Consignia, the former Post Office, is determined to play a key role
in the Internet home shopping revolution.
The village Post Office is coming under increasing threat in the
UK. Post Offices have been closing at an alarming rate for some
time - around 250 small, rural Post Offices shut their doors each
year, a figure that rose to a record 547 in 2000.
Consignia, the new name for the organisation that runs the Post
Office, Royal Mail and Parcelforce Worldwide, is finding it hard to
recruit new postmasters. The reason is clear. Not only are people
completing fewer transactions in Post Offices, but benefits
payments, which are currently paid to millions of claimants each
year through local Post Offices, will be paid directly into bank
accounts from 2003.
They will lose a huge source of revenue from the government, and a
huge number of regular customers will, in effect, have fewer
reasons to visit their local Post Office. But Consignia has come up
with a strategy for saving its troubled rural Post Office network,
a large part of which involves Internet home shopping.
It is planning to build up a package of home shopping fulfilment
services that it hopes will either entice new customers or
encourage existing ones to continue using its 1,500 Royal Mail and
Parcelforce Worldwide delivery centres, as well as its network of
18,000 Post Office branches.
The first of its home shopping services was time-slot deliveries to
9pm, on offer throughout most of the UK via Parcelforce Worldwide,
which has been adopted by more than 100 catalogue and Internet
retailers.
Last month, it launched its Local Collect service, which offers its
network of Post Office branches as alternative delivery addresses.
The scheme allows consumers to choose delivery direct to a Post
Office branch of their choice when they order from a retailer
signed up to the service.
Alternatively, they can opt to deliver to their home but have the
package directed to their nearest Post Office if they are not at
home when delivery is attempted. Currently, undelivered packages
are returned to one of the 1,500 Parcelforce Worldwide or Royal
Mail depots, which are often quite a distance away from the
consumer and have inconvenient opening hours.
Online retailers pay nothing for Local Collect except a £300
joining fee, which covers the cost of linking their fulfilment
systems to the Post Offices' new Horizon IT system.
Consumers can still use the system if the retailer they are
purchasing from has not joined the scheme. All they do is tick a
box on the advice of delivery card that comes through the letter
box when a package cannot be delivered. This will cost 50p,
however.
"We are not charging retailers, so there is absolutely no reason
for them to charge for this service either. It would be a straight
profit take," says David Taylor, director of Consignia's home
shopping division.
So far, the service is available to the 100 companies selling goods
via Consignia's worldofshopping.com website and a couple of other
retailers including Redcats, which runs the Empire and La Redoute
mail-order catalogues.
Retailers linking to the Horizon system can take orders and then
print off a label from a database of local Post Offices. Thus, they
can despatch parcels and packages with the address of the customer
and a back-up address of the nearest Post Office if it needs to be
re-directed in their absence.
"We can offer the service for free to retailers because every
failed delivery costs us. We are also doing it to generate more
business for home shopping and Consignia. We want this market to
take off," adds Taylor.
A trial of the Local Collect service in the 1,000 Post Offices and
160 delivery centres in the South West was hugely successful, with
a greater than 90% user satisfaction rate. Seventy-five percent of
those using the service said they ended up making an additional
visit to the Post Office just to pick up their delivery.
As well as getting the added 'pass-through' custom for their other
products, Post Offices are also paid 30p for each Local Collect
parcel they handle. The next couple of months will see the company
trialling the use of drop boxes, secure devices that can be used to
store home shopping deliveries until the customer can pick them up.
"We haven't finalised the arrangements for trialling these yet,"
says Taylor. "We need to sort out the standards for accessing them
and understand how planning regulations will effect where they are
placed."
Consignia will deliver to the drop boxes but consumers will have to
rent or buy the drop-boxes from third-party organisations. The
final and most ambitious part of Consignia's strategy is the
creation of a huge customer preference database. Taylor hopes a
database can be built containing the delivery preference of
millions of home shopping consumers; for example, whether a
consumer wants all deliveries made to a neighbour during working
hours, and to their own house on weekends.
Currently on the drawing board, the database will enable retailers
to know in advance what delivery instructions to offer, thus
speeding up the fulfilment process.
Once the data protection criteria have been met, the customer
preference database will be linked up with retailers in spring
2002. Taylor believes these new initiatives will go a long way to
cracking some of the traditional problems associated with home
delivery.
The same problems that caused the collapse of giant US home
shopping start-ups such as Urbanfetch and Webvan have apparently
been overcome by UK grocery retailer Tesco. "Tesco's success is
very important. The trick is to create new business models that
crack the problems of home delivery," says Taylor.
"The Tesco model is driven by store picking and the willingness of
people to pay premiums on their goods. Tesco says it charges £5 for
deliveries that cost it £8, but they claim they can cover the costs
by adding additional margins on their goods," says Taylor.
"[Tesco] stuck at it long enough to make it work, but we only
deliver, so we cannot depend on product margins. The idea is to
find other models."
Whether or not breakthroughs in home delivery models are made,
online shopping will continue to boom. A recent report from Merrill
Lynch shows that the value of online shopping in the UK has doubled
from just over £3bn in 2000 to more than £6bn in 2001, with the UK
accounting for 36% of the European market.
Part of this success, according to the report's authors, can be
attributed to Post Office efficiency. "A typical delivery in Italy
or the US might take up to two weeks. In the UK, a typical delivery
takes two days," says Merrill Lynch's head of European Internet
research, Peter Bradshaw. "On a relative basis, the UK's Post
Office clocks the opposition."
The Horizon Project
Completed in June 2001, the £1bn
Horizon automation project was one of the largest IT projects ever
undertaken in Europe. Nearly 18,000 Post Offices have been
installed with a touch-screen terminal, barcode reader, keyboard
and printer. They are all linked to the main Post Office datacentre
via the largest secure non-military ISDN network in Europe or by
satellite connection. The system handles up to 3,500 sales,
automated payments
or benefits payments transactions per second. ICL, the Post
Office's technology supplier for the project, trained more than
63,000 employees at over 12,000 training venues throughout the
country.
Consignia's strategy
1. Evening deliveries: Time-slot deliveries up to 9pm
2. Local collect: Pick up your home shopping at the local Post
Office
3. Drop-boxes: Home shopping purchases dropped in a secure box
outside your home
4. Customer preference database: Automatically tells retailers
your delivery instructions