Royal Mail is investing £1.8bn (US$2.2bn) in its network, introducing new customer-centric services in the last mile. But is Royal Mail just playing catch-up in the world’s most competitive e-commerce market? Analysis from Ian Kerr (Postal Hub Podcast) and Marek Różycki (Last Mile Experts)
Royal Mail is introducing several new last-mile options including a second delivery for parcels, in addition to its existing daily service and US style parcel drop boxes. This initiative is part of its five-year strategic plan, involving an investment of around £1.8bn (US$2.2bn) over five years.
Putting the customer first
The last mile in the UK is increasingly competitive, with multinationals such as DPD, Hermes and DHL along with large local players such as Yodel – not to mention various PUDO networks – fighting Royal Mail for e-commerce business. Amazon has also entered the fray a few years ago and is probably a top-three player by volume, right now.
It seems that Royal Mail has realized that to win in the last mile it needs to offer customer-centric delivery services, such as two wave parcel deliveries. The second delivery will consist of Next Day parcels, which means orders purchased online from retailers the evening before could be delivered in less than 24 hours.
Royal Mail’s analysis indicates that Next Day parcels are expected to significantly outpace growth in other delivery time categories. This initiative will help facilitate that growth. Having said that, leading customer experience (CX) players such as DPD UK already have multiple wave delivery in place.
This aligns with previous efforts by Royal Mail to allow later collection of e-commerce parcels from fulfillment centers while still delivering next day, along with the recent announcement of 1,400 new parcel post boxes.
Customers will continue to receive a delivery of letters and all other parcels earlier in the day via Royal Mail’s postie network. The second delivery will include larger items more appropriate for van delivery.
The separate processing and delivery of Next Day and larger items will reduce Royal Mail’s parcel processing costs. Posties will no longer have to deliver heavy or bulky items, allowing them to focus on the easier-to-deliver items such as letters and small packets.
Royal Mail will also offer a range of ‘DPD style’ inflight redirection options where consumers are not going to be at home when their parcel is scheduled to arrive.
E-commerce collections and returns
Royal Mail has also announced it will collect e-commerce returns from customers at home. It will also collect parcels being lodged by small marketplace sellers. While these are not particularly innovative initiatives, they are a step in the right direction.
Royal Mail says its £1.8bn (US$2.2bn) investment program will focus on customer service improvements, digital initiatives, as well as network and productivity enhancements. To support a second daily delivery, three new fully-automated parcel hubs will be built.
Royal Mail finally coming to the party
To be fair, none of these initiatives are particularly new. It’s about time that Royal Mail, a huge player in what is often called the world’s most developed e-commerce market, started offering world-class delivery options – DPD UK and Amazon logistics are streets ahead of Royal Mail in this regard. Perhaps with Rico Back (of GLS fame) at the helm, this will happen.
Having said that, Royal Mail has an unmatched delivery and retail footprint in the UK. It should leverage these assets to the full to become the UK’s dominant customer-focused delivery company instead of allowing smart outsiders such as Collect + to do this. Inertia is not an option – e-commerce is demanding more and more and Royal Mail’s competitors are queuing up to steal the most profitable business, leaving the post with deliveries to rural and remote areas. It will be interesting to see if Royal Mail is able to deliver here (no pun intended); it has much to lose and all to gain.
Ian Kerr is the founder and host of the Postal Hub Podcast, the weekly podcast for the postal and delivery sectors.
Marek Różycki is managing partner at Last Mile Experts, specializing in CEP and e-commerce last-mile advisory.