using an existing route to drive profit despite the USO is genius, which is why so many posts are launching similar propositions. Royal Mail have the building blocks here, they just need to push the proposition to the next level and focus on first-mile consumers. That’s where the real profit could be, that’s where the real consumer needs are, and that’s where they should be focusing. Now is a great time for Royal Mail to use their uniquely strong daily coverage of UK residents as a platform to offer services like Parcel Collect that few others could afford to match at the same price point.

How and when should you tackle fraudulent returns?

Consumer modelling and segmentation has never been more important in retail, as the pandemic-driven ecommerce boom puts customer acquisition and retention under the spotlight like never before. With shopper behaviours under scrutiny, retailers are continuing to focus on fraud prevention and loss minimisation when it comes to returns.

Many have been inspired by ecommerce apparel pureplay ASOS, which implemented an automated system that can blacklist customers who are deemed to be taking excessive advantage of their returns policy. Some retailers are aiming to create similar algorithm-driven systems, while others are simply using their returns process to pre-empt fraudulent or excessive returning.

Preventing fraud and minimizing excessive returns is obviously a reasonable goal. However, retailers need to be sure that their efforts are well-placed and prioritized. Data from Appriss suggests the cost of returns fraud (both online and offline) in 2020 was $27 billion USD. That’s a lot of money, but against total retail sales of $4.04 trillion, just 0.6% of the value of retail sales is lost to returns fraud.

Now those are national numbers which may or may not ring true for individual businesses. However, the question should be asked, what price are retailers willing to pay in order to reduce the rate of excessive or fraudulent returns, and what capabilities do they need in order to achieve that goal?

If ASOS can do it…

Let’s cut to the chase here: The ASOS brand thrives on data. Yes, it is a retailer, but it’s important to recognise the part that cutting-edge technology plays in creating its success. They view data as a means to accelerate growth, which puts it at the centre of everything and every action taken at ASOS is underpinned by a cultural foundation of data-driven decision-making. By 2019, they had employed over 50 data scientists and machine learning engineers to build proprietary systems – bespoke to the ASOS business – that produce everything from consumer intelligence to product sales modelling and are constantly hiring more and more talent in this area. These teams are responsible for tools like image searching and the ‘cognitive analytics’, that tracks individual customer behaviour in real-time to match them with product recommendations.

The question is whether other retailers, with existing technology tools and analysis, can deliver a returns fraud prevention system that works as effectively.

The problem with data – big and small

Clearly the vast majority of ecommerce businesses simply do not have the resources to implement such an embedded programme of machine learning and purpose-built technology. Instead, they will rely on more traditional methods to assess their customer’s lifetime value and returns profile. That is absolutely fine, as long as they understand the limitations of that data.

For example, how are returns included in the assessment of customer value? Is the overall value of the customer calculated after all sales and returns have been made, and is there data showing the average impact of a return on future customer spending and frequency? Or are “serial returners” flagged as a ‘problematic’ segment on the basis of return volume or percentage alone?

The risk is that retailers miss the bigger picture. Our experience suggests that customers who make a higher number of returns often have a higher lifetime value – they shop more often and spend more with their favourite brands, and while they may be selective and have high expectations, their loyalty is deeply valuable. Customers with high levels of returns are valuable sources of information and feedback, too. Are they having to compensate for a sizing issue, or difficult to fathom photography? Understanding their returns behaviour gives a retailer clear opportunities for improvement, after which those return rates may well drop again.

In short, it’s easy to throw the baby out with the bathwater unless returns behaviour is both properly understood (i.e. what is driving the returns) and put into a longer-term context of customer lifetime value (i.e. the impact of making a return on future purchasing and frequency.)  Without this data, no returns algorithm can make intelligent decisions about which customers are actually worth blacklisting.

Playing the numbers game to tackle fraud

After retailers properly contextualise and understand their returns data, they can come back to the question of fraud and excessive returning. There are a variety of non-algorithmic approaches we see used.

Penalise

Free returns are a useful acquisition tool, but for customers whose spending and frequency don’t compensate for their return rate, retailers have the option of introducing charges for returns.

Careful segmentation and good data collection are essential to make this approach effective without punishing customers acting in good faith.

Protect

If returns data shows that most purchases are taking a long time to return to stock, retailers have the option of targeting their policy towards faster returns. For example, returning within a week is free, but there is a charge after the initial period. This could decrease wardrobing, cover some costs and bring stock back to sale faster, uplifting the resale potential value of returned items.

Prevent

It’s still fairly common for retailers to require customers to obtain authorisation from customer support in order to process a return. This approach ensures that items are eligible for return, helping to prevent fraud, and could be used to identify problematic returns behaviours.

However, this strategy encompasses every customer who wants to make a return, making returns significantly less convenient across the board, not just for those who may abuse the system. 36% of shoppers surveyed by YouGov on behalf of Doddle in 2020 said that they would like retailers to remove these authorisation policies.

The most important calculation

Retailers have to be able to estimate both the current cost of returns fraud, the difference that any intervention would make, and most importantly the other costs of altering the returns process or blacklisting customers – reduced loyalty and potentially reduced brand equity.

If there’s still a significant gain to be made with all costs factored in, it’s well worth investing time and energy pursuing reduced fraud and returns abuse. In order to fully understand and appreciate what is driving returns and their longer term impact on customer loyalty, as well as to measure the difference such a project actually makes, retailers first need to have a digital returns journey that gives them proper visibility and the possibility of analysis.  

A new mindset for returns

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.

It may be the case that the majority of shoppers want home delivery. But that doesn’t mean PUDO points and lockers are being ignored – far from it. They are the preferred way to return items in Germany. 

Many retailers will include a free returns label in with a purchase. All the customer needs to do if they change their mind is package up their unwanted items and leave them in a locker or at a PUDO counter. The ease with which returns are handled, from the shoppers’ perspective at least, is one reason some customers treat online shopping like a visit to a store changing room. Multiple items in different colour or size combinations are routinely ordered – most are subsequently returned.

There is a perception that the existence of and usage of alternative delivery options actually leads to increased returns. The concept is that shoppers simply leave purchases uncollected out of a sense of ‘buyer’s remorse’. These uncollected parcels in lockers and PUDOs are automatically sent back to the retailer, who automatically refunds the shopper.

The belief in buyers’ regret, and that a noticeable proportion of sales that go to a PUDO point rather than someone’s home will never be picked up at all, is based on a number of assumptions. Maybe the shopper has been too busy. Maybe, during periods of lockdown since early 2020, it has simply been too challenging to get out and collect things. Or maybe the shopper had second thoughts sometime after hitting the buy button. But not all of those assumptions can be borne out by recourse to data.

The challenge

Whatever the exact cause, there are around 350 million returns per year in Germany. The phenomenon of buyers’regret might account for some of that, of course. But without a detailed analysis of return rates from home and PUDO, coupled with research into returners’ motives, buyers’ regrets are really only hypothetical.

Some retailers don’t offer PUDO as a delivery option. It is hard to apportion 100% of the responsibility for that to a single cause. But whatever the cause, encouraging more away-from-home delivery and collection could help ease some of the pressure on networks and halt escalating costs.

The opportunity

Let’s assume a shopper regrets the purchase they made and leaves it uncollected in a locker to be returned. Setting aside, just for a moment, any concerns about the effective use of data and communications, that isn’t necessarily such a bad thing. An untouched item in its original packaging is a far easier thing to realise full value from once its back on sale.

If dealing with uncollected parcels is a problem that may be because of underlying factors. Fixing those issues could represent a significant opportunity. If the retailer and carrier aren’t making the most of every opportunity to encourage a customer to collect their item, there may be something missing from their customer journey and communication flow. If getting uncollected items back on sale quickly is costly or time-consuming, there may be problems with the way the network is oriented.

Or could it be as simple as the carrier using PUDO points that aren’t conveniently located for a particular customer. In a situation like that, understanding the distance a customer will have to travel to collect something ought to be reflected in the approach to communicating with that customer. It could even lead to co-marketing opportunities with businesses near the locker or PUDO point: if the promise of a free latte is all it takes to get someone to pick something up, it might be a worthwhile undertaking.

It’s also worth appreciating that research suggests that shoppers who use PUDOs have a better customer experience, which increases their loyalty to the retailer[1]. Carriers have the chance to turn the assumptions on their head when it comes to PUDOs, and deliver improved customer experience and retention to retailers with a sophisticated PUDO proposition.

To find out how Doddle can help you to offer a world-class returns proposition to retailers, get in touch today.


[1] Developing the last mile of a parcel delivery service concept for consumers. Aranko, Jenni. 2013, Laurea Leppävaara.

Putting PUDOs at the heart of sustainable ecommerce growth

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.

The years from 2015 to 2019 saw the parcel market in Germany grow at an average of 5.3% annually. Putting that into some context, the UK has experienced an average of 16.7% annual growth in parcel volumes over the same period, with both nations reaching volumes around 3.5 billion parcels shipped in 2019, per Pitney Bowes. However, the UK ships ~53 parcels per capita, whereas the figure for Germany is approximately 42, highlighting a slower rate of ecommerce adoption in Germany.

Just as it has in most of the world, the pandemic has ushered in rapid ecommerce sales growth in Germany. There was a 10% lift in parcel volumes in 2020, the bulk of which have been delivered to shoppers’ homes. This was largely because of Amazon; it accounted for around 80% of 2020’s growth.

There is already a fairly solid delivery and collections infrastructure in Germany. Nationwide, there are around 50,000 PUDO points, more than half of which are part of the DPDHL network. Even so, 75-80% of DPDHL parcels are destined for home delivery. Of the rest, 5-10% go straight to a locker and 10-20% to PUDO points in shops.

That network of lockers and collection points means that DPDHL typically routes failed first-time delivery to a nearby PUDO. From many perspectives, that makes good sense. It puts the existing PUDO network to use, relieves some of the pressure from vehicles and distribution centres, and helps manage costs. The contrast with one of DPDHL’s nearest rivals, Hermes (which attempts deliveries four times), is stark. Its repeated attempts to deliver represent a commendable commitment to service. But in the face of 10% growth in parcel volumes in a one-year period, it also represents a potentially escalating cost problem. 

With around three quarters of Germans living in towns and cities, complete with PUDO options, there are already cost-saving alternatives. Whether the German public can be encouraged to use them more routinely remains to be seen.

Delivery expectations continue to stretch carriers

The overwhelming majority of Germany’s online shoppers say free delivery is either important or rather important when placing orders – 85%, to be precise. A similar number (81%) want tracking information, too. It’s an example of an age-old problem in the retail delivery sector – balancing customer expectations of high service levels with customer reluctance to pay for those high service levels.

The combination of volume growth and customer expectations is likely to put tremendous strain on carriers. Simply adding more resources in a linear response to climbing demand is not a long-term strategy for success. German labour costs rose by 2.8% in the period 2016-19. While that’s lower than in some parts of eastern and central Europe, it is higher than the average cross-EU rise. Added to which, there is the aggressive growth strategy of Amazon.

Of the $80+ billion that constitutes the size of the German ecommerce market, an estimated $20 billion of that is Amazon’s – it is the largest single player in the market and is making its presence felt in the delivery sector too.  As it grows its German presence, Amazon is taking more of the workforce out of reach of the rest of the sector. That could effectively force other carriers to join in a bidding war, offering higher and higher wages.

The future of digital delivery and consolidation

There’s nothing unique about the above challenge. Customers always want more. Businesses always need to take care of costs. Finite resources are always expensive.

Reaching the point where tracking – or other premium options like on-the-fly changes – can be offered at little marginal cost requires the adoption of digital technology throughout the value chain. That’s likely to mean seeking opportunities to automate as many back-end functions as can be done. Again, that’s not a unique-to-Germany situation. 

But the real difference comes with shifting customer attitudes. If this notion of the spoiled customer is to be believed, there needs to be a real effort to win shoppers’ hearts and minds, as well as their wallets. That could work well for those businesses that invest in the technology that will allow them to forge closer links with customers through better communications and other value-added services. 

It may be the case that currently German shoppers see no value in routing their deliveries to a PUDO point. It will, therefore, be up to smart retail and carrier partnerships to create that needed value. That could mean bundling parcel deliveries with other services, or even finding new uses for PUDO points to make the location itself more appealing to visit.

There are already interesting collaborations addressing capacity underway in the German market. Three rival carriers – DPD, GLS and Hermes – joined forces to launch a parcel locker business called ParcelLock. The company describes itself as “the public parcel station for all parcel services” and its network can be used by other carriers. A collaborative mindset will be a crucial requirement for building new services for the German market. Those carriers who can demonstrate a clear value proposition could be well placed to become the hub of future successful services.

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.

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.

Spoiled customers?

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.

How to shift consumer expectations of delivery

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.

German consumers are some of the most demanding in the world. That goes beyond any of the considerations of delivery convenience already discussed. Major purchases tend not to be impulse buys, but the result of careful consideration and comparison.

Quality matters to the German shopper. This is hardly surprising – the country manufactures goods that are famed for their durability and many German brand names are synonymous with quality: Audi, Bosch, BMW, Mercedes-Benz, Siemens, Thyssenkrupp and more.

In short, there are many reasons why German shoppers aren’t prepared to accept second best. An estimated 60% of them will keep buying a particular brand once they are satisfied they are receiving quality goods and services.

Germans also have a high degree of social and environmental awareness, which influences many of their purchasing decisions. Whether it’s organic products, vegan food, energy consumption, or recycling, there is a maturity in the country’s attitude to the needs of wider society.

High expectations

More than half (53%) of 18-34s in Germany shop online at least once per week, according to the Spectos eCommerce Monitor 2021. They are also part of a demographic more likely to gravitate toward environmentally friendly, sustainable products and services. One of the questions carriers and retailers will have to come to terms with is how to continue to support the growth in online sales in sustainable ways.

Currently though, shoppers in Europe’s most important economy are pampered by the routine nature of home deliveries, where some carriers will try to avoid inconveniencing the customer to the point of attempting delivery 4 times. That will be a challenging mindset to shift.

Conscientious consumers offer a route for change

Putting the climate first is second nature in Germany. The country’s people cycle and recycle in great numbers as they strive to limit car use and reduce waste. It’s an ethos that could respond warmly to the right service from the right provider, packaged with the right messaging. Part of that messaging should be focused on the pro-climate benefits that alternatives to home delivery offer.

Sending 200 parcels to 200 homes uses a good deal more resources than sending 200 parcels to a single PUDO point. So, the potential for cleaner, greener ecommerce should be a big motivator for sustainability-conscious consumers to adopt out-of-home deliveries.

It is a shift that will still need to be highly configured around customer convenience, however, if it is to appeal to the mass market of online shoppers. But many of the components for a successful disruption of the ecommerce delivery sector are already in place. There is a high degree of smartphone use, for example, and there is no need to build an extensive PUDO network as it is already in place in large parts of the country.

Innovative customer experience and communication developments, taking advantage of the widespread use of apps and smartphones, could play an important part here as well. Home delivery is always likely to exist, and its convenience is undeniable. But there is no reason it has to be the default. PUDO should feel as easy as possible, with notifications and flexible options helping the customer feel in control via their phone, no matter where they are.

To find out how Doddle can help you to offer a great out-of-home delivery and returns proposition and guide your consumer behaviour strategy, get in touch today.

The puzzle pieces ecommerce marketers are missing

As much as we’d love them to, most customers don’t simply drop onto your site by accident, so your success is heavily determined by the acquisition strategy of your marketers. The problem is that many retailers aren’t using key data points about their customers to analyse marketing effectiveness and are losing money as a result.

The missing jigsaw pieces

Unfortunately, marketers are often only looking at half the picture when they report, focusing solely on how much their budget can achieve in sales without accounting for the comprehensive cost of that sale. For example, if a customer purchases six items as a result of a campaign, but returns four, that returns factor had better make its way into the campaign reporting; and the wider data set about returns should go well beyond campaign reports and into strategic decision-making.

If your current customer segmentation is made without taking returns data into account, you don’t know what the real value of your customer is, and your segmentation and targeting decisions are immediately thrown into question. Ultimately, this could mean that your marketing effectiveness ends up well below its potential. To spend marketing budget effectively, you need to understand the returns behaviors across your customer base and in your target segments.

How returns plays a role in targeting and segmentation

Let’s look at a quick example – you’re a men’s formalwear retailer in the process of making strategic targeting decisions. You’ve identified two key market segments:

Segment A consists of 35-40 year old men who are looking to upgrade their work suits. Data from your CRM platform tells you that this demographic are big spenders who are likely to buy at the top end of your range and may buy more than one suit at a time. However, they frequently make returns, often at a rate of one or two items per purchase.

Segment B is made up of younger men – in their early 20s – who may have just started their working life and are in need of a sharp but affordable suit, usually from the lower end of your range. However, despite this lower spend, your returns data shows that they are actually much less likely to make a return. And better still, those that have a great experience with you at this stage stay loyal to your brand and make more purchases in the following years.

If you look at spend and volume, Segment A looks pretty appealing. You might be tempted to direct the lion’s share of your marketing budget at this high-spending demographic with expensive tastes. Yet they are significantly more likely to make returns, and that could drastically change their value to your business.  Factoring that in, the younger, more cautious Segment B might be a strategically safer place to put your marketing budget. After all, they buy, but vitally they keep what they buy, and they have a high propensity to become repeat customers.  That said, perhaps the older Segment A should still be your focus – it all depends on the numbers themselves: what percentage of items they return, how much returns cost you to process, and so on.

The point is that returns behavior is a crucial factor in assessing the profitability of these two segments, and so your effectiveness is dependent on having the visibility and data to base targeting decisions upon. If you’ve got a digital returns platform which can flag that segment A returns purchases at a higher rate, then you can make a more informed decision about the value of targeting that segment.

Return rates aren’t set in stone, but brand perceptions can be

You don’t necessarily have to accept that Segment A shoppers will always necessarily return a high proportion of their purchases. The rate at which customers return items isn’t set in stone and can be influenced. Once again, the vital question is one of visibility. If retailers are able to capture and aggregate the reasons why returns are happening, they can identify the concrete improvements to make that will lead to reduced returns.

For example, if sizing is a common issue for our Segment A shoppers, perhaps the website needs improving to clarify sizing. AI tools can aggregate how a product fits differently shaped customers to offer predictions to new shopper about which size will suit them best. If shoppers are returning specific items time after time, there may be design or manufacturing defects which can be addressed at the root.

While return rates can be reduced in this way to great effect, improving the profitability and lifetime value of customers, there are limits to how far this approach can be taken. Making returns unnecessarily hard or treating customers with suspicion can result in more financial damage than it saves. Returns are costly, but upsetting customers is almost always more costly in the long run.

In the end, it’s all about the impact of every transaction and subsequent action on your sales data, and the returns process is a huge part of that post-purchase experience. Fitting the data jigsaw together using all of the pieces is the only way to get a clear picture. Once you’re seeing clearly, you can make better decisions that will keep you competitive and make your marketing significantly more effective in the long-term.

5 key learnings from the “Out-of-home delivery in Europe 2021” report

Out of home delivery has historically been a tricky topic to get hard facts on. There’s no shortage of debate and endless points of view, but much of the discussion has been reliant on assumptions (usually relatively sensible ones, at least) and finger-in-the-air estimates. Thankfully, the guys over at Last Mile Experts have put together what is easily the most comprehensive summary of the state of OOH delivery in Europe, covering 28 countries and 213 networks.

For our part, here are the 5 most interesting titbits from the report.

1.     Forecasting future volume is hard, but it’s going to be massive

In 2020, 10 billion parcels were shipped in the EU & Great Britain, the first time the 10 billion threshold had been crossed. By 2025, the report suggests we might see twice as many, and that figure could even double again by 2029. The challenge with all of these forecasts is to estimate the extent to which ecommerce growth, accelerated by COVID, will continue to remain this strong in the coming years, and the report illustrates how different assumptions about that growth rate might play out in terms of volume. The difference is staggering: at pre-COVID growth rates, we would reach 20 billion parcels in 2029. If growth continues at the same rate as it has during the pandemic, we’ll be there in 2023.

The report authors have estimated a “new normal” between these two options for their 20 billion by 2025 estimate. Such a figure truly puts into perspective the analysis later in the report on OOH networks – if we are to have double the volume of parcels by 2025, the efficacy and readiness of OOH will be a huge determinant of success for parcel carriers and postal operators.

2.     Out of home delivery routes are between 3 and 4 times more efficient

Parcel volumes could feasibly double in the space of 5 years between 2020 and 2025. The infrastructure to deliver them cannot realistically do the same. As a result, parcel carriers will need to work their existing infrastructure much harder to deliver the new volumes. That logic is what is driving out-of-home network investment as a strategic priority. The report’s authors state that OOH routes are 3 to 4 times more efficient compared to door-to-door deliveries. The stat they’re drawing up suggests that deliveries to lockers allow a driver to serve up to 800 parcels, versus 200 for a dense urban door-to-door scenario.

3.     Could C2C usage drive a significant amount of OOH volume?

DPD’s impressively job-titled Executive Vice President for Marketing, Communications and CSR, Jean-Claude Sonet, is quoted in the report on the topic of consumer-to-consumer parcel sends. He anticipates a 30% growth rate annually for C2C volume throughout Europe, driven by increased adoption of recommerce, pre-owned and circular economy models. Perhaps most importantly though, Sonet reckons around 90% of this volume will be linked to OOH solutions, whether PUDOs or APMs, to use the language of the report (APMs are automated parcel machines, often referred to as parcel lockers.)

So DPD are forecasting that by 2025, 30% of total OOH volume will be driven by C2C usage. Besides the simple volume that would bring into an OOH network, it’s worth thinking about the second-order effects. If buying second-hand stuff online continues to grow at an impressive rate, and consumers use OOH solutions for delivering these orders, that will bring more and more shoppers into contact with OOH delivery propositions. In time, increased exposure like this could increase the rate of growth of PUDO and locker adoption among consumers for all deliveries, not just C2C.

4.     Density, the MVP rule and the situation in Europe and the UK

The report notes that Last Mile Experts have a target figure for the minimum density required for a network to be successful, which is 1 PUDO or APM point per 10,000 inhabitants. However, they also cite two other benchmarks. The first is for the last mile to become “economically sustainable”, at 8 points per 10,000 inhabitants, and the second is for the last mile to be “environmentally friendly” at 10 points per 10,000 inhabitants.

However, all but 5 countries of the 28 covered by the report are below both of these markers. The Czech Republic, Poland, Slovenia, Denmark and Finland all exceed 10 points per 10,000 inhabitants, with Finland leading by some distance with 24 points per 10,000 inhabitants. Unsurprisingly, these are also nations with some of the highest percentage of deliveries occurring through OOH networks. The lack of truly dense OOH delivery networks across most of Europe is a barrier to further adoption by consumers, who need a truly convenient alternative to shift from home delivery. That said, this is a challenge being actively addressed by leading carriers. DPD are planning to double their network by 2025 to 100,000 points, and DHL recently announced a plan to increase their Packstation lockers to 12,500 installations in Germany by 2023.

One thing that the report doesn’t count towards these statistics in particular is Amazon, due to the difficulties assessing the exact size of their network and its geographic distribution (though the report does have a summary of what is known about Amazon’s network.) What we can say confidently is that Amazon has over 20,000 OOH delivery points in Europe, and at least in the UK has rapidly expanded its “Amazon Hub Counter” offering after initially primarily deploying lockers.

In any case, it’s clear that additional PUDO and locker points are being created at a fairly rapid rate across the continent, which will continue to push OOH networks forward and make them more convenient for consumers in the 28 countries.

5.     What about the format of OOH points?

A key finding of the report is that just under 13% of OOH delivery points are lockers. Parcel shops, post offices and store counters continue to make up the vast majority of OOH delivery points.

We’ve recently looked at the reasons why some companies like Poland’s InPost are so keen to emphasise lockers as a primary method, when others appear to be less single-minded about the format they use. What’s clear is that while lockers are currently a relatively small part of the OOH mix, they’re likely to be a growing segment. The allure of automation and one-touch convenience which lockers can provide is hard to beat, and we anticipate that over time the obstacles to their deployment by carriers (primarily cost-based) will be reduced.

You can download the full report here. If you’d like to find out how Doddle’s market-leading technology and expertise can help you to set up, operate and optimise an OOH network, feel free to get in touch.

2021: More sales, more returns, more opportunities

Offline shopping has been hammered by restrictions and shoppers’ reduced appetite for crowded malls and in-store retail. On the other hand, ecommerce has skyrocketed, bringing with it a tidal wave of returns and logistical challenges for retailers. The question for many is: what’s next?

Analysts have been assiduously making their predictions for post-pandemic retail, but it doesn’t take a professional number cruncher to work out that ecommerce sales won’t be falling back to pre-Covid volumes any time soon. US retail ecommerce leapt 31.8% to $211.5 billion in Q2 of 2020, according to the U.S. Census Bureau. That’s an astronomic increase which, while not expected to continue indefinitely, certainly gives us a glimpse into what’s possible.

With this amazing growth comes another key stat that retailers need to give some serious consideration: around 20% of ecommerce sales are returned. So naturally, all that additional ecommerce activity generates more returns. That $211.5bn we mentioned above? Eyeballing the percentages, you can reckon that around $42bn worth of those ecommerce sales were returned.

Need a complete guide to ecommerce return excellence? We recently released our updated eCommerce Returns 101 ebook. It answers the most important questions online retailers ask when it comes to ecommerce returns – you can get your copy for free here.

Why so high?

In-store returns are only around 5-10%, so why are ecommerce return rates so high, even when the products themselves can often be found in a retailer’s stores? The simple answer is ‘clarity and convenience’. If a customer doesn’t know for sure what they’re getting, they’re more likely to end up sending it back. They might also be tempted to get multiple variants of the same SKU, just to be safe. The prevalence of ‘wardrobing’, while not unheard of in stores, is also more of an issue online, as unscrupulous shoppers can hide behind the comparative anonymity of the internet.  

Returns begin with the retailer

Stores are built around the idea of maximising sales, consumer confidence and comfort. The same has to be true online, where shoppers who are confident in the information they have about a product are able to select the right product in the right size/fit/color/other variation. It boosts sales, and it helps reduce returns. Giving customers access to the same level information online as offline really counts. A few key examples:

  • Representative photography
  • Accurate sizing
  • Plenty of understandable product data

Just as importantly, retailers can provide information online that they might not be able to offer in-store, such as user reviews and Artificial Intelligence or Augmented Reality tools to help create looks or see what products will look like in your home. A digital returns platform, of course, will help you to see clearly who is making excessive returns and an effective returns policy will give you the means to challenge them. Together, you’ll have the strength to wrestle your returns rate into something far less terrifying.

Lowering costs…

Returns are not just about their impact on sales numbers – they’re operationally costly too. However, bringing that cost down isn’t impossible. A digital returns platform is a must-have for any online retailer that wants greater cost control. For example, a customer who books a return via your digital returns platform is telling you a great deal about how you might process that incoming package:

  • A damaged item can generate a QR code for slower, cheaper shipping. It can’t be resold, so there’s no hurry – it might even be directed straight to your waste processor.
  • A desirable, seasonal item can be given expedited shipping, to get it back up for sale faster. After all, you shouldn’t be treating $300 sneakers and $3 socks the same in your returns process.

Additionally, digitising returns gives retailers the opportunity to implement their returns policy at the point of the return being booked – out of policy items simply aren’t available in the platform, whereas with paper returns labels, customers can send whatever they like, whenever they like.

Even better, a digital returns platform means retailers can do away with printed returns labels entirely. The cost of each label is very low, but for retailers shipping millions of orders annually, it quickly adds up.

…and raising standards

Thinking of customers on a ‘one-sale’ basis is the antithesis of good marketing. Approach each return as an opportunity:

  • To learn more about the customer’s wants and needs
  • To make frequent connections
  • To demonstrate exceptional customer service.

Every time your customer needs to make a return – no matter how much you wish they weren’t – they’re offering you a chance to talk to them and improve their day. You can have your brand at their front of mind through reminders to post their return, updates on the process, even notifications to say that their refund is on its way. And now you know that little bit more about them, you can tailor future offers that they won’t be able to resist.

Nothing to fear, everything to gain

There’s no need for retailers to be panicking about the increased percentages of product returns they’re experiencing – in some ways quite the opposite. By adopting a digital returns platform, retailers can transform a painful and expensive process into a feedback loop that decreases return rates, reduces costs and improves customer loyalty and long-term value.

How to reduce return rates without cutting off customers

This article is an excerpt from our guide for ecommerce retailers: eCommerce Returns 101. The guide goes through every stage of the return process from policy to process, as well as covering customer experience and return rate reduction. Download your copy for free here.

Beware the doom-mongers. You’ll know them when you see them – they’re the ones clutching their half-empty coffee cup as they describe ecommerce returns as “out of control” and “an epidemic”. They are often the same people who believe that making it harder for customers to return goods is the answer.

Hold your horses, buddy! When well-managed, returns can play a really important role in customer acquisition and continued loyalty. After all, some returns might not even be the customer’s fault. So, let’s take a moment to think about returns from inside your business and look at what you can do to reduce them without your customers even noticing.

Who is your returns warrior?

To reduce your returns and make them work for you, you need a hero.

  • Someone who can step up and take ownership.
  • Someone fearless and focused.
  • Someone who can see the bigger picture and create shared goals.

You see, while returns really are an issue for everyone involved in your business, they often aren’t considered a key priority in amongst the day-to-day. Your returns warrior can bring the issues and the people together so that returns don’t get overlooked.

Trust the data

How much are you guessing and how much do you really know? The key to bringing your returns rate down lies in your data. The person you’ve appointed ‘returns warrior/champion/project manager/guru’ will need to know exactly what your returns look like at any given time and do this by generating reports with the right information. Starting with a series of weekly and monthly ‘top tens’, which look at returns by:

  • SKU
  • Vendor/drop shipper/supplier
  • Customer segment
  • Product Category
  • Price range

Once this information is generated, they need to dive a little deeper and sort the return rates by value (your return rate multiplied by profit margin on a product), to give the value loss of the return.

For example…

  • Your most-returned SKU is a coffee mug. It retails for $5, and you make $1.50 profit. It gets returned 100 times, so the value-adjusted result is $150.
  • Your second most-returned SKU, with 50 returns, is a TV which nets you $100 margin in a sale. That’s $5000 of margin that got returned.

You can also apply this logic to calculate the value impact of the returns rate by supplier, customer segment, product category or price range, but you see what we’re getting at here – the volume of returns alone should never be your sole metric.

Products + people = a better picture

Those ‘top tens’ are great, but you need more. More context, more understanding of customer behaviour, more patterns. A further knowledge-gathering exercise is required to combine everything we’ve already learnt above with additional data on:

  • Customer Satisfaction (specifically in regard to returns)
  • Customer lifetime value (grouped by returns volume in the same period)
  • Week-on-week and month-on-month view of the average time between return booked, return received, and refund authorised.
  • Customer contact reasons, week-on-week and month-on-month

Now it’s time to book a weekly recurring team meeting flagged ‘critical’, because this insight is going to be essential to driving your business forward across the board, not just in return rate reduction.

Where the action happens

In the scale of one to ten where one is “the most unnecessary meeting of all time” and ten is “presidential briefing”, returns meetings are a solid eight. No one is going to die if you don’t have them, but the success of your business absolutely depends on them. This meeting is for sharing the data and deciding what it means for your business and what actions you need to take to reduce return rates – without hurting customer loyalty and acquisition.

There are lots of potential outcomes from this meeting, but there will always be actions. In fact, if anyone leaves without an action it’s a problem. These are just some ways in which everyone gets involved.

  • Ecommerce/Customer service: Your data may have highlighted a fundamental flaw with your website that means customers don’t have a clear idea of measurements or sizing. Or colour. Or even just how the product looks overall – this must be addressed.
  • Buying: There may be a problem with a product – or a whole range of products. Why is this happening and how do we stop it?
  • Logistics/operations: The same kinds of products may be arriving damaged and in broken packaging. This requires investigation.
  • Marketing: You may see patterns of purchasing that surprise you. Serial returners, for example, can prove to be seriously valuable [LINK TO BLOG] –. What does this knowledge mean for your marketing?
  • Marketing: Or you may discover practices that are unacceptable. Wardrobing is a very real problem, but it can be identified and addressed with the right data.

Everyone will walk away with actions, but more importantly, everyone will walk away with an understanding that this is really important and what potential it has for your business. This meeting is the place where change begins.

Goals are good

These meetings are also a great place to set out a direction for the future – otherwise you’re just firefighting that week’s problem. When you have the data in black and white in front of you, it’s basically telling you just what kind of service your customers expect from you in order to come back and shop with you again. That insight is used by major retailers like ASOS or IKEA to channel investment in the customer experience and beyond. Reducing the returns rate is often the driving force behind the introduction of technologies like AR on retailers’ websites, launching customer service live chats, or allowing real customer reviews.

Obviously, among the grander plans are those that can simply be targets for improvement. For example:

  • Buying can pay ongoing attention to loss-making SKUs/vendors and seek alternatives.
  • Logistics can support resale and cashflow by working towards a target that will get returns back into stock as a matter of priority.
  • Marketing can create accurate targeted content for those high lifetime value customers and actively remove serial returners of no value from campaigns.

They’re not sexy or glamorous, but they all share long-term measurable effects. And that translates into profit. Which is definitely sexy and glamorous by anyone’s standards.

Keep on keeping on

The one thing that the doom-mongers do have right is this: returns are endless. They’re a fact of retail life. So, it makes total sense that if products keep being returned, you need to stay focused on that data. And as your business grows (and it surely will), so will your returns – and the challenge. Continuing the virtuous circle you’ve created means keeping on top of a lot of information, which right now might be coming at you in streams, from lots of different places:

  • Returns packing slips from the warehouse
  • Emails to the customer service inbox
  • Daily and weekly sales
  • Campaign activity
  • Product pipelines

As volumes of sales increase, these can easily become difficult to wrestle in a timely way. Ultimately, you could find that returns slip back down the priority list as you focus on your growing business – but make sure they’re always in the mix for your attention and energy.

Keeping the customer experience at the forefront

The biggest single change you can make quickly is to put all the elements of the returns experience into one tidy, effective and customer-friendly digital returns journey. It gives the truest visibility of what is coming back, why and when – directly from the customer, easy to access and integrate with your business operations.

And because the data comes in real-time, it can immediately present problems with products, allow you to flag unusual customer activity and tweak your customer communications (maybe they need encouraging them to get that return in the post a little faster!) When these elements embed themselves as natural courses of action in your business, it means that the way you now deal with returns is truly outcome driven.

In conclusion

Returns are such an essential part of online shopping. Customers rely upon them even when they don’t use them, for the reassurance that they can’t go too wrong by shopping with you. Putting up barriers to stop them returning items can break the trust that underpins ecommerce more than any other shopping interaction. The real cost of returns often lies in this unseen loss of customer loyalty.

And it’s the unseen nature of so much of returns that does damage to retailers who aren’t prepared. Because of the perception that returns is a logistical problem and cost centre, it’s been historically neglected and left out of digital transformation. Visibility is murky and problems are harder to solve when they’re hard to measure in the first place.

Digitising returns is the key to setting up a proper process. You won’t get it perfected on day one, but you’ll get a lot closer with the lights on than you can by working in the dark.

Download the full copy of eCommerce Returns 101 here.