Following the domestic delivery crisis and the collapse of City Link on Christmas Eve, the boss of Royal Mail has predicted that further companies will go under in the near future.
Last month, we wrote extensively on the building delivery crisis and the threat it poses to delivery companies across the nation. If you missed it, catch up here.
To summarise the article: we are a national building towards crisis point. Online shopping is enjoying steady double-figure growth and retailers are involved in a race to the bottom for customers. A core component of the race for customers is discounted delivery. In recent years these circumstances have been exacerbated further by retailers adoption of American shopping holiday Black Friday – a relationship that was recently likened to that of a drug addict by AO.com CEO John Roberts.
While demand has ballooned, the domestic delivery industry has failed to keep up in terms of scale or complexity. It was only a matter of time until something gave.
An inopportune crash
The Christmas Eve collapse of City Link came as a surprise to most of us. City Link had struggled, like many do, with the Christmas demand, but few expected such an established name to disappear overnight. According to Royal Mail chief executive, Moya Greene, it will not be the last failure in the delivery industry. Green said:
“There’s too much capacity in the market, and it’s put pressure on prices … I don’t want to predict the demise of other companies, [but] there needs to be a new equilibrium in this industry.”
Part of the problem is the nonlinear nature of demand through the year. The number of packages sent spikes over Christmas and all but the largest companies simply don’t have the resources to cope. Royal Mail, with gargantuan existing infrastructure, successfully delivered 120 million parcels over Christmas. Meanwhile, Yodel’s demand grew with such unprecedented verve they resorted to stopped accepting delivery jobs from retailers. If demand continued to rise, they simply wouldn’t have the delivery capacity to get packages to their destination. Most would simply sit in storage, forgotten and unloved until space in a van opened up.
Rumours of change
Greene went on to predict a change in the relationship between retailer and supplier:
“This year some of our competitors unfortunately saw their networks struggling under the weight of the surge in Christmas traffic. We’re very happy that did not happen to us.
“This year, big retailers will realise that quality counts and it’s worth paying for. A good delivery partner has a halo effect. Consumers are more likely to order from them again.”
However, as we explained before, the effect of the status quo is not to be underestimated. If consumers aren’t offered what they have come to expect, they will, in all likelihood, go elsewhere.
However, we aren’t resigned to the fate of a self-fulfilling prophesy. We, like Moya Green, do not want to see delivery companies collapse. It’s not good for the industry, it’s not good for the consumer and it’s not good for the people whose lives depend on it.
If we require a shift in a culture, then that is what we shall push for.