How Parcel Collect Can Turn Royal Mail Into A Returns Leader

Launched in October 2020, Parcel Collect is Royal Mail’s home collection service. It’s designed to process both prepaid packages and returns for select retailers, allowing consumers to send packages without leaving their home.

But the true power of Parcel Collect isn’t what it offers today, but the potential power it can bring.

Creating opportunity from USOs

Like other national postal providers, Royal Mail is obligated to provide delivery to every address in the UK as part of their Universal Service Obligation (USO).

Parcel Collect is how Royal Mail is turning its USO into opportunity. They already have the infrastructure and routes in place to visit every address in the UK each week. If they collected parcels at the same time as delivering, they can cut costs and provide an attractive offer to every consumer in the UK.

Globally, the same service could be replicated by other mail carriers who also share a legal obligation to serve every doorstep in their country. It’s a great opportunity for postal carriers to differentiate themselves within the market and offer something that other carriers cannot facilitate.

Nobody else in the UK delivers mail, so it’s essentially impossible for Royal Mail’s competitors in the ecommerce delivery and returns space to offer the same service without a significant uptick in cost. That’s not sustainable for carriers, who see a higher profit margin by getting their consumers to consolidate returns into drop-off locations.

Parcel Collect is also a sustainable option as Royal Mail can provide this service without putting more vans on the road or increasing journeys. Posties are already doing these rounds, they’re just picking up parcels at the same time, as their recent advertising highlights.

What’s next for Parcel Collect?

We tried Parcel Collect in its early stages last year, where we believed that it had the building blocks of a successful and profitable home pick-up network. But there are two pivotal problems that Royal Mail, and other posts looking to offer similar services, will have to conquer to see that success.

Improving customer experience

A home pickup promises convenience, but the first challenge for Parcel Collect is about making sure that it really feels convenient for shoppers.

Clear communication is a cornerstone of the customer experience of delivery, and the same is true of returns, especially when there’s the same element of waiting for the postal worker to arrive. In comparison to drop-off locations which consumers can use whenever they like, Parcel Collect means they must wait at home – which is great, if they know when their parcel will be collected. Without clear comms, the customer experience becomes more about waiting for the doorbell than the easy and convenient handover.

Parcel Collect does work with pre-paid returns labels from retailers, but with only 18% of retailers utilising these labels (Doddle 2022), the service also offers print-at-home labels, or customers can order a label which the postie will bring to the doorstep at the point of collection.

Of these journeys, none are hugely customer friendly. Having the label in the box is all well and good, but doesn’t give the retailer any insight into the return, requires the customer to fill out a form (which results in unreliable data) and for that data to be manually input into a system when the return is processed (which results in slower processing and flawed data.) Booking the label in advance is tedious for the customer and requires them to visit Royal Mail on their own initiative to fill out forms online, whether they then print the label at home or ask the postie to bring it.

We predict that the next logical step for Royal Mail is to give postal workers small, portable printers and QR readers in order to provide a better paperless return option for shoppers and improved customer experience. Shoppers booking a return can do so from the retailer site, pop their order number into a portal, select their return reason, select home collection, and generate a QR code to be sent to their email.

As they reach the doorstep of a Parcel Collect customer, a postal worker can use that QR code to scan the item as handed over and generate a returns label right there on the doorstep. That scan can also trigger customer communications to confirm the handover, and give the retailer advance notice of the return, as well as the reason for the return.

For a consumer, this means less time and hassle ordering and printing labels and fewer forms to fill.

For Royal Mail, this saves time having to preprint labels before a round, and potentially offers the ability to accommodate for returns booked after a worker has started their route, on the fly.

Solving returns for SMBs

The second key challenge for Parcel Collect is the role it can play to help small businesses selling online to deal with their returns issue.

A recent Doddle study revealed that 57% of retailers said returns were a significant problem for their business. In the UK, British retailers are losing around £7 billion a year from consumers ‘bracketing’ their orders, which is the process of ordering multiple sizes with the intention of sending most back.

Currently, 1 in 4 retailers are charging customers for returns to recover costs.

Most SMBs don’t have the resources to build integrated solutions themselves. They need a solution that’s easy for them to set up, through which they can offer convenient returns options to their customer and enforce their own returns rules. That means allowing them to set the length of their returns policy and checking against the order date, and potentially preventing certain items from being returned, particularly if they are outside of guarantee or cannot be resold, such as swimwear or sales items.

This will save smaller merchants from dealing with out-of-policy returns, which in turn avoids waste and improves profits. What’s more, by using a fully integrated solution retailers won’t have to rely on supplying labels inside packages, reducing waste and cost of printing – and they’ll have access to information about incoming returns before they turn up at their doorstep, which means they can plan in advance for processing.

Royal Mail already provides excellent returns services for SMBs. By combining a fully integrated returns portal with a paperless doorstep collection, they will be able to offer merchants of all sizes the quality of returns experience that currently only the biggest online merchants can provide.

Looking to reduce costs on your returns strategy? Talk to our team today.

Why Carriers Need To Act On Rising Merchant Return Rates

At the start of this year, we predicted that 2022 would provide a reckoning for ecommerce. And no, it’s not just down to supply chain issues that have plagued retailers and headlines alike.

There’s another big problem affecting merchants: returns. For example, Boohoo had to issue a profit warning at the end of 2021, citing higher return rates impacting net sales growth and profits. Overnight, its market valuation fell by 15%. Combined with the supply chain challenges that many ecommerce businesses are facing, returns are becoming an obstacle to future growth.

The more returns impact merchants, the bigger knock-on effect it will have on carriers. If merchants are suffering from returns hurting their bottom line and inhibiting their growth, they’ll be more likely to squeeze on logistics costs, and fulfil less of their growth potential, resulting in reduced volume growth for carriers.

It’s not all doom and gloom though. If carriers can provide solutions to help merchants with returns and enable continued growth, they’ll be able to actively grow alongside them. 

The growing problem of returns

A survey of merchants conducted for Doddle in January 2022 reveals that 57% of merchants say returns are a significant problem for their business.

In America, ecommerce accounted for over 20% of the holiday spending in 2021, increasing from the pre-pandemic amount of 15% from 2019. Using estimates based on previous years, this would lead to $112-114 billion in returns goods. However, 61% of merchants expect an even higher return rate, raising that cost.

Doddle’s research also backed this up, with 52% of merchants stating that their return rate had increased over the last 12 months. On average, the reported return rate is 22%. In the UK and Germany, this figure rose to 24% and 25% respectively. Without intervention, this figure will continue to rise.

Doddle’s full research report on merchant returns can be found here.

The role carriers must play in returns

If carriers want to secure their future growth, they need to offer solutions that enable their merchants to grow, and returns are a perfect example of where they can help. This doesn’t involve just handling the returns but providing a product that makes the whole process easier, from a consumer booking a return to when it arrives at a merchant processing centre.

An effective returns solution needs to satisfy requirements for:

  1. The end consumer, providing a seamless interface to book a return, with plenty of options for drop-off, including paperless returns.
  2. The merchant, allowing them to manage and control the returns coming back and providing them with the data to reduce costs
  3. The carrier, allowing this solution to feed into your own network for smooth pick-up and delivery.

An integrated returns portal offers a digital solution to meet all of these needs. Merchants can easily sign up and create their own branded experience within the portal, and all the volume is controlled by the carrier. Customers can access a convenient digital experience for booking a return, and merchants can automatically cross-check their order details to ensure any return booked is fully within policy, e.g. preventing returns after more than 30 days from an order, or preventing returns of non-eligible products like those on sale or swimwear.

Catching such returns before they are sent back for processing reduces costs for merchants – and can help reduce the amount of non-resalable items ending up in landfills.

Returns that are booked using this system are then handled by your network, and the merchant gains access to analytics and data to guide their returns strategy. By providing a returns solution for your merchants, you enable their ecommerce success, strengthen your relationships and ensure long-term growth with them.

Returns to become key to carrier growth

Returns shouldn’t just be seen as a problem for merchants. They should be seen as an opportunity for carriers to help merchants and secure growth on both sides.

Ready to take advantage of returns? Get in touch today

Why Amazon’s move into UK grocery should be another wake-up call for parcel carriers

Amazon’s dominance of online retail has only accelerated throughout the pandemic, but the UK grocery market still feels like an ambitious target to crack into. Yet that’s exactly what Amazon plans to do, per an internal document leaked by Business Insider. Aiming to roll out cashierless Amazon Fresh grocery stores across the country at a rate rivalling major convenience players, Amazon is setting its sights firmly on a hyper-competitive, old-school, physical-first industry.

If that sounds familiar, that might be because this also describes Amazon’s aggressive approach in the parcel delivery space, channelling massive volumes (of their own parcels) through Amazon Logistics, which has come from nowhere to become a major force in UK parcel delivery in the last 5 years. Across the pond, the same phenomenon has occurred, with Amazon set to be America’s largest parcel delivery business in early 2022.

So what is it that makes Amazon think it can enter these industries where it starts with almost no presence? Why does it seem able to succeed, and what should its current and future competition learn from this approach? Let’s take a look at grocery.

The Plan

The leaked document states: “In 2022, we assume a broader rollout of 2 store launches per week by the end of the year, targeting 60 total openings. In 2023 and 2024, we are planning 100 store launches per year, in line with the more aggressive opening programmes achieved by convenience grocers in the UK in the last five years (Tesco, Sainsbury’s and Co-op have all exceeded 100 store openings in a year)”.

The Industry

Grocery retail in the UK is an intensely competitive market to enter, where very expensive decades-long battles are fought over small percentages of market share. The incumbent businesses here are massively experienced – the top 5 have an average age of just under a century.

Amazon is of course relatively young, having started in 1997, but is much younger again in terms of grocery operations. If we assume that experience is an advantage, as it seems it must be looking at the average age of the incumbents, it would appear insanely optimistic for a relative newborn to profitably scale in the way that it hopes to. The question is whether this is truly a disadvantage, or whether it is actually exactly what will allow Amazon to succeed.

The Difference

Amazon is coming into the UK grocery market with something different. It isn’t a century-old expert at grocery – it’s a machine for building successful businesses in all sorts of areas, starting with retail and expanding along the supply chain (warehousing and fulfilment, last-mile delivery) and outwards into new verticals (grocery, web hosting, advertising platforms). Mark Ritson reminds us of how Bezos explained his approach to a group of sceptical MBA students. Those students weren’t convinced that this new “” business could really open up retail in a big way by quickly establishing itself online.

“I think you might be underestimating the degree to which established brick-and-mortar business, or any company that might be used to doing things a certain way, will find it hard to be nimble or to focus attention on a new channel. I guess we’ll see.”

That ability to focus on a new channel, operate in a different way, and identify the right place to be operating differently at the right time, is what makes Amazon the competitive threat that it is. The entire organisation is set up to maximise customer data and understanding, then deliver the right experience for those customers, at any cost, until it starts to pay off. That’s a way of operating that legacy, heavily physical players usually can’t dream of.

In grocery, Amazon is making that happen with its “Just Walk Out” technology, eliminating the friction of queuing to pay – something no grocer in the UK was even attempting to create, and which Sainsbury’s (the UK’s second biggest grocer) is now licensing from Amazon for use in its own convenience stores.

To understand the power of ‘Just Walk Out’, you have to try it. Taking away the checkout doesn’t feel like it should really transform the shopping experience – you’re still walking round the shop, filling a basket, deciding what potatoes to buy, et cetera… but it truly does transform it. It must be something to do with the Peak-End Rule we’ve blogged about before, the fact that the last moment of a customer experience is often the defining characteristic of the whole experience and the thing you remember. Either way, walking out of the store without having gone through a checkout  is an absolutely wonderful, transformative experience you do not forget. It’s akin to the feeling when you closed the door on an Uber for the first time and didn’t have to deal with paying a taxi driver. It feels like the game in physical grocery retail has changed and it won’t be long til you never go back to ‘the old way.’

From grocery to parcels

In parcels, Amazon is set to deliver more than anybody else in America next year, fighting off FedEx and UPS (which are 50- and 114-year-old businesses respectively.) But it hasn’t reached this stage by replicating every service that existing logistics providers are established in. Instead, it found an opening in digital solutions, and specialised in last mile deliveries from its own fulfilment centres.

Dean Maciuba of Last Mile Experts rightly notes that comparing Amazon to companies like FedEx or UPS is like comparing apples to oranges.  “If you are confused, simply pick up the phone and try and get Amazon to pick up your package from your home or business, and deliver it to any US address.”

Therein lies the point. As in grocery, Amazon is choosing what to do based on value to the customer, and last mile is one of the most crucial factors in overall customer experience. Choosing to own that internally, and then offering it as a service to everyone else, makes Amazon a competitive threat to other last-mile delivery providers, which includes FedEx and UPS. No, it won’t be doing middle-mile line hauling for other businesses any time soon, but more and more often, the person at the doorstep handing over the parcel will be wearing that familiar a-to-z smile logo.

Amazon reverse engineered an entire delivery system based on customer needs, just as they’re reverse-engineering grocery stores from a huge stockpile of data and insight.

From partners to leaders

Amazon’s move into grocery has been coming for a long time.

First, it carried out strategic partnerships to gather data. For the UK grocery market, this came from a partnership with Morrisons where Amazon customers could shop from Morrison’s assortment on Amazon, which used its existing delivery infrastructure.  Morrisons benefited from more sales from its stores, while Amazon captured huge amounts of data through its platform.

Then, much like the parcel delivery offering, the grocery store proposition is reverse engineered based on every grain of consumer understanding built up in those partnerships. Amazon is not remaining a total outsider though. To help guide the strategy, it has poached one of Tesco’s most senior executives to become the Senior Vice President of Amazon’s physical grocery stores.

Amazon’s grocery plan is built on the core principle of giving customers a quick, easy and contactless shopping experience. Knowing its digital capabilities are stronger than any other supermarket, it created the “Just Walk Out” model that no competitor could match, and in doing so opened up a number of new possibilities for how the store could become more efficient and effective without as much space and staff resource had to be dedicated to the checkout.

Digital-first thinking leads the way

That pattern of working, starting with the most value to the customer and building backwards, describes Amazon’s approach in every area. The biggest lesson for parcel carriers is how they do it, with a digital approach and a comprehensive set of technology brought to bear on the most valuable customer experiences, leading to a hugely effective physical operation.

For both carriers and grocers, the Amazon approach means that being excellent physical operators is no longer enough to be safe from disruption from the digitally nimble and the omnichannel experts. At Doddle, we’ve been working with carriers all over the globe to address the challenges they’re facing with digital solutions so that they can offer deeper value to consumers and retailers alike.

Discover how we created a future-proof out of home strategy for bpost here, or get in touch to see how we can help shape your transformation.

5 Changes We Predict In Ecommerce Delivery And Returns In 2022

Welcome once again to our yearly set of predictions, where we cover what’s next for the last mile & ecommerce delivery and returns. In the spirit of Prof Galloway, whose format we’ve shamelessly stolen, we also mark our predictions from last year to see what we called with Nostradamus-like foresight, what we can claim as a ‘partial win’, and what we got wrong.

2021 Predictions Review

1. PUDO reaches the mainstream: 7/10

We love a prediction about out-of-home delivery (OOH). Last January, we thought that once COVID was more manageable (optimistic!), it would be time for OOH to go mainstream. We hadn’t anticipated the way COVID would continue to create such significant disruption in many markets and require a great deal of strategic management too.

In spite of that, major carriers have made big strides to drive forward their OOH propositions. DPD announced a plan to double their already massive 50,000-strong Pickup network by 2025. InPost have installed around 2,000 more lockers in the UK and acquired French PUDO-specialist Mondial Relay as they look to “unlock untapped demand and re-define the last mile delivery experience for consumers”, and Hermes in the UK seems to be rapidly scaling a dedicated out-of-home team – a first of its kind (from what we’ve seen).  

From a Doddle perspective, 2021 saw us continuing the growth of OOH networks in Japan, Australia and Saudi Arabia – as well as being the technology behind Morrison’s nationwide parcel counter services in the UK. We’ve also worked with several posts and parcel carriers across Europe on their evolving strategies in PUDO.

OOH may not have reached its full potential, but we’re certain massive growth is to come with the foundations that continue to be laid.

2. Networks start to open: 3/10

Hard to say this one really came true. In the UK, the big move on this was the Post Office opening up between 2,000-3,000 of their 11,000 locations to Amazon and DPD. That’s a first for a national post office and is largely a consequence of a distinct division between the national carrier in the UK (Royal Mail) and the national post office network (the Post Office).

Elsewhere, however, the vast majority of OOH networks remain single-operator, frustratingly for consumers.

3. Planning and strategy make a welcome return: 5/10

Yes and no – when we talked last year about carriers no longer needing to perform heroics to keep operations running, that was optimistic, but we have seen more resource and time able to be dedicated to a longer horizon than the next 6-12 months. Unfortunately for us, this prediction essentially turned into a proxy for “how badly is COVID affecting carriers”, which has resulted in a very mixed global picture.

*(In hindsight, we accept this was a bit of an obscure prediction!)

4. Returns aren’t just a “retailer problem”: 7/10

There are now more or less two types of carrier when it comes to returns: those for whom this prediction statement is now true, and those for whom it is not yet true. Appropriately enough, one of the side effects of so much investment (often from payments businesses) in the returns space has been to give carriers a very clear picture of how much it matters to their customers, and highlights how much value there is in helping them with it.

5. Giants from the payments sector take a keener interest in fulfilment – 10/10

As hinted at above, Doddle = Nostradamus on this one. Buy-Now-Pay-Later (BNPL) giant Affirm acquired Returnly, PayPal picked up Happy Returns, and Klarna built a Shipping Assistant tool to enable merchants to manage their delivery options. We foresee more to come, as payments businesses have plenty of cash to spend, and tend to justify their % fee at the checkout based on conversion. What’s more important to conversion rates than payment options? Delivery and returns.

Payments businesses were loving returns in particular during 2021.

2022 predictions

1 2022 provides a reckoning for eCommerce

The term “supply chain disruption” has probably never had as big a year as it did in 2021. Whether it was container prices quintupling, shoppers finding shortages on the shelves or a huge ship blocking the Suez Canal, “the supply chain” was never far from headlines. The world of global shipping feels different now.

What does that mean? Well, container prices aren’t going to go down drastically any time soon. Capacity is expensive and slow to add in this world. For ecommerce businesses whose model is predicated on shipping large amounts of product around the world from where it’s manufactured to where it’s sold (i.e. a heck of a lot of ecommerce businesses), that means profits are being squeezed further than ever, and they have less margin than ever before to deal with other challenges.

We’re already seeing examples of this, and it’s happening to some of the star names of ecommerce here in the UK. Boohoo published a profit warning, cutting its EBITDA forecast by a third thanks to an increased return rate and supply chain issues. That wiped 20% off the stock price overnight, showing just how vulnerable even the best businesses are to disruption from returns while the supply chain is stretching them tight. In a time when ecommerce is at an all-time high, Boohoo is at its lowest share price in 5 years. Missguided, another fast-fashion darling of UK ecommerce is also in trouble, and set to be rescued by an investment business, with the reasons for its struggles more or less identical to Boohoo.

Expect to see many more ecommerce retailers suffering bad quarters, halves or years – and a few more rescues or acquisitions before the end of ’22. Returns will be a big factor in the apparel space especially. Another stop-start year of locking down and going out again and locking down again will give rise to more uncertainty, so growth could easily slow down further.

At some point, ecommerce businesses are going to have to become sustainable without a boom market buoying them up. This could be that year.

2 Green new wheels, and the mountain they must climb

The biggest 13 parcel markets represented 131 billion parcels in 2020 (Pitney Bowes), with 28 billion additional parcels delivered compared to 2019. That number grew again in 2021.

Despite these staggering growth numbers, parcel carriers spent a lot of time and energy in 2021 promoting their new and existing sustainability initiatives, with more and more signing up to become carbon neutral or net zero by 2025, 2030, 2040, and so on.

DPD has been a leader on this topic for years, and in 2020 reduced its carbon emissions per parcel by 5.7% vs 2019. The problem is that the group also delivered 35% more parcels in that time, which implies a year-on-year increase in carbon emissions, at least those tied to parcels. Total CO2 emissions are not noted in their otherwise excellent and thorough CSR report, so we can’t completely confirm this. The point is not to harp on DPD: the same principle will apply equally to almost every carrier, very few of whom could claim to be hugely exceeding DPD’s excellent work on sustainability, and most of whom will also have had massive volume growth in the past few years.

So: there’s a lot of noise made on sustainability because there’s an increasing recognition of the problem. There is also progress, albeit slow progress that must accelerate faster than the market if it is to actually make a difference to the bottom line in greenhouse emissions terms.

However, in 2022, we expect to see two major sustainability trends pick up pace. The first is reporting – the first hurdle to overcome towards sustainability is to have a clear picture of where emissions and environmental harm is coming from. Some are already excellent; others will need to get there quickly.

The second is fleet electrification, which will accelerate as investor money continues to pour into the space. Delivery EV maker Rivian is still valued higher than Ford despite not quite meeting a target of 1200 vans produced in 2021 – and they’ve still received interest and orders from the likes of Amazon. Whether it’s Rivian, Ford, or someone else, the future of delivery vehicles is clearly electric, and by 2023 more carriers will have localised electric-only fleets, a la DPD’s London depot, to meet urbanites’ desire for eco-friendly deliveries.

3 Out of home, sweet home

Once again we’re back to forecast the future of out-of-home delivery and returns. Pre-pandemic, it was a nice-to-have, but COVID has given everyone a vision of the future where unmanageable volumes overload limited capacity. While scaling up delivery capacity, carriers are also now looking for ways to make the model more efficient, and OOH delivery ticks that box. We’ve covered the strategic momentum in the market, with DPD doubling to 100,000 locations in the next few years and Hermes appointing a team to look after the network.

InPost’s continued growth also suggests lockers will have a crucial role in this world, providing a new type of customer experience that can complement other options.

We believe in 2022, carriers will for the first time exert industry-wide pressure on retailers and shoppers to try to divert more volume through their OOH networks. They’ll aim to reach consumers by emphasising the increased flexibility of OOH and the opportunity to avoid missed deliveries – especially as spring and summer bring a little relief from the pandemic once more. They’ll target retailers to promote OOH at the checkout, improving conversion with a wider array of delivery options, and potentially incentivising them with pricing discounts too.

4 Recommerce establishes new delivery and return behaviour

Green vehicles won’t be the only sustainable action in 2022. Rental and re-loved retail will also grow significantly as the trend moves into the mainstream. To evidence the scale at which this is already happening, ASOS saw vintage sales increase by a staggering 92% over the past year. 

And although a prediction on the growth of recommerce is not exactly ‘insightful’, we think this trend will provide a major shift in the delivery and returns sector.

What this new segment brings in droves is the ‘micro-merchant’. We’ve heard for years about SMEs – who one thinks of as a business that sells somewhere between 10-1,000 items a day – and those SMEs are catered for by carriers who provide increasingly attractive rates and service as volume increases. But the explosion of recommerce has created a new category of seller who sells much less frequently, and much lower volumes – say 3 items a week.

We see PUDO locations becoming a bedrock of the micro-merchant community, and carriers racing to create PUDO networks that are increasingly designed with the micro-merchant’s ‘drop-off’ needs in mind (think label printers, multiple pick-ups per day, price incentives).

The ‘new’ volume flooding into networks from micro-merchants will have a flywheel effect of making the location more popular, and thus more beneficial to the carrier. As we’ve predicted out earlier, OOH will continue to become more mainstream – the micro-merchant / recommerce category will be a major factor in that.

5 And just for fun – Another bite, this time from the Apple

We enjoyed seeing payments giants validating our thesis that returns and delivery are their next frontier in 2021. In fact, we enjoyed it so much that we’re following up with a new take. Last year we said Shopify was a dark horse to merge the payments/fulfilment world with a one-click checkout – and to be fair, Shopify has continued to grow dramatically in 2021, and is currently moving closer to a one-click style checkout through Shop Pay, which stores customer delivery and payment details. It’s also continuing to develop the Shopify Fulfilment Network, and launched Shopify Shipping to allow merchants to buy shipping directly within Shopify.

But there’s a bigger player with a product that has the potential to truly bring one-click checkouts to life, uniting payments and deliveries with a tap. With an estimated half a billion users in the tail end of 2020, Apple Pay shoppers already trust their bank card to the app, so why not their preferred delivery options?

We predict Apple will incorporate multiple shipping addresses and delivery options into Apple Pay, allowing retailers who integrate it into their checkouts to offer a one-tap buy button on mobile – and what’s more awkward than typing your address into finicky form fields on a phone screen? With mobile commerce expected to be responsible for nearly three quarters of ecommerce sales in 2021, improving mobile conversion will continue to be a massive priority for retailers.

If you’re interested in how Doddle’s technology and expertise can help you keep down delivery costs and drive better customer experiences in challenging and changing markets, get in touch today.

The world’s best retailers are promoting out-of-home delivery. Carriers should help the rest

Most retailers understand that delivery choice and satisfaction are absolutely key tests of an ecommerce experience. Consumers vote with their wallets, and the winners are those who can offer faster, cheaper or more convenient options. Those don’t have to be the same option, but the ability to choose how and when to receive a purchase is crucial. Data from Metapack’s 2021 eCommerce Delivery Benchmark suggests that checkout conversion is 38% higher when retailers have the right delivery options.

In a YouGov poll commissioned by Doddle, 79% of UK adults said flexibility was an important factor for delivery – coming behind only to cost and speed, which unsurprisingly remain the key considerations. However, even that speed aspect can be flexible, as around half (47%) of consumers would wait longer for a delivery that was more sustainable (Metapack).

There’s one aspect of delivery options that currently sets the best apart from the rest. Out-of-home deliveries are a vital way for retailers to offer customers more flexibility and choice, with nearly three quarters (74%) of UK adults expect to use out-of-home delivery options in future (YouGov / Doddle). However, only the biggest and best retailers in the world are currently integrating out-of-home options into their checkouts.

Best practice

Amazon is the perfect example. The retailer has united all of its out-of-home delivery options under the Amazon Hub brand, with parcel locker and PUDO (or Locker & Counter, as they’re called) options available. The checkout experience has home delivery by default (in most situations – some products are only eligible for free delivery to Hub locations) but also clearly offers the out-of-home route too.

The full checkout experience includes an easy-to-use location finder, which includes all formats and lists them in order of distance from their postcode. Shoppers can also toggle to select parcel lockers or PUDOs only. Arguably the best etailer in the world has a suitably leading OOH offering – and it’s even keen to incentivise shoppers to adopt, with discount offers.

This French example from Cdiscount highlights another pricing offer, with cheaper express delivery to local collection points than to home. It includes a mixture of PUDOs and dedicated parcel shops.

The reason that these major players are investing in making this happen is that they understand the benefits of out-of-home delivery on checkout conversion, but also because they’re increasingly seeing the value of appealing to shoppers who habitually use OOH delivery options.

We know, based on data shared with us by a top UK ecommerce retailer, that shoppers using pickup and dropoff options for delivery are 138% more valuable (as defined by average basket value) and shop more than twice as often (2.17x order frequency).

But if Amazon et al have recognised that this is best practice for checkouts, many mid-tier retailers aren’t yet there.

This basic checkout is the default across much of ecommerce, for the mid-tier merchant audience, often using a platform like Shopify or Magento to build their business. They frequently don’t offer the out-of-home option at all, much less an intuitive location finder experience.

As a result, they’re missing out on the benefits of out-of-home delivery, because they’re not making it available to their customers. Some retailers will offer a click & collect option, but this will only include their stores and lacks the depth of choice and sheer convenience of a dense PUDO network.

Why only the best are promoting OOH at the checkout

There are three reasons why fixing this isn’t a priority for these retailers, and they all come down to a question of cost and benefit. Firstly, some don’t fully understand the benefit, where it hasn’t been marketed or advised by their carrier partners. Secondly, those who do understand the benefit often feel that the cost of resource and money spent on integrations to make this possible outweighs that benefit, because it does tend to be resource-intensive and complicated for a single retailer to pull all the information about a carrier’s PUDO network into the checkout and display that in a useful and easy way for the customer.

Finally and perhaps most importantly, they’re not being helped through this process. Carriers are not making that integration process simpler and offering plugins for apps like Shopify, BigCommerce, or self-hosted webstore platforms like Magento.

The carrier opportunity

62% of retailers say it’s a high priority to have a flexible logistics network – and a further 13% reckon it’s their most important priority (Metapack). That alone should be a compelling reason for parcel carriers to start working on making their OOH networks more accessible at the checkout. There are other benefits too: by making the network easier to surface at the checkout, carriers become more than just movers of parcels – they’re providing a useful service to merchant customers, making them a more valuable and ‘sticky’ partner in the long term. That reduces churn on the one hand; and on the other, having a simple integration process and an ability to onboard merchants at scale using integrations to common web store solutions also boosts customer acquisition.

As an added bonus, having more checkouts displaying OOH options means driving more volume through the OOH network, with all of the associated efficiency benefits of consolidation: lower cost per parcel, more parcels delivered per mile driven, and lower CO2 emissions per parcel.

Australia Post Collect & Return is powered by Doddle, including the location finder and merchant checkout integration.

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The 5 things retailers need from carrier returns solutions

Parcel carriers around the world are beginning to recognise the opportunity they have to solve the returns challenge their retailer customers are struggling with. Something like 22% of ecommerce orders are returned – with the proportion even higher in some categories. That leads to huge costs for retailers, who have to find ways to manage and process returns without compromising on customer experience, or face losing their customers to the competition.

With that in mind, parcel carriers are looking to win more business and retain more retailer clients by offering a solution to their returns woes through a digital returns platform. Doing so successfully makes the carrier a more valuable partner, reduces customer churn and helps to move sales conversations away from a pure price-comparison approach. So, what do carriers need to know in order to create and sell a digital returns proposition to retailers?

Frictionless CX to preserve customer loyalty

As far as the end customer is concerned, the experience of dealing with a return is often the most emotive part of their shopping experience, which makes it doubly important for the retailer that it’s dealt with quickly and effectively – 87% of shoppers agree that a positive returns experience makes them want to shop again with a retailer. Nobel prize-winning behavioural economist Daniel Kahneman showed that the way we remember experiences is affected by the “peak-end rule”. That is, our memory of an experience is heavily weighted towards two key points: the most intense moment, and the last moment. The returns process often represents both for a shopper.

That means hassle and inconvenience at this stage will not be forgotten, and so the emphasis has to be on an intuitive and straightforward user experience. We asked American shoppers in a YouGov poll to rate the importance of delivery and returns to their overall shopping experience – 88% said delivery was important or very important, but 87% said the same of returns: the returns experience is just as important as the delivery experience.

In practical terms, what that requires is a tested user journey moving from the retailer site to the returns portal, where exchange options and other revenue recovery opportunities are presented. The customer has a clear step-by-step path to booking their return, ultimately resulting in a label or QR code for posting or dropping off their return.

Consistent branding

Shoppers like to know who they’re dealing with, and as far as most of us are concerned, when we buy something and it’s not what we expected, the business we’re dealing with is the retailer who sold it.

That means the returns process should have consistent retailer branding – from selecting the items to return on the retailer site, to the experience in the portal itself. From the carrier perspective, that means providing retail clients with the toolset to customise the portal and email communications with their key brand elements.

Communication and visibility

Speaking of emails, a 2020 YouGov study commissioned by Doddle found that 51% of shoppers want retailers to provide better communications and visibility during the return and refund process. To enable that, a carrier’s returns platform needs to include a system to trigger automatic email updates with high deliverability and clear information to keep customers updated on their return and refund status.

That communication element isn’t just for the customer’s benefit. Merchants also appreciate knowing in advance their inbound returns volume, and which SKUs are coming back – this allows them to manage capacity and get high-value items back in stock faster.

Insight and improvement

One of the single biggest barriers to retailers addressing the issue of ecommerce returns is a lack of visibility. Manual processes, based on paper return labels, make it hard for them to build a clear picture of who is returning which products, and why? When is a return eligible for free returns, and when should they really be charging a shipping or restocking fee?

They need insight. Digitising the returns journey and giving them access to the data generated by customer returns opens up huge opportunities for merchants to track and fix issues, reduce their return rate and increase their profitability. A carrier returns platform needs to have reporting and analytics capability to enable those improvements.

Onboarding seamlessly – through multiple channels

The biggest retailers are likely to already have a digital returns solution in place, so the audience for carrier returns is typically those retailers without their own massive tech capabilities. That means that ease of integration and onboarding is paramount. Flexibility to integrate into different platforms (from marketplaces to webstore providers) can massively increase the potential audience too. Offering a mix of integration types can also give retailers the opportunity to pick their own best fit – whether that’s an API integration or a Shopify app.

Ultimately, getting returns right for retailers is a tricky balancing act. Postal operators and parcel carriers looking to provide a digital solution to their merchants can avoid expensive development projects and ongoing maintenance costs by partnering with Doddle. Our returns platform has been developed over years of experience in the world’s most advanced ecommerce markets, with millions of returns processed. Find out more about our digital returns solutions for carriers.

What’s your returns strategy?

eCommerce retailers tend to have a strategic lean towards growth. It makes sense – for digitally native brands, the ethos of capturing as much of the market as possible as quickly as possible is essential for surviving past the first year. This outlook brings challenges further down the line, because as the business scales, the efficiency with which it operates and its ability to retain the customers it has won become the twin pillars of longer-term success. That means growth maximisation can’t be the primary focus, and the strategy must pivot.

As part of that pivot, ecommerce retailers need to make sure they have a coherent returns strategy that fits their wider goal. This strategy is much more than just the policy on the website, although that policy is crucial! A returns strategy includes the following elements:

  • A philosophy
  • An owner
  • A process

The philosophy

Dealing with returns costs a lot of money. The more returns you deal with, the more it costs you, at least in the short term. In the long term, a great returns experience should net you more loyal customers and increased customer lifetime value. The philosophy element of your strategy really refers to where you want to sit on this spectrum. For example, if stellar customer service is a big part of your brand promise? You probably want to maximise the ease of returns and accept higher short-term costs. Don’t worry – you can still make a big dent in how much returns cost you without costing yourself customers.

To decide on your philosophy, you’ll need to consult your data. Can you put a dollar value on how much you think you can shrink return rates? What impact does that have on customer retention? Currently, when someone goes through your returns experience, what does it do to their long-term metrics – are they more or less likely to repurchase, do they spend with more abandon knowing they can return something, or do they shop less with you because the return was a hassle?

Many ecommerce businesses can’t answer those questions because returns data remains unavailable, or exists separately to the rest of their customer data. Fixing this gap is essential for improvement, but in the immediate term, the solution is to test and learn if you can’t rely on existing data to give you answers.

You don’t need guaranteed perfect numbers, but reasonable estimates will help to make the decision about your philosophy clearer. Now you can decide a strategy: what are you willing to invest to make returns easier, and what costs are you willing to absorb? This is where your policy comes in. The policy sets out your approach to returns and defines the costs you bear from higher or lower return rates, as well as establishing how easy you make it for your customer when they want to return something.

The owner

A strategy without an owner is unlikely to work, but returns often ends up falling through the cracks. Have a team or person who is tasked with implementing your strategy, and give them the authority and cross-department reach to make it happen. Collaboration between teams is absolutely essential to making returns work for you.

The process

The strategy doesn’t get made once and remain forever etched in stone. It’s a continuous exercise in identifying problems, seeing opportunities and paying attention to the results. For that, you need an ongoing project, overseen by your returns owner, with the right people in the room who can make changes. 

For example, if marketing is promoting a discount on a product that has sky-high return rates, they need to take it out of the campaign. The buying team need to consider whether there is a manufacturer defect, whether other products might have similar issues, et cetera. The logistics team need to know that there’s an influx of returns on the way for them to process. A regular meeting that highlights these issues and addresses them keeps your strategy on track. It can also tell you when you might need to change tack and adopt a different philosophy, if the results aren’t what they should be.

Having a returns strategy is about taking a position, then measuring your performance and adapting to your customer. To do that requires up-to-date returns technology that gives you full insight into the performance of returns and their impact on your customer. Even better, it reduces your costs in the short term too. 

If you need a digital returns platform on which to build your returns strategy, talk to us.

Making the margins of ecommerce work better

Online shopping has blown up to a scale that few could have imagined just a quarter of a century ago.  Online sales made up 14% of American retail last year, and that is forecast to grow drastically to 23.5% by 2025, according to research company eMarketer.

The problem for retail is that online sales come with a cost footprint that more than rivals those of brick and mortar stores. When a customer visits a store, bringing their own bag, they are effectively doing the picking, packing and last mile transportation themselves – the most margin-eating activities for any online retailer.

The challenge is for retailers to manage a continual transition of their businesses towards more sales happening online. There’s no need for drastic proclamations about the death of physical retail, just sensible planning for the mix of sales to continue to move over to online channels. To do that, retailers need to address some of those major cost implications of online sales.

The last mile impact

Getting products into stores isn’t “easy” per se, but centuries of practice and the growth of entire industries and sub-industries to support the process has helped to grease the wheels and ease the burden on retailers. Bringing products in to stores in bulk and allowing consumers to do the last mile is far more efficient than storing products in bulk and shipping them out one by one as orders come in from across the land. The cost of fulfilment is a huge contributor to the reason for margins being lower for online sales, compared to sales made in-store.

Retailers needn’t accept that online sales have to be completely separate from store sales, though. Buy online, pickup in-store (BOPIS) has proven to be a valuable option for shoppers, especially with contactless versions of this consumer journey becoming popular across categories during the pandemic.

Returns happen more often online

It’s well-known that return rates are significantly higher for ecommerce, which comes down to a combination of factors, but the obvious reason is the most important: the customer is not physically interacting with the product. Many retailers are wisely providing in online tools that help customers to make the right choice, such as interactive sizing apps and Augmented Reality, but while they’re effective and do appeal to shoppers, they can only realistically prevent a percentage of the returns deluge.

However, as with delivery options, retailers can still reduce the impact of ecommerce returns on their margins. For example, most online retailers still print physical labels for every order, so that shoppers can fill out a form and ship it with a return. Using a digital returns process eliminates the need to buy and print these labels, which can add up to surprisingly large savings for high-volume retailers.

In addition, the data captured by a digital returns journey gives retailers much clearer insight into why items are being returned, enabling them to still further reduce returns rates and increase their online margins.

How to sharpen up your customer focus with returns feedback

Steve Jobs was desperate to make Apple focus on customers.

“Some people say, “Give the customers what they want.” But that’s not my approach. Our job is to figure out what they’re going to want before they do.”

That’s a classic Jobs quote you’re probably familiar with. How many retailers really take it to heart, though? Listening to what the customer wants is the very essence of what great retailers do – but what if there was a whole array of very direct customer feedback that they weren’t really using to its full effect?

What do returns have to do with customer focus?

It can be all too easy to overlook the returns journey as an opportunity for important data gathering, but when you think about the potential, it seems so obvious. There are a multitude of reasons why a customer might return an item. In isolation, they may feel meaningless. But what if a hundred customers returned the same item? A thousand? More? If you give those customers the chance to explain their decision to return, you could uncover important trends – misrepresentation on your website, perhaps? Erroneous sizing? Small, but consequential quality issues can be picked up here – if you’re using the right toolkit.

A massive reason for the under-utilization of returns data as a source of customer feedback and improvement is that retailers often simply lack the digital capabilities. They lack visibility, analytical capacity or often both.

A returns slip, hastily completed and shoved into the parcel simply isn’t an effective way to encourage this feedback or gather it. Customers frequently do not fill them out accurately. Warehouse employees processing returns may or may not have time to accurately transfer all of the information from the returns slip into an inventory management system.

Using a digital tool to process returns flips the process,, ensuring the customer feedback is captured at the point of the return decision. There is no physical paperwork, and the data can be assessed and acted upon before the return even arrives back in the warehouse.

Taking responsibility

A final challenge some retailers must overcome is the issue of ownership for returns. If responsibility for returns sits between multiple departments and there is insufficient co-ordination between them, it becomes impossible to drive improvements or build these vital capabilities. Traditionally, returns may have been treated simply as a cost center, reducing the appetite to invest in the customer experience and capture that useful data.  Defining clear ownership, whether of one individual, one team or across teams, will go a long way to making returns improvements possible.

That returns data can shape the business to become more customer-centric across departments.

  • Marketing: We have identified a segment that costs us more in return than they spend – can we adjust campaigns to exclude them?
  • Ecommerce: This range is being returned more than others because the photography is not clear.
  • Logistics: We have discovered an unacceptable lag between customer drop off and arrival at the warehouse. It’s impacting resale opportunities and time to refund.
  • Purchasing: Customers are flagging an inherent problem with a product.

All of these issues have financial repercussions, and can become much more easily visible and more easily addressed thanks to the customer feedback inherent in returns data.

Getting real on sustainability

This article was originally published in Postal and Parcel Technology International magazine.

Jeff Bezos would have you believe that next-day delivery is better for the environment than slower deliveries. The PR line out of Amazon is as follows:

“Although it’s counter-intuitive, the fastest delivery speeds generate the least carbon emissions because these products ship from fulfilment centres very close to the customer.”

That’s interesting, and kind of makes sense as long as you don’t think about it for too long. If you do that, though, you might ask a couple of follow up questions. Questions like “I wonder what the climate impact of building new local fulfilment centres is?” Or, “I wonder how those products got to the local fulfilment centres in the first place?”

I’m not trying to rubbish the idea of localised fulfilment. A number of players are investing in so-called darkstores, using otherwise under-used urban space to store goods close to customers. That allows for faster delivery and better local stock availability. It’s a concept with real potential to change how urban delivery works.

However, the claim Amazon are making here goes to a much deeper point about our model for sustainability in delivery. It’s not dissimilar to claims from logistics providers who suggest that home delivery is more environmentally friendly than brick-and-mortar shopping, because one delivery van accomplishes many deliveries, versus one car trip for one purchase. (The World Economic Forum disagrees, saying that home delivery is about 3 times worse than shopping in stores in terms of additional miles driven.) We need a better, clearer standard when we’re claiming to be sustainable in ecommerce delivery.

Right now there are lots of ways to fudge the numbers and come up with a result which says that your existing business model is actually improving things and making delivery more sustainable. Everybody wants to say they’re being green, or at least greener than before, but given the current dire state of climate forecasts we should be aiming much higher – or rather lower, in emissions terms.

Let’s take a quick look at the actual harms we’re talking about. 

Emissions are not just about CO2 and other greenhouse gases, but also particulates and air pollutants. In London alone, air pollution contributes to more than 9,000 premature deaths each year, according to a study by King’s College. Air in the capital won’t even be legally compliant until around 2025 according to estimates36 of 43 air quality measuring zones in the UK had higher than the legal limit of NO2 in 2018, proving that this issue is far from unique to London.

The slowest bus commutes in London now move only slightly faster than walking pace thanks to rush hour congestion. It’s not just about journey times – busier streets are more dangerous. A study in the Journal of Transportation Safety and Security found that congestion increases the risk of crashes. If we want to decarbonise our transport, pedestrians and cyclists need space and incentives to spend more time walking and cycling. Having fewer vans and lorries on the roads is key.

To actually address the problems last-mile ecommerce delivery is causing, we need a working industry standard for sustainability – and that shouldn’t just include emissions. Congestion, noise and air pollution, and other effects on our communities have to be part of the equation. 

Any measurement also has to factor in the full context. For example, it would clearly be good for emissions if we could flip a switch and have all diesel vans become electric vehicles overnight. However, that doesn’t do anything to reduce congestion and make our roads safer. The rare earth metals in the batteries of those vans are massively carbon-intensive to mine and transport, and they are themselves a finite natural resource. The so-called ‘energy mix’ we use to produce electricity remains heavily fossil-fuel oriented. We have to consider the context of these decisions rather than treating them in isolation, just like we shouldn’t only consider the last leg of a one-day delivery when we’re evaluating emissions.

Electrification is undoubtedly a positive step (although one which remains some way distant for most carriers.) It’s just that any solution which imagines ecommerce delivery continuing largely unchanged as a model will be fundamentally too limited. Look at the usually cut-throat automotive industry, where collaboration between erstwhile rivals has become commonplace in order to facilitate a paradigm shift. Ford aren’t working with VW because they’re best mates now. They recognise that the tide is changing and their current business model simply won’t work in future, so they’re trying to build a raft together.

In that spirit of collaboration, retailers and logistics businesses can and should be working to create shared infrastructure and standards that will allow us to measure, target and improve the sustainability of ecommerce. The desire is already there – there isn’t a courier company out there without a public plan to become eco-friendly. Retailers are increasingly marketing themselves as eco-conscious, even in peak periods like Black Friday.

Obviously, the question is how to structure this co-operation. Thankfully there are already models provided by other industries. Take two very different sectors: newspapers and magazines, and nuclear power. Both have membership-based oversight and collaboration through voluntary bodies IPSO and WANO (the Independent Press Standards Organisation and the World Association of Nuclear Operators respectively, for those not in the know.)

Businesses in the industry sign up to the organisation and become members. The organisation operates independently and offers monitoring, oversight and regulation. In the case of ecommerce delivery, we could look to represent the sustainability of delivery to the end consumer, harnessing market forces to push delivery operators towards more sustainable offerings. That could take the form of the independent body ‘grading’ the performance of its members, which would then be represented to consumers at the checkout. 

WANO offers best practice training and advice to its members, collaboratively sharing knowledge throughout the industry. The principle is that safer nuclear power benefits the whole industry, so there should be no barrier to sharing information and innovation. That same principle should absolutely be true of sustainability in ecommerce delivery.

Find out how to make your delivery offering more sustainable with a market-leading out-of-home proposition.