Thanks to the growth of e-commerce bringing about drastic changes in today’s retail scene, customer experience needs have evolved greatly. Partnerships between logistics companies and retail shops will need to continue to strengthen as more parcel drop-off and pick-up locations are needed to cope with evolving last-mile demands.
By Arun Mambully, Vice President, Domestic and Fulfillment, DHL eCommerce Asia Pacific
Read this article in Thai (ภาษาไทย)
Read this article in Vietnamese (Tiếng Việt).
Click-and-collect – where consumers buy online and pick up from a convenient location – is a growing trend in many mature e-commerce markets like the UK, Germany, Europe, Singapore, and Australia. Traditional brick-and-mortar retailers, supermarkets, grocers, convenience stores and ‘mom-and-pop’ shops are teaming up with parcel delivery providers to act as pick-up points for goods bought from other retailers as a new tactic to attract footfall.
This symbiotic relationship is mutually beneficial for not just the retailer and the parcel delivery company, but also for the e-tailer in reducing delivery costs, as well as the consumer who can now enjoy greater convenience in choosing where, when and how they collect their parcels.
This new trend is now rapidly taking place in Southeast Asia with its aggressive e-commerce growth. We see three models taking shape, all aimed at ensuring profitability and customer value, but the jury is still out on the question of which model is best. With the newer approach of the ‘shop-in-shop’ model on the right most column, the retail shop gains with additional footfall, and the parcel delivery company is getting wider coverage.
Beginning with “first mile”
Over the last two years, many last-mile logistics companies that invested heavily in their own parcel shop networks focused on the first mile elements of these shops to gain more volumes for their network – that is, getting the e-tailer to drop off their parcels at these parcel shops. They opened asset-heavy shops either owned, which entailed high costs, or franchised. The franchise model common then in Thailand offered high commissions and heavy support in marketing and sales support in an attempt to increase the number of franchisee shops in Thailand. While the model was attractive for franchisees, it only worked to increase volumes in the key central business district areas of cities such as Bangkok where retail footfall was high enough.
At the same time, companies like MBE in Malaysia opened multi-service shops that aim to provide a partner-agnostic service model by combining more than one revenue source. This business model worked well as the companies could reduce investment needed by adding franchises, and offer additional services like bill payments that provided a much-needed boost to revenues that helped negate high rental costs. In Thailand we work with large retail chains such as SE-ED that enable them to expand their product offering and bring additional footfall to their stores, while we are able to expand our ServicePoint network to provide easy parcel drop-off and pick-up points.
There are also compounded benefits of a ‘shop-in-shop’ parcel service when a retailer also happens to be an e-tailer with a network of stores across the country using this concept. The retailer can leverage their retail footprint as collection points not only for their own products and customers, but also act as a consolidator for other orders for the customer.
Shifting to “last mile”
With the almost ubiquitous availability of technology platforms available today to manage many shops at the same time, almost all logistics providers have moved to an asset-light model while leveraging technology to build a dense network of multiple shops, with each shop handling about 5 parcels a day. In this model, logistics players are now providing consumers with access to parcel shops in a short 500-800m radius, and are experimenting with ideas on how to incentivize consumers to pick up their parcels from a nearby shop. The benefits are very clear – there is convenience for the consumer as they can pick up their parcel anytime they wish at locations across the country, instead of getting a notification of unsuccessful delivery. This also saves costs for the retailer, which really means that the delivery cost does not get passed on to the consumer.
The figure below shows the potential of 5% savings in the total delivery cost by moving just 10% of last mile deliveries to shops*.
*Calculations are based on the typical cost structure of a last mile B2C delivery provider adopting conservative assumptions. First mile pickup and failed delivery benefits not included
Winning the trust of consumers
Southeast Asian consumers are very unique, and as we all know, every market in SEA is different in their cultures and infrastructural challenges. However, what unites them is a lack of sustained trust in e-commerce.
At the same time, they want greater control, convenience and choice in how they receive their parcels – just like how they would like to do their shopping.
A case in point is the continued use of cash-on-delivery (COD) even while credit card and mobile wallet penetration continues to rise – what the consumer is saying is ‘I want to see the goods before I hand over my cash’. Retailers need to meet these demands in innovative ways to win the customer while keeping their costs low. They may not have the resources to offer this on their own, so that’s where logistics players like us come in. We offer not just secure COD for the consumer, but also quick cash remittance for the seller.
By adding more pick-up points, retailers will not only reduce costs but also up their convenience factor for the consumer when they have easy, accessible locations and a dense network of collection points. However, the use of non-dedicated shop-in-shop parcel shops that could include non-traditional shopfronts like mom-and-pop stores will require the slow building of awareness and trust amongst the populace.
Parcel delivery companies will have to invest additional effort and time into building this trust with both retailers and consumers. At DHL eCommerce, we evaluate our partners thoroughly and ensure that a live list of DHL-approved partners is available on Google Maps or on our website (Thailand example), allowing users to validate the authenticity of the shop and read Google reviews from other users. In addition, any merchant dropping off parcels at a service point gets an immediate SMS notification of acceptance, providing greater accountability and peace of mind for the retailer by confirming that their parcel has been accepted by DHL.
As we enter the second half of 2018, the battle is likely to move toward last mile use cases of the parcel shop network, and it will be interesting to see how much convenience courier providers can bring for consumers in the most complex leg of a parcel’s journey – especially in a region where COD is a such a major share of total volumes.