Will store pick-up alter the course of home delivery?
Designed to cut down on delivery stops, United Parcel Service announced last week it is launching a service that allows customers to pick up their packages at dry cleaners, convenience stores and pharmacies as well as UPS stores.
UPS Access Point network, already available in Europe, has been expanded to New York City and Chicago and will extend to all major U.S. metropolitan markets during 2015. Self-service lockers are also being tested in Chicago. In January, all 4,400 UPS stores in the U.S. will become access points.
For consumers, the service solves the problem of customers missing package deliveries or having them stolen after being dropped off on a doorstep or in a lobby. Its 2014 UPS Pulse of the Online Shopper study found that 37 percent of U.S. online shoppers wanted alternate delivery locations when they’re not at home.
If unable to deliver a package, drivers leave a note informing customers when they can expect to collect their package at a nearby UPS Access Point location. Typing the tracking number on ups.com identifies the pick-up location. UPS wrote in a press release, "These local businesses, primarily neighborhood convenience and grocery stores with evening and weekend hours, fit a consumer’s busy lifestyle."
The pick-up spots are expected to be no farther than a 10-minute walk away in the city or a 10-minute drive in the suburbs. Customers can also select the UPS Access Point location as their preferred delivery address instead of home or work. UPS is also working with online retailers to enable customers to select an access point as their delivery location.
For the Access Point pick-up stores, the Wall Street Journal reports that Danny’s Pharmacy in the Bronx receives 50 cents per package but the bigger benefit is expected to come from new customers and the traffic the pick-ups bring.
For UPS, significant cost savings are expected since less repeat delivery attempts will be required by drivers. Packages delivered to homes are also less profitable since consumers often aren’t home and order fewer packages than businesses. Logistical margins are also eroding due to free or cheap delivery options.
FedEx offers pick-up and drop off options at many of its 2,400 locations in the U.S. although UPS’s Access Point program promises to be much more expansive.
Amazon also has lockers in convenience stores and parking garages across the country to handle deliveries and returns. But the lockers don’t provide same-day delivery and many stores are said to be apprehensive about partnering with a competitor like Amazon.
- UPS Gives Online Shoppers Around the World Delivery Confidence, Control and Convenience – United Parcel Service
- Poll UPS Launching Service To Cut Down on Delivery Stops – The Wall Street Journal (sub. required)
- UPS Access Point Network Could Help Improve Margins And Competitive Edge – Forbes
- UPS Pickup Locations Could Be Essential To Improving Profitability – International Business Times
Discussion Questions
Do you see wide consumer appeal for pick-up options for online purchases? Does the cost structure supporting e-commerce change notably if pick-ups of online purchases become pervasive?
The increase in online shopping has created the need for a better delivery system and the ability to pick up packages would have consumer appeal. It is most likely to increase costs for those using the service, but to ensure the package is safe may be worth the cost. However, if UPS and others are saving costs with the decrease in delivery stops then that needs to be used to reduce the cost to the consumer and reward the drop-off locations. Seems like a win-win to me and anyone who wants the package delivered to their home may see additional costs going forward.
As a consumer, I love the idea. If it works for the providers, then it works for me.
Yes. Customers are seeking maximum flexibility in convenience and service and these options address these longstanding customer compromises. In Europe click-and-collect is ahead of the U.S. An additional noted benefit is the traffic generation for retail pickup locations, benefiting both retailers and customers.
Click-and-collect has the potential to reduce the associated logistics costs.
Interesting that UPS is taking a page from Amazon’s playbook. The difference is it sounds like this is being done more for UPS’s benefit than the consumers whereas Amazon’s initiatives tend to benefit the consumer. Subtle difference, but looking at the motivation for who stands to benefit can make a big difference in how a program is received.
Personally, I think UPS is looking to soak up the savings rather than pass them along to consumers, but we’ll see.
I think it depends on the location of the pick-up spot. It could be more convenient than waiting for a delivery, asking a neighbor to watch for a delivery, having a delivery come to the office, etc.
Last month I was on a California university campus and saw an Amazon locker space to which deliveries are made. Students are informed of a delivery and given a code to unlock a specific locker to pick up a delivery (care packages from mom and dad?). Great!
The ability to “get it my way” certainly has a strong appeal to consumers. There are three delivery choices for online buyers, all with some pluses and minuses. Their home, at the retailer’s store (assuming there is a brick-and-mortar location and that it somewhere near their home or work) and now at a c-store or other convenient location.
The last two alternatives offer the advantage of being open in the evenings, weekends, etc. This is especially true for c-stores, which are often open 24 hours. The challenge for the c-store operator will be finding the space to house a number of lockers. Typically these installations have been on a wall location and c-stores have increasingly found their sales moving to the perimeter of their stores.
I expect this will be a part of a constantly-evolving answer, along with home delivery, Amazon Prime, BOPIS, ROPO, use of mobile in-store, and many other combinations of accessing both information and physical products across channels.
More broadly, it’s nice to see anything that integrates physical and digital in new ways. Retailers (online and off) and shippers have done some things to integrate the physical and digital worlds, but for the most part they haven’t tested aggressively enough. The real winners will be those who test many different integration ideas rapidly and hone in on the subset that work for their customers.
Enabling store pick-up services will appeal to many people. I always see people worry about being home at a certain hour to get their delivery or people who are concerned about someone stealing their package if left on the doorstep. If they go on a trip or vacation, they usually ask a friend or relative to go to their home when their delivery is expected to arrive. Sometimes, people will hold off on ordering something if they know they will be away for a while. With pick-up services, they don’t have to be concerned about any of this. They can pick up their packages when it’s convenient for them. I think this will make people encouraged to shop online more often and thus it will help the e-commerce businesses. UPS will also be saving money since they won’t need too many drivers to deliver packages. This decision is very cost effective and also beneficial to the customers.
The more flexibility consumers have in selecting how they wish to have online orders fulfilled can be viewed only as a benefit. From click-and-collect to same-day delivery to lockers in third-party locations, U.S. retailers and delivery services are finally catching on that fulfillment is a huge battleground.
And I definitely agree with other panelists that there’s a strong cost savings component in some of these initiatives, particularly with lockers (as opposed to staffed collection points).
This is a service which is already used extensively in Japan. As we become more urbanized and more mobile, it only makes sense to untether a consumer from “home” delivery. Nobody’s home.
it’s an interesting one. I know I would use it and find it very convenient. In some respects, with the direction Amazon is heading I can order online, get same-day delivery and even better, have it delivered to a depot so I can leave my house at my convenience and pick up the product.
Perhaps there could be another innovative service where I could also go to that depot near my house before I actually order the product, check it out, look at alternatives and then order and pick it up at the same time. Maybe we can group a bunch of depots all together in one physical location and make an afternoon of it.
We were providing this service at Marsh Supermarkets 20 years ago with some success. As it was then and as it is now, the business model and the pathway to “stand alone” profitability is still very much the concern of the retailer.
While some retailers are willing to take the plunge and fine tune the operation to profitability, others are seeing this holistically as a means to gaining market share and relevancy despite any compelling financial rationale.
The good news for both types of retailers is that as consumer acceptance increases and technology becomes more affordable, store pick-ups can be a gateway to engage e-commerce without losing their shirts in the process.
The end game for retail is the nearly frictionless availability of products. Any product, in any place, at any time the customer wants.
In UPS’s case, the primary challenge will be reverse logistics. One of the main reasons customers like in-store pickup is that it alleviates the inconvenience associated with returns. If the shoe is the wrong size, I give it back and probably can get the one I want right away.
Convenience stores and pharmacies will be fine for picking up but not so fine for returning.
Just my two cents.
Yep, I see wide appeal! Also, if UPS is able to save cost using this approach and pass it along to the consumer, even wider!
Go Big Brown…for my 2 cents!
Just a side note that it’s a shame that so many consumers are so worried about packages being left on their doorstep that they would prefer to drive to a “secure location” to pick up delivered items.
It is great to see UPS adapting to consumer/customer needs in such an innovative way. Expanded pick-up options, still close by, will almost certainly be embraced by consumers, and for those pick-up locations inside an existing small business, hopefully a lift in their sales as well.
This will serve as yet another option for consumers, and an especially good one for those who don’t want or can’t have deliveries to their dwelling place. Remains to be seen whether this will increase or reduce the cost to the consumer.
It’s good to see large companies be creative to solve ever evolving challenges caused by changing retail formats and consumer lifestyle patterns. Allowing the consumer to collect packages from convenient locations that fit their own schedule seems like a good idea, especially in urban settings. That said, I am not sure that any drug store, dry cleaner, etc. is going to deliver an acceptable level of service. But the idea is good, so let’s see how the execution goes.
The cost structure will have to change as the more people who touch the package, the more the final landing cost. We’ll see how much of this will be eaten by the delivery service and if there will be an additional charge tacked on for this service.
We just did an extensive study about this, and consumers, in particular young people, ranked going to a “combined pick up spot” very high; second only to the idea of driving up to a store and having someone come out and put the goods in your trunk.
Interesting thing about that study is this: people were averse to going into stores, especially now that they don’t have to at all. What does this say about the condition of bricks retail? Or, the future of bricks retail? For sure one thing: stores had better improve!
I think this is a great idea. Positives for UPS, positives for the access point merchants, convenience for the consumer. If this catches on—which I predict it will—the number of stops will be cut down to a fraction of what they are now, which will drive down UPS costs greatly. Great stuff.
I see two approaches emerging. First is one order to multiple delivery/drop off points. Second is multiple orders consolidated into one delivery point. Each approach will appeal to a different market segment. The home bound will utilize the second approach. The most popular will be when mom orders dinner/food and picks up on the way home from work. The cost structure does slightly change by reducing the number of stops and hopefully miles driven. These cost savings will not change consumer buying habits as most are receiving free shipment so they don’t care.
It’s all about customer convenience. If customers find it a convenient and cost-effective option, it may work. Still, if security isn’t an issue, how much more will it cost to have it delivered to a home or office. That seems to be the most convenient.
Yes: Introducing more options for time-starved consumers gives them a wider selection of options to suit their specific needs. For many of us, home delivery is not a practical option.
As for the cost structure, it will inevitably come down due to increased scale, new options (e.g., Uber), and/or automation (e.g., drones).
This is a trend. There may be a time where the volume at (online) pick-up locations eclipses the volume of purchases from traditional sources. UPS seems to adjust their business model to keep up with technology and trends—this is a survival tactic. One would only hope that the USPS works its way into some modified business model as well. Consumers demand it.