24 hours is not what it seems

It’s sometimes difficult to understand why, but there is undoubtedly a growing demand for a 24 hours delivery service for orders placed on the internet. That is, place your order by some time late this afternoon and you’ll get your delivery tomorrow – and “some time” is getting later and later. It’s difficult to understand because there seems to be no clear reason as to why customers need some of these things so urgently. It can’t all be those forgotten wedding anniversaries or last minute birthday presents. There is certainly something in the human psyche that wants things quickly once they’ve been ordered – and customers seem willing to pay the premium for this.

This demand for 24 hour service causes severe problems for retailers such as Amazon, Tesco Direct and many other much smaller businesses. They have little time to pick and pack the evening orders, prepare them for despatch, and get them ready for the parcel carriers’ hubs where they can be sorted and sent off to customers. The parcel carriers, who have to pick up the orders, sort them and get them to the local depot where they can be loaded for delivery, face even more difficulties than the retailers. It is they who are responsible for getting the order to the customer and meeting these ever more demanding service levels. It doesn’t take a lot to appreciate that much of the delivery time is taken up with transport on the road, and that the 24 hour window is not what it seems. In fact parcel carriers have only a few hours in which to sort hundreds of thousands of parcels and get them on the road to their destinations throughout the UK. The result is that evening windows are at a premium in parcel carrier sortation hubs, and as 24 hour service requirement grows, so does the need for sortation capacity.

And it’s not going to get any easier. On-line ordering is still growing rapidly, and what’s more these orders are coming just from people on their PCs at home. Current predictions are that at sometime within the next three or four years there will be more people accessing the internet via their mobile phones than there will be using home computers – and that means that customers will be placing on-line orders from any place at any time.

What retailers want is later and later cut-off times so that they can offer customers next day service for orders placed in the evening. And what parcel carriers want is earlier cut-off or – even better – more 48 hour or 72 hour deliveries so that they can more evenly balance their sortation hubs. There is limited capacity for the evening window, and on current predictions demand is out-stripping supply. And that can mean only one thing – when demand exceeds supply, prices rise. So, will consumers see an increase in the cost of next day delivery, or will the market forces ensure retailers absorb the cost? It remains to be seen, but there are certainly some interesting dynamics developing.