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Home delivery backlogs: Premium price for next-day delivery

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Dick Stead, chairman at Yodel, looks at planning for the Christmas delivery market.

Once seen as a fad imported from the US, Black Friday became a huge event in the retail calendar in 2014. Advance notification of promotions, coupled with a mild winter, meant shoppers waited before they started buying presents and investing in their winter wardrobes, resulting in low parcel volumes in November.

The flash sales then triggered an unprecedented spike in demand. Customers were enticed by bargain deals, often with a promise of next-day delivery. The scale of the orders taken exceeded the pick, pack and despatch capacity of many retailers and surpassed the next-day delivery capacity of the UK parcel market. Promised delivery dates were missed, leading to customer frustration and dissatisfaction.

Despite what was written at the time, we kept our operations going, delivering more than 15.5 million parcels between December 1 and 24 – up 11% year-on-year. However, we built up a backlog of parcels, and had to implement a two-day suspension of collections from retailers, while deliveries to consumers continued. We were back to normal a few days later.

Since then, the industry has dusted itself down. It’s clear 2015 requires a different strategy – and not just for Yodel.

A number of practical steps need to be taken. Firstly, carriers and retailers need to work together to predict volume and better manage consumer expectations. We also need to work with industry analysts to fully understand what 2015 and beyond may bring.

Secondly, there needs to be more transparency about the true costs of delivery. At present, many retailers absorb all, or part, of the delivery costs and, in turn, are squeezing the carriers. Consumers expect an ever-shortening delivery window, at lower and lower prices. The equation does not balance. The UK’s next-day delivery capacity is finite. During peak periods, 48- and 72-hour services may have to become the standard and next-day delivery available only at a premium price.

The industry has strategic decisions to make in advance of Christmas 2015, in what I fully expect to be another record year for sales.

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