Finland - the promised land of Click and Collect lockers
Recently there has been discussion about whether home delivery or Click & collect is better. In Sweden, the country manager of Amazon marvelled at the culture of Click & Collect lockers.
“Going to a place 1,5 km from my home, standing in line, and showing ID was a very different experience for me. Nowhere else is it used to the same high extent as in Sweden.”
In fact, the lockers are used even more in Finland than in Sweden.
According to a PostNord survey, Finns are among Europe’s most active Click & Collect lockers users. The difference between the delivery preference of Finnish customers of other countries is striking. Customers in big (and densely populated) European countries such as Spain, the UK, Italy, Germany, and the Netherlands expect retailers to offer home delivery. Other Nordic countries are low on home delivery preference compared to the big countries but high compared to Finland. In Sweden and Norway, the most popular delivery method is the delivery to the mailbox.
At the same time as we have been taught to use lockers, we have also been taught not to expect fast delivery. Finnish customers are the least demanding regarding delivery time (alongside the Norwegian). Only 4% of customers expect the deliveries to arrive in 1-2 days, whereas a whopping 29% would settle for a delivery time of more than six days.
However, one could say that we Finns are also leading the international development where many retailers (such as Amazon) are becoming more and more interested in lockers.
Locker popularity: a good or a bad thing?
Collection from a parcel locker has been regarded as a better alternative due to its flexibility and price. However, home delivery is the original (and potentially disruptive) model of online retailing. Home delivery is also often preferred by the customer.
Especially in countries other than Finland, home delivery is the preferred option, as depicted by the PostNord survey. The big European countries also have a significantly bigger share of retailing going through the online channel.
Thus, one can safely say that Finland is an outlier in last-mile delivery methods. Is it then good or bad to have such a high preference for lockers?
Lockers can be an excellent alternative for home delivery. Lockers are
more flexible
a good option when the value of the purchase is low
more efficient for the retailer -> cheaper than home delivery
The main emphasis is that Click & Collect is the preferred option for the (bricks and mortar) retailer and the delivery company as they don’t need to drive customers’ homes, the famous last mile.
Click & Collect: a hybrid model from the offline players
This preference for Click & Collect highlights the potential disruptiveness of online retailing.
If a retailer wants to disrupt the existing competition in the industry, it should focus on good home delivery.
It will be very difficult (or unpleasant) for traditional retailers to compete on that. Just look at the success of Amazon.
Click & Collect can be regarded as a hybrid model between online and offline channels. The order is done online, but the customer still needs to drive or walk to the locker. The lockers are often located normally close to a store (grocery).
Thus, the whole customer experience is somewhat close to the offline buying experience, without the cashiers and with an extended product offering.
The lockers also get full quite easily during the peak shopping seasons. During the first quarter of 2023 (not a peak season), Matkahuolto has rerouted 7,3% of their locker deliveries.
With lockers, the real benefit and convenience of online purchasing are removed. Home delivery is also probably more sustainable as the delivery driver drives one large and optimized route (ideally with an electric van) instead of each customer driving back and forth to the locker.
The lockers (and other forms of Click & Collect) are much better than mediocre home delivery. Delivery with a lead time of weeks and a delivery slot of ”8.00-18.00” is not good by any standards.
However, the huge success of lockers has led logistics companies to ignore home delivery and put all their development efforts into the lockers.
What is then a good home delivery?
Home delivery has five variables that influence the customer experience:
Price
Speed
Availability of delivery windows
Accuracy of the delivery
Communication
Price
The price of home delivery is most probably the single most important thing for the success of home delivery. Delivery fee is a similarly important differentiator for home delivery as the free parking is for the out-of-town big-box retailers.
When the delivery fee increases, the customer groups are narrowed to only the ones who need to buy the delivery.
On the contrary, when the delivery fee is reduced, the amount of orders grows accordingly.
Speed
The speed of delivery is a more nuanced topic. As in all retailing, there is a wide variety of customer needs with regard to delivery speed. This depends on the category and the urgency of the customer’s need. A general trend in home deliveries is the drive to shorten the delivery time. This is depicted by Amazon, which has invested heavily over the years to drive down the delivery times from several days to the next day and currently same-day.
In the Q1/2023 earnings release, Amazon highlighted that in the past quarter, almost 26 million customers ordered with Same-Day Delivery.
Availability
A rather overlooked aspect of home delivery is the availability of delivery windows, which ties back to the fulfillment and delivery operations processes. Availability can be divided into delivery windows that the company offers for customers and how fast they get fulfilled. This means that can the customer rely on there being a preferred delivery window available at any time?
At a time when the majority of online orders are picked from existing stores, the availability of delivery windows can easily become an issue. The fulfilment processes and product availability are subject to and inferior to the existing processes of the store. It is impossible to fulfill orders as reliably and as many in quantity from a store as from a warehouse.
Accuracy
Delivery accuracy is related to delivery speed. With fast deliveries, there are not as many deliveries batched together; thus, it is often easier to arrive accurately. The quick delivery companies also don’t need to give out delivery windows as the order is delivered on demand.
The length of the delivery windows is one of the most important elements of good customer experience in home delivery, alongside the delivery price. The shorter the delivery windows, the less there is a need for the customer to be waiting.
Communication
The final element of home delivery is the communication of the fulfilment process. For the customer, it is important (especially with first orders) to get enough information on how the fulfillment and delivery processes are unfolding and whether everything is running in-time. For the later orders, it is often enough to have the information easily available somewhere, not necessarily bombarding the customer with messages.
The other aspect of communication, alongside transparent information sharing, is what happens on the doorstep. After all, the doorstep is the only human interaction between the customer and the retailer. Often the other party is factually not the retailer, but the customer perceives the delivery person to be a representative of the retailer. Therefore, this moment should get much more attention.
If the driver is not representing the retailer well, everything that has been good in the process will be forgotten, and vice versa.
If all of the above-mentioned elements of the delivery experience are in place, people will prefer home deliveries. There are two obvious examples.
The rapid success of quick delivery companies, such as Wolt, is a great illustration that customers like to have things delivered to their homes.
The huge success of Amazon Prime. Prime is probably this century’s most important retail innovation, with over 180 million loyal subscribers. Many surveys have indicated that clearly, the most reason for customers to subscribe to Prime has been the ”free” home delivery.
Many interesting development avenues could exist if companies invested more in-home delivery. As long as the lockers are so extremely successful, the new concepts for home delivery do not have a chance to grow and flourish. The customers would win if there were good (pricing, time, and availability) options for Click & Collect and home delivery.