PUDOs and lockers take Turkey by storm

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Up until recently Turkey didn’t have any significant out of home (OOH) capability other than what was offered by Ptt (Turkish Post) through a network of around 3,700 postal offices and via 3,200 commercial carrier local offices. This is now changing fast with several major players engaged in fast track development of PUDO and locker networks. Read on to find out more about what is happening in this exciting and dynamic last mile environment.

Background to the Turkish market and its last mile challenges  

Turkey is a dynamic and entrepreneurial country, which despite various political and economic challenges has seen a dramatic growth in e-commerce volumes – averaging 40% in the period from 2018-2019 and over 46% in the first six months of 2020.

As a result of this growth, the first serious capacity challenges were experienced during the 2019 Black Friday period. The pandemic has only exacerbated matters and has led to a serious disconnect between acceptable customer experience and the service currently available on the market.

What is currently available to B2C consignees in Turkey?

The Ptt and four major legacy carriers B2C delivery proposition includes:

  • Non day-definite home delivery and only one delivery attempt; following any failed first time delivery attempt, consignees need to pick-up at carrier branch of which there are about 800 per carrier.
  • Returns can only be made from the carrier branch.
  • Customer interaction is fairly basic, and while the customer may receive some notifications during the delivery process, it cannot be considered as a meaningful IDM (interactive delivery management) tool.

Due to the demand for a more customer-centric B2C delivery proposition, the leading e-commerce companies Trendyol and Hepsiburada have developed their own in-house delivery capability (Trendyol Express and HepsiJet). Simultaneously, a number of e-commerce fulfillment and delivery companies, large and small, have popped up in response to demand. These so-called “new generation delivery companies” offer various B2C delivery services such as day-definite delivery, same day delivery, and time window delivery, while mostly concentrating on large players.

After realizing that home delivery won’t be able scale up to meet tremendous anticipated demand, two leading e-commerce players along with legacy carrier Yurtiçi Kargo kicked up the rapid development of new OOH delivery networks, mainly via PUDOs and some lockers, in the second half of 2020. Because of the speed of the development needed, variable partnerships are being created with petrol station chains, supermarkets and other service providers with a wide bricks and mortar footprint. In addition to this, Bukoli – the pioneer of Turkish PUDOs – has returned to this market despite an earlier, unsuccessful foray into this market.

The biggest, and most dynamically growing network has been created by the leading marketplace, Trendyol Group, which is reportedly aiming to have almost 4,000 points throughout Turkey by the end of 2021. While the majority of points will be PUDOs, Trendyol is also including increasingly popular parcel lockers in the network.

Black Friday (Efsane Cuma) week showed a 57% increase in transactions compared to 2019. Potentially volumes could have been even bigger, but we believe capacity issues with carriers and volume caps have significantly restricted the growth rate.

The key driver for OOH is the increasing need for capacity; given recent experience, this is a must for carriers to solve the growing capacity shortage. In addition to this, OOH gives e-commerce customers more choice in delivery options and although home delivery may still be the first choice today, when the pandemic finishes, fewer people will be able to wait for courier at home as they do during lockdown. The fact that OOH first time delivery rates are usually in excess of 99.5% only makes the argument more potent. Finally, OOH is known to be an excellent solution for returns management but also gives significant financial and ecological benefits when managed well.

Let’s now look at who will benefit most from the new OOH networks. OOH is particularly attractive for SME e-commerce shippers that may only send small numbers of parcels monthly and not warrant a dedicated carrier pick up from their premises. Currently SMEs are a group that are disproportionately suffering from price increases and shipping caps due to carriers’ capacity issues. The nascent C2X segment, for example the increasingly popular second hand selling platforms, is also highly dependent upon effective solutions with a reasonable price tag.

A new and growing group of stakeholders are retailers who are suffering from lower footfall at their stores. There are many big brand names in Turkey that used to be “classic” retailers but in the new post-COVID world need to think about an omnichannel approach to customer fulfillment. Many of them will have to redesign their internal supply chain, stock management and web presence if they are to survive. Fortunately, some have already recognized this and with the support of Last Mile Experts, already have advanced plans in place.

What is needed for Turkish OOH and can this be achieved?

In the major cities, OOH delivery networks are the only way to meet the delivery demand and Turkey is progressing fast in this direction. However, if it develops in the current manner, several parallel OOH networks will be established, and one may question whether all of them can achieve the minimum proximity numbers to be convenient enough for consignees. If we only look at the huge metropolis of Istanbul, we estimate that a minimum of 1,600 PUDOs/Lockers are needed.

It is our considered view that the only tenable solution would be one or two widely developed open networks that would reach acceptable proximity and efficiency goals.

The US$64,000 question; who will be the winners… and losers?

The first players who establishes or controls an open network of PUDOs and lockers, with sufficient density and good software solutions will definitely reap the rewards while the others will only reap the losses.

While Turkey is just at the beginning of the OOH delivery journey, we can definitely see that things are moving very fast. Accordingly, it will not be a surprise if in a few years’ time we will see PUDOs on every corner, increasingly complemented by well-placed lockers.

While various stakeholders stand to gain, we have no doubt that the real winners will be the Turkish customers and, in turn, the vendors who serve them.

About the authors

Julia Bayram is a last mile logistics expert with 10 years expertise on the Turkish last mile market.

Marek Różycki is managing partner at Last Mile Experts, specializing in CEP and e-commerce last-mile advisory.

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