The rise of online shopping has transformed how we receive our purchases, leading to a surge in demand for efficient parcel delivery services. To adapt to this changing landscape, delivery companies started incorporating out-of-home (OOH) delivery. But implementing this delivery method comes with its own set of challenges and expenses.
To provide quality service and establish a truly successful network, several factors must be taken into account. This article aims to provide an overview of out-of-home delivery, including the key drivers behind its adoption, benefits, and tips for success.
What is out-of-home delivery?
Out-of-home delivery refers to delivering a parcel to a machine or location other than the recipient’s home. The recipient plays an active role and travels to collect their parcel from the OOH point within a specific time frame.
Out-of-home delivery networks include:
- Parcel lockers (also called Automatic Parcel Machines) - Unattended self-collection points, often available 24/7. Recipients can unlock them using a digital code, QR code, or a mobile application.
- Pick-up and drop-off points (PUDO) -Staffed designated locations for parcel pick-ups and drop-offs, such as parcel shops, corner shops, supermarkets, in-store Click&Collect stations, or micro depots.
What’s driving the adoption of out-of-home delivery?
Many parcel delivery companies and national postal operators are continuously working on increasing the density of their networks.According to the Out-of-home delivery in Europe 2022 report, the total number of unique OOH points grew by 36% YoY. Several factors contributed to this:
- Capacity issues - The global parcel shipping volume is expected to reach approximately 262 billion parcels by 2026. However, the last-mile industry is experiencing labor shortages and rising expenses. With the projected growth in volume and operational problems, OOH delivery is becoming a crucial component to achieving capacity.
- The pressure to go green - By 2030, the demand for urban last-mile delivery will result in a 36% increase in delivery vehicles and a one-third rise in related emissions. The pressure to be carbon neutral in logistics is stronger than ever. Deliveries to PUDOs and parcel lockers generate fewer carbon emissions than home delivery, as they minimize unnecessary vehicle mileage, noise, and congestion impact.
- Customer-to-customer (C2C) e-commerce - According to Geopost, 70% of e-shoppers buy or sell products on C2C marketplaces. OOH delivery can sustain the increase in parcel volume from C2C e-commerce while making deliveries and returns more convenient. Potentially, it can bring C2C trade to an international or even worldwide level instead of just local.
- Growing customer expectations - Even though e-shoppers are buying less than last year, their expectations continue to grow. The previous source shows that predictability and parcel tracking is becoming expected, as well as choosing when and where the parcels will be delivered.
The benefits of OOH delivery
Compared to home delivery, OOH delivery has many advantages for delivery companies and recipients:
- Operational and cost efficiency - By consolidating shipments to achieve substantially more items per stop and with a nearly 100% first-attempt delivery, OOH delivery presents an efficient way to reduce last-mile delivery costs and achieve operational efficiency.
- Convenience - OOH provides a more customer-centric approach. Parcel lockers and PUDOs offer a more extended storage period, allowing recipients to pick up their parcels at a convenient time and place. Parcel shops and lockers with a drop box and label printer make sending parcels and returns cheaper and easier.
- Reduction of negative environmental impact - The Green Last Mile Europe report 2023 states that shifting all courier transport to close and efficient parcel lockers can reduce CO2 emissions by up to 2/3 in urban areas and more in rural areas. However, this can only be achieved if recipients travel by foot or bike to collect their parcels or combine the trip with another already planned one.
The recipe for OOH success
While OOH delivery is highly beneficial for the delivery service providers, building and managing the network can still be costly. That is why knowing which steps to take to set up for success is essential.
Strategic location planning
Location is one of the most critical factors for efficient utilization and profitability. Choosing the right locations leads to a greater network reach and a competitive delivery service.
Studies show that the recipients’ travel distance to the parcel lockers greatly influences the success of OOH networks. As a result, most delivery companies recommend choosing locations within “slippers distance” or around 300 meters from the recipients’ homes.
However, proximity to recipients isn’t the only factor that should be considered. Finding ideal locations calls for a more detailed analysis involving multiple data layers such as demographics, movement patterns, locations of points of interest, and even shipment data.
Understanding network performance
Positioning PUDOs and parcel lockers is just the first step in building a successful OOH network. It’s important to continuously track the network's performance and adjust processes accordingly. This can be challenging if you monitor only the number of shipments related to a PUDO point or parcel locker without other data to provide more context. To truly understand the network's performance, you must track the utilization rate, dwell times, time before delivery, and more.
Optimizing delivery processes
Efficient delivery operations are crucial for the success of OOH delivery networks. This involves not only optimizing delivery routes but also streamlining the pickup and drop-off processes. Parcel lockers are a good example of this, as how couriers approach the location and even how they fill the lockers can significantly affect their efficiency.
Creating awareness
The parcel volume from OOH delivery will only grow if people are aware of the option and its benefits. The choice of OOH delivery needs to be available for consumers during the checkout process on e-commerce websites. Additionally, informing shoppers about the environmental and convenience benefits of OOH delivery at checkout can encourage them to opt for this type of delivery more often.