Everybody Orders Online and Expect Fast and Cheap Delivery. Is it Possible to Raise Quality and Speed without Raising Prices?
By Mladen Puzak, Executive Director, Hrvatska Posta
Mladen Puzak, Executive Director, Hrvatska Posta
Decembers poses great logistics challenges for many companies. No matter if you are directly involved in logistics (e.g. delivering parcels) or you have an e-commerce business, the sheer growth in number and volume of parcels can be intimidating. Croatian parcel market is experiencing significant growth, reaching almost 30 percent year over year. E-commerce is the primary driver of this growth as more and more buyers opt in to buy from the comfort of their homes. Of course, such significant growth of business must be accompanied by equivalent growth in human resources and technology, particularly regarding information and communication technology.
In order to meet growing customer demands, courier companies must invest in IT infrastructure and constantly track disruptive technologies and hype trends with deep insight to what will not change during next 5-10 years. And through development of new delivery models, parcel delivery will become simpler, cheaper and faster and customers will, in return, become more satisfied.
Future development opportunities
Traditional models of delivery cannot follow increased demand without increased transport costs. That’s why big postal operators, including Croatian post, explore different opportunities such as parcel sorting automation, pre-advance delivery notification, alternative delivery location, cognitive/predictive 24/7 logistic and AI supported delivery. It is also possible that parcels of the future would by and large be delivered to centralized locations such as pick-up-points and self-service machines. Especially since price increase is not an option for most customers.
Of course, personal contact and delivery will still be available but for much higher price. In that light the role of couriers will also change, and we can expect them to become salesmen who might sell merchandise directly from vehicles. Also, drone delivery or unmanned vehicle delivery is considered as a viable option, especially throughout less populated areas.
Customers want it cheap and now!
And all of this is happening in the time when customer grow more demanding. Modern customers want full control over their parcel delivery, and they expect it fast and cheap - if not free. And their impatience already produced results. On several developed markets, same day delivery is already offered when buying through web shops. One of the reasons for this is obviously the extraordinary development of modern technology (smart phones in particular), which enables instant gratification and makes us all even more impatient.
Currently e-retailers are investing in local markets, and some are even investing in brick and mortar stores since they want to be closer to their customers. In that sense logistics operators have already an opportunity to use this advantage of being present on local markets. We expect expansion on the market and more investments in regional logistics hubs and parcel shops, which could offer high-quality last mile delivery at reasonable prices. This is one way to deal with pressure on logistics operators caused by economy of scale which is propelled by e-commerce.
Can logistics operators bring you more customers?
Also, it is expected that in the foreseeable future customers will distinguish between retailers based on their provider of logistics services. Croatian post is already heavily investing in customer service and brand recognition. Perhaps we will see less price wars and more fights for better product delivery options? It is crucial that logistics operator take the role of mediator in this “war” for customer loyalty and appeal between retailers. Even more important is not to fall into trap of false promises regarding price and speed or quality of delivery.
We are all aware of the project management triangle, which is a model of the constraints that can be applied to almost every business situation. It is not possible to simultaneously achieve fast, cheap and high-quality delivery. Since only two of the conditions can be achieved, it is up to businesses, or even better, up to consumers to decide what is most important for them. And it is up to us to recognize and fulfil their needs.