Parcel lockers are becoming integral to delivery networks, providing convenient and secure parcel delivery and pickup solutions.
Due to the increased demand for out-of-home delivery, parcel delivery companies are now faced with the important decision of choosing between open and closed networks, making it a relevant topic for discussion.
This blog explores the advantages, challenges, and potential of open and closed parcel locker networks and the possibility of middle-ground solutions.
Open parcel locker networks
An open or carrier-agnostic locker network is accessible to multiple delivery companies and sometimes merchants. A third-party service provider owns the network and coordinates all active carriers. This is usually a parcel locker manufacturer or a delivery company.
Carrier-agnostic networks have been more present in Asia, with successful players like HiveBox or Singapore’s Locker Alliance. But recently, they can also be found in Europe, with Direct4me, Parcel Pending, MYFLEXBOX, and other notable mentions. This begs the question, why are open networks appealing?
Advantages of open parcel locker networks
- Shared costs and scalability - Agnostic networks don't require a sizeable individual investment in infrastructure. Carriers who want to use the network pay a fee to reserve a locker compartment, with the cost based on its size and the duration of parcel storage. Also, due to existing infrastructure, carriers can scale their operations quickly.
- Greater utilization - Multiple carriers share the same locker infrastructure in an open network. This approach ensures efficient use of resources and maximizes the capacity of the locker system, as some lockers may be used multiple times a day.
- Consolidation and convenience - By being accessible to multiple carriers, open parcel locker networks allow for more efficient consolidation of deliveries. This is also more convenient for the recipient, as they do not need to go to multiple locations to pick up different orders.
At first glance, a carrier-agnostic approach is an attractive solution for last-mile delivery. However, it doesn’t come without its own set of drawbacks.
Challenges of open parcel locker networks
- Coordination complexity - Multiple carriers using the same parcel locker can lead to coordination difficulties, such as scheduling and balancing locker utilization. Open networks need real-time availability management, which requires advanced and dynamic software for all parties involved. Another solution would be to have so many parcel lockers that capacity is no longer an issue. Both options break the bank, with the second almost financially impossible to pull off.
- Recipient dissatisfaction - Due to the previous challenge, there might be a need to redirect a parcel due to the locker being full of items from other delivery companies. This could result in the recipient being unable to collect their parcel from a convenient location and having to wait longer than expected. Such a situation can harm the carrier's reputation and discourage recipients from using parcel lockers for future online shopping.
Closed parcel locker networks
Closed or carrier-specific parcel locker networks are exclusive, limiting access to other parcel delivery companies.
Closed out-of-home delivery networks have existed for a while. Postal operators had closed networks (post offices) as they already had nationwide service and infrastructure coverage. The same concept was applied to parcel lockers as more private courier companies rolled out their networks.
Logically, most advantaged or closed networks are disadvantages of open networks, and vice versa. But there are some specific characteristics to each approach.
Advantages of closed parcel locker networks
- Complete control - The carrier has full control over the network’s operations. Because of this, it’s easier to gain an overview of the capacity and performance and ensure that the first-time delivery success rate is almost always 100%.
- Uniform service quality -All lockers, from installation to operation, adhere to standardized service levels, operational processes, and user interfaces within the network. This allows recipients to build a relationship with a trusted brand.
- Branding - On the topic of trusted brands, promotional aspects are also important. Closed networks provide more branding opportunities for the carrier. The lockers can be customized with the carrier’s logo, colors, and other elements to provide visibility and awareness.
Challenges of closed parcel locker networks
- High entrance barrier - One of the main challenges of carrier-specific networks is money. According to previous calculations, the purchasing price of a parcel locker can be between $6,000 and $21,000. This means that the total cost of ownership is exceptionally high as it includes additional expenses related to acquiring permits, location rent, installation and site preparation, power and internet connectivity, software development, maintenance, and support. Even if carriers were to rent lockers, it would still be a costly experiment.
- Limited space - Parcel locker networks are a location game, and only so much space is available. With a high OOH network density and adoption rate, some European countries developed a location problem. Numerous carriers with closed networks often place their parcel lockers in the same location, crowding public space. This situation raised the question of parcel locker market regulations.
Now that we’ve reviewed both approaches' pros and cons, could there be the best of both worlds?
A third option
Some delivery companies are already testing ways to merge the benefits of both types of networks. Instead of making every compartment available, open lockers are sectioned by carriers while sharing the same platform and user interface.
Others propose a middle step, creating hybrid downstream access to the parcel locker network. In this model, multiple carriers can deliver to a hub or aggregation center, after which a specific carrier delivers the parcels to their network.
Another choice could be incorporating PUDO points into the mix. This creates multiple possibilities as the PUDO points could be shared or private, as well as the combining parcel lockers.
In general, parcel lockers offer great benefits for all parties involved. Their adoption will become inevitable due to the rapid growth of e-commerce, increased parcel volumes, and changes in consumer habits.
However, the greatness of the benefits for parcel delivery companies may depend on the type of network. While there is a middle ground between open and closed parcel locker networks, applying it may still be complicated.
Ultimately, the choice depends on the company's goals, needs, and priorities.
Interested to learn more about parcel locker networks and how to integrate them into your services? Check out our Comprehensive guide to building a successful OOH delivery network.