1

E-commerce and Delivery – an IPC Strategic Perspective February 2013

2

E-commerce and Delivery – an IPC Strategic Perspective

Summary IPC analysis suggests that e-commerce and distance sales markets around the world are

“dynamically efficient”. There is intense competition (between retailers, e-retailers and

between delivery operators) that promotes innovation, development of new products,

increased choice for consumers and more competitive prices

Consumers all over the world are able, as never before, to exercise a choice – purchase in a

retail outlet, delivery to a retail outlet, delivery at home or another location, redelivery to a

retail outlet etc. Market boundaries and service standards for “bricks and mortar” and

distance sales outlets are converging: fulfilment and market rules can no longer usefully

(from a consumer perspective) distinguish between the two.

To respond to the consumer’s wish for choice, wherever they may wish to shop in the world,

a wide range of new and differentiated services have been, or are being, introduced by

delivery operators: parcel delivery drop boxes, alternative delivery choices if a receiver has

been unable to receive an item, pre-advice of delivery time by text message, choice of transit

times, returns systems that give the receiver flexibility, and many more.

The delivery sector (and particularly postal operators) are developing and providing

interconnected systems that deliver the benefits of new services to consumers around the

world. Operators also have considerable experience of working in partnership with distance

sellers, although the challenge of creating awareness, amongst SMEs, of the systems

available is ever present.

3

Introduction The International Post Corporation (IPC) is a cooperative company of postal mail and parcel

operators which has its aim the improvement of cross-border letter mail and parcel services

throughout the world, and particularly amongst its members. In pursuit of its aim IPC leads

improvement and benchmarking projects and provides services (mostly based around

information technology) for its members.

There are twenty-four members of IPC of which seventeen are based in the European Union

(EU), three outside the EU but in the EEA, two in North America, and two in the Asia-Pacific

region. IPC’s members handle some eighty percent of the world’s letter mail and parcel

traffic. In addition IPC provides services for some 150 postal operators around the world and

manages programmes aimed at improving end-to-end mail quality that involve postal

operators, airlines and road hauliers.

IPC has more than twenty years experience, working with and for its members and ultimately

their customers, of devising and implementing interoperable solutions (including UNEX

worldwide delivery quality monitoring, the REIMS system, and the EPG parcel network). This

gives IPC a unique global experience of, and perspective on, the impact of e-Commerce on

the delivery sector.

The development of e-Commerce and the associated delivery of goods is a hot topic around

the world, generating debates ranging from the future of bricks and mortar retailing to the

environmental impact of delivery. The subject is of vital interest to IPC members and the

millions of diverse consumers and businesses that IPC’s members serve. This, and the

publication by the European Commission of a Green Paper on e-Commerce and Parcel

Delivery, has prompted IPC to draw together its perspectives on the global e-Commerce

delivery market and how IPC’s members interconnect to serve their customers.

The EU Green Paper asked a range of questions, arranged under various headings, about

e-Commerce and physical delivery. This Strategic Perspective paper, while it does not set-

out to answer the questions posed by the EU Commission, borrows some of those headings

as they are a useful way of thinking about developments in the e-Commerce delivery market.

The e-Commerce Delivery Market There is, firstly, the issue of where to draw the boundary of the “delivery” market. From the

point-of-view of consumers the market is that of retailers – whether they be distance sellers

(located at home or overseas), local “bricks and mortar” outlets, or retailers that are a

4

combination of both. From a consumer perspective shopping in a retail outlet is simple:

goods are on display, prices are marked and, once purchased, the chosen item can be taken

away for immediate use, or easily returned. For the consumer shopping at a distance

(wherever the seller might be in the world) their experience should be, other than the

physical presence of the goods, the same.

This slightly wider perspective upon the boundaries of the market highlights an obvious

point: we, as consumers, shop in multiple channels. This morning’s distance purchaser can

be this afternoon’s visitor to a retail outlet. These observations yield a policy prescription for

actors in the market: research and understand the buying preferences of consumers whether

in a shop or at a distance, and give priority to those actions that facilitate best practice in

consumer satisfaction when using either channel. As the delivery sector knows the delivery

experience is sometimes currently some way from the consumer expectation of best

practice, but the attainment of best practice is not confined to physical delivery. In fact it is

the entire process of fulfilment that needs to be taken into account, of which delivery is but

one element. For example, what is best practice for an item bought at a distance and

delivered to a retail outlet for collection?

The wider definition of market boundaries also yields some insights into the overall

economics of distance selling. From a logistics perspective, retail outlets and their logistics

chains are simply a cost-effective process of consolidation and subsequent break-bulk of

large volumes of goods: retail logistics chains are “consolidation platforms” (in which the

consumer undertakes the final delivery). Ultimately the competitive price that a retailer can

charge for distance sales of goods is determined by the cost of making the same product

available in a retail outlet, plus an add-on for the convenience of delivery to the consumer’s

location of choice. The issue (for all actors in the distance selling market) is to understand

what is meant by “convenience”, and how much it is worth to the consumer.

The value (or otherwise) of this convenience is perhaps best illustrated by the fact that 60%

of goods ordered on the website of the British department store John Lewis are delivered

(with a commensurate delivery charge) whereas 40% are directed – by the purchaser – for

pick-up (without incurring a delivery charge) at one of the firm’s stores.

Clearly convenience is not simply about delivery – it is about ordering and knowing that what

is wanted is available, and it is about integrating distance shopping with other activities. In

sum, it is (at least in part) about choice.

5

Once a consumer has decided upon delivery IPC research sheds some light upon the value

of convenience:

The question “what would be a fair price for the delivery of...” was asked without reference to

the geographical origin of the goods. The response reflects what consumers are willing to

pay for convenience and, as can be seen, there is considerable variation around the average

for every category. It is also clear that the perceived fair price is correlated with the value of

the goods received. The absolute price levels suggested for some categories – DVDs, books

and clothing – are barely sufficient to cover delivery costs even for short-distance deliveries,

let alone those for longer distances.

If the above broadly determines the price that can be charged to the consumer for goods

sold at a distance, what of the costs for physical delivery? Labour costs account for a high

percentage of overall costs. Staff in the larger delivery operators (both public and private)

are unionised and labour costs per hour are relatively inflexible. In addition real fuel costs

have risen, and will continue to do so. In such circumstances aiming only at producing a cost

level that will increase the distant sale of (in particular) low value goods will probably entail

increased (both in number and degree) exploitation of labour (either through driving cost

1. European survey, 2007 (10,149 respondents) 2. Handbags, sunglasses, etc. 3. Includes fresh fruits and vegetables, meat, fish and seafood, cheese 4. Style, size, location, etc.

Estimated fair price per delivery (€)

6

efficiencies at existing delivery operators, or through the entry of new operators). The real

challenge is to seek efficiencies and innovation that facilitate market growth whilst sustaining

responsible employment conditions.

If the term “eCommerce” has replaced the phrase “Mail Order” without affecting the

economics of physical delivery it is worth asking what has really changed. First and foremost

the transformation has occurred in the “order” part of the process where the internet is now

replacing the letter and the telephone. In addition the application of track and trace to the

movement of parcels - a change which pre-dated the internet – has been rendered vastly

more informative to senders and receivers by the advent of internet access. The two

changes taken together are revolutionising service expectations (in terms of speed of

response and information availability) throughout the world.

Apart from the transformation of ordering, in the product categories of DVDs and books

digitisation is now a direct competitor to physical delivery – perhaps especially, given the

types of traffic traditionally carried - to postal operators. Electronic delivery – a worldwide

phenomenon – is not perfect and failures (downloads that do not work, or fail to run) can be

annoying for the consumer. Actors – particularly physical delivery operators - in the e-

Commerce market need to understand the good and bad points of electronic delivery and

incorporate the results of that learning into best practice.

The widening of access and information enabled by the internet has, of course, transformed

the operations of traditional mail order companies and also drawn many new entrants into

the worldwide market. The new entrants are concerned with selling goods and initially

probably have little knowledge of the economics and the practicalities of physical delivery; in

economists’ jargon they are embarking upon a voyage along the “experience curve”. In

these circumstances a sensible course of action is to find means of facilitating that journey,

and that promote the adoption of best practice.

Lastly it is the case that the bulk of the market for distance sales (and hence the application

of e-Commerce) is within national borders. There are certainly issues that are peculiar to

cross-border delivery (for example, address standards, customs procedures for movements

outside the EU) but the majority of delivery issues are common to both domestic and cross-

border traffic. Inevitably the size and customer demands of a national delivery market will

determine the speed at which some desirable improvements to cross-border traffic flows can

be introduced.

7

In summary IPC believes that, in order better to understand the role of “delivery” in the e-

Commerce market it is necessary to acknowledge explicitly the perspective of the consumer

in the purchase (not just delivery) of goods, a somewhat wider definition of market

boundaries and competitive actors, the economics of physical distance delivery in relation to

the types of goods sold, and the importance of domestic distance sales markets in

determining the deployment of desirable changes in cross-border activities.

Competition in physical delivery markets As noted above competition between retailers (whether “bricks and mortar”, distance sellers

or a combination of the two) is intense. In addition there are many thousands of parcel

carriers in the EU, and many thousands more throughout the world. The majority serve only

domestic markets although a significant minority also serve international trade, either directly

or by means of contracts with the international carriers.

The worldwide physical delivery market is relatively fragmented (more so in the EU;

somewhat less so in North America) and postal operators in most countries are subject to

explicit universal service obligations and often price control. Thus, in addition to the impact of

retail competition and electronic delivery there is a high degree of direct competition in the

carriage of parcels of almost any weight or size.

In sum competition – both direct and indirect – in all segments of the worldwide parcels

market is intense: prices and profit margins reflect this intensity. The challenge for physical

delivery operators (public and private) is how to generate the funds required for the

investment required to meet the needs of the rapidly developing e-Commerce market.

Improving the Consumer Experience As noted earlier the objective should be for a consumer to feel that visiting a shop or

ordering for remote delivery should have the same convenient and easy “feel”. In a shop the

sticker price is the price paid. Thus, in principle, on a website there should be only one price

– the delivered price of the item. The consumer can thus easily compare shop and website

price, and make a judgement about the value of remote delivery. In such a situation there is

no value for the consumer in knowing more about the constituent elements of the sales price

(unless the seller is willing to offer a price “ex works”, leaving the buyer to arrange, and pay

for, delivery).

Traditionally the distance selling industry has not worked this way (although practices are

changing), believing that consumers compare item prices and treat delivery as a separate

8

matter. The majority still leave mention of packing and delivery costs to the penultimate

stage of the order process; comparison of delivered cost is thus made more difficult. The

issue is not one of the level or transparency of delivery tariffs: rather it flows from the

marketing judgement of retailers in an intensely competitive sector. Time will tell which

method of presentation most attracts the consumer.

If the delivery price is itemised it is often bundled with handling and packing (performed by

the seller) cost. It is not obvious that quoting the two elements separately would be of any

help to the consumer (any more than itemising the warehousing and handling cost of an item

bought in a shop). The essential information for the consumer are those that help the

consumer judge the value of remote delivery: the delivery service level (options for transit

time, track/trace, delivery location), the expected delivery date and time (preceded by

information about whether the item is in stock), and the cost/ease of returning an item.

The name and contact details of the delivery operator are also a necessity. Many consumers

are relatively frequent purchasers of goods sold at a distance and as such are aware of the

usual delivery times (whether to their homes or to alternative delivery locations) of operators

active in their area. To know the name of the delivery operator (which may not be the name

of the operator that collected the goods) thus adds some certainty to the purchase process.

So far as service issues and any subsequent complaints are concerned the route must be

via the accountable party: the distance seller, which must deal with the delivery operator

concerned if this is the source of the difficulty (which could be related to items not in stock, or

an incorrect address, neither of which are the delivery operator’s responsibility).

None of the above items of information need result in consumer confusion if presented in the

right sequence on a distance seller’s website. Indeed, a proper presentation would enhance

the consumer’s purchase experience. The delivery information required exists and can be

obtained from delivery operators. An example of best practice from the United States is

shown at annex 1. As noted earlier in this response the new e-retailer entrants to the market

have to make their way along the experience curve and may well benefit from access to

examples of best practice.

Turning to the performance of the actual delivery the EU Green Paper gives useful examples

of possible performance indicators - “the speed of delivery, the geographic coverage of the

delivery operator, delays, damaged or lost items” – which most physical delivery operators

measure. However the consumer is interested not just in delivery but the totality of the

9

process – that is, the performance of fulfilment (of the order). To the list suggested must then

be added the availability of stock at time of order, the speed with which stock is picked and

packed, and the availability of packages for movement at the cut-off time required for the

delivery option chosen by the customer.

Therefore the first conclusion about performance monitoring is that it must embrace the

process of fulfilment from order and, to add value to consumers, it must include retail outlets

(and ideally electronic delivery) as well as distance sellers. Otherwise how are consumers to

make performance comparisons and how does publishing partial information (that

concerning delivery alone) add value to consumers?

The issue is not quite the same viewed from the perspective of the buyer of physical delivery

services: the e-retailer (in which definition is included those individuals that offer goods for

sale on auction websites). At present these actors are confronted with three situations:

tracked services where delivery performance can be easily ascertained (by the retailer or the

auction site on behalf of the retailer) from the competitive operators; untracked services for

lightweight packets provided by postal operators for which delivery reliability information is

monitored and published (for domestic services) by the postal operator, and by IPC for

cross-border (both within and to/from the EU) services; and untracked services offered by

competitive private operators, for which no delivery reliability statistics are published,

although the operator concerned can be requested to provide them. All of the available

information is to an existing standard: it measures end-to-end performance to first delivery

(whether completed or attempted). The problem is more one of awareness (on the part of e-

retailers) than of availability.

A trust label or ISO certification of a delivery process might be a shortcut to generating

awareness and consumer confidence. As noted above such certificates are primarily needed

for the entire fulfilment process: it is not easy to identify a single industry association

(integrating both retail outlets and e-retailers) that could develop a trust label. It is easier to

envisage an ISO quality certification for the fulfilment process (whether for retail outlets or

distance selling fulfilment). Such a certification could be obtained today by either of these

actors. It is notable that, in a fiercely competitive market, none appears to have chosen to

obtain ISO certification – a sure sign that there is felt to be little consumer demand. By

contrast there are delivery operators that do have ISO quality certification – but not all

delivery operators have chosen to do so. In the competitive delivery market there is no public

reason to mandate such certification – it must be a decision for the economic actor

concerned.

10

Delivery Solutions that better Respond to Consumers IPC members feedback – deriving from their customers – make it clear that distance selling

senders and receivers would like a choice of delivery options (whether domestic, cross-

border within the EU or from/to the EU). The options include differentiated and reliable transit

times from moment of order (including the time taken to pick and pack goods), a choice of

tracking options (including no tracking), pre-payment of duties and taxes for goods entering

the EU, a range of possible delivery locations (home, office, retail outlet, drop-box), a choice

of delivery time slots, pre-advice of delivery, the ability to change delivery preferences while

the goods are in transit, a simple returns process (including simple reclaim of VAT and any

duties paid) and delivered prices that are clearly and simply related to the service offered

and the value of the goods ordered.

The extent to which these features are currently offered in cross-border markets related to

the EU is illustrated (a solid circle meaning comprehensively offered, a hollow circle meaning

rarely offered) in the table1 below:

Feature Availability in the EU cross-border market

Availability in the cross-border market to/from the EU

Differentiated and reliable transit times

Choice of tracking options (including no tracking)

Pre-payment of duties and taxes for goods entering the EU

Range of possible delivery locations (home, neighbour, office, retail outlet, drop-box),

Choice of delivery time slots

1 Source: IPC analysis

11

Pre-advice of delivery

Ability to change delivery preferences while the goods are in transit

Simple returns process

Delivered prices that are clear, simple, and related to the service offered and the value of the goods ordered

Amongst the many hundreds of parcel operators operating within and from/to the EU there

are a range of transit times on offer, ranging from delivery next working day before 08.00 (or

earlier) to delivery in six or seven working days, with an accompanying range of prices. In

terms of transit times the choice exists – it is for e-retailers to decide which choices to offer

their customers and to integrate those choices on their web site.

Cross-border tracking options (including no tracking) exist for parcels although those on offer

for lightweight (up to 2 kg) parcels in the postal network currently tend to be provided by the

Registered and Exprès letter systems. That said, Registered and Exprès traffic is growing

rapidly so a need in terms of service and price is already being met.

Perhaps the most interesting development for consumers is the development of alternative

delivery points. There are two aspects to this development: alternatives which the consumer

may chose in advance of delivery; and choices made available if the delivery to the chosen

location (home, for example) has not proved successful.

As with many opportunities in physical delivery the possibilities are not new – Relay Points

(from which the consumer collects) have been used by some mail order companies for many

years. Relay Points and their like have two great advantages, especially for lightweight and

low-value goods: the consumer can collect from a location (generally a grocery store) which

they visit frequently, and at a time of their choosing. The distance retailer can deliver many

packages to one place at one time, thus securing a lower average cost per delivered parcel.

12

The “newness” now is the advent of automated 24/7 drop boxes which can be made secure

and related to an individual consumer and parcel, and the ability of any web site to access

information about the location and availability of alternative delivery points. The choice

available to consumers and distance seller SMEs is thus much greater and, if the parcel is

tracked, the consumer can be notified of delivery and availability for collection by SMS or e-

mail. Furthermore the operator can secure, if deliveries at any one time are sufficient, a

lower unit cost per parcel delivered. In this lies the basis of a differentiated service (for

example, delivered at home or delivered at a drop box) and price.

Re-delivery to alternative locations is a different issue. Traditionally most carriers have either

left the parcel with a neighbour or offered one or two re-delivery attempts and, if these fail,

have made the parcel available for collection at the carrier’s depot (which may be

inconveniently located for the consumer). The advent of text messaging and e-mail offer the

opportunity for the consumer easily to order re-delivery either to the same location, or to

another location (such as a drop box). Equally, carriers are creating consumer databases

which hold a consumer’s delivery preferences (which may help to avoid a failed delivery in

the first place). The advantage to the consumer in these arrangements is obvious: choice

and convenience. The advantage to the carrier may be elimination of abortive work and cost;

on the other hand additional cost may be incurred – directing a parcel to a distant drop box is

effectively a new delivery, which carries a cost and price.

Data capture and electronic transmission have the capability to minimise delivery failure

through the use of pre-advice of delivery. Delivery operators are increasingly pre-planning

the sequence of deliveries in a delivery round; thus it is possible, at the time goods are

ordered on a merchant’s website and the delivery address captured, to inform the consumer

of the likely time slot for delivery. The estimation can be refined as the work for a delivery

route on a particular day is built-up, and the consumer kept informed of the estimated

delivery time. On the delivery day itself GPS fitted to the delivery vehicle can match the

vehicle position with the planned route and the consumer can be informed of an ever-better

estimate of delivery time (in one hour, in thirty minutes etc.).

These solutions – which many operators around the world have or are developing – require

that all parcels are tracked through the handling and transport process, and potentially allow

the destination of the parcel to be changed (by the consumer) en route. The solutions also

require two other actors to participate: the distance sales retailer – which must present

information and options in the delivery section of a website – and the consumer – who will

typically require a smart phone to receive pre-advice information.

13

The goods safely delivered there remains the subject of returned items – typically distance

sellers can expect 20 – 30% of goods (especially clothing) sold to be returned. In the first

instance returns are not an issue for the delivery operator: the merchant must first decide on

a returns policy (as must a “bricks and mortar” retailer). If returns are accepted the next step

for the distance retailer is to decide upon whether the retailer or the consumer will bear the

cost of returning the goods. If the former then acceptance (say, at a Post Office or a delivery

operator’s depot) can be arranged with the carrier. Automation (in the form of collection

requests directly to a distance seller’s website and transmitted to the carrier, with the

necessary parcel labels printed by the consumer) can be added (as is the case for the EPG

Easy Returns Solution) and the returns process put in motion. If the latter, then the

consumer has a choice: despatch by mail, or with another carrier.

The story does not end with the receipt (by the seller) of the returned goods. The sales price

needs to be refunded to the consumer and VAT (for sales made within the EU) reclaimed

from the excise authorities. Under current legislation this may involve a VAT office in the EU

country of original delivery, or an office in the country of original despatch. For new entrants

to cross-border e-retailing mastering the VAT regulations (both for the original sale and any

reclaimed VAT) is part of moving along the experience curve.

Finally, what of distance sales made by e-retailers inside the EU to consumers outside

(excluding EFTA countries) the EU, or by e-retailers outside (excluding EFTA countries) the

EU to consumers within or outside the EU? The issue here is frequently that the “price you

see is not the price that you pay” as customs duty, sales tax (and for some countries, various

other taxes depending upon the nature of the goods) and a customs agent handling charge

are added when the goods are imported to the country of destination. To add to the

confusion de minimis levels from which charges are levied vary widely between countries.

Traditionally these charges have been payable by the consumer who has ordered the goods

and may only become apparent at the time of delivery (sometimes resulting in refusal of

delivery). If the goods are returned to the seller there is then a cumbersome (and opaque, to

most consumers) process for reclaiming duties and taxes paid.

Databases and electronic communication are now well on the way to providing solutions to

the dilemmas outlined in the previous paragraph. Specialist companies are now able to

provide software (generically referred to as a “Landed Cost Calculator”) that will, for every

item in a distance seller’s product range, calculate the delivered cost (product price plus

duties, taxes, customs agent fee and transport) in practically any country in the world (see

14

Annex 2). Some delivery operators (including two postal companies, one inside and one

outside the EU, but with more to follow from within the EU) make such software available to

distance sellers but the practice is not yet widespread, either inside or outside the EU. The

issue here appears to be lack of awareness of possible solutions amongst distance sellers

and some carriers.

Furthermore, if a parcel is tracked throughout its transit (and especially upon entry to a

country) the e-retailer can collect from the consumer (at the time of sale) the duties etc.

owing and pay these either to the delivery operator or customs agent (which will pay the

authorities of the importing country) or settle directly with the import authorities. If parcels are

not tracked then the consumer is pre-advised of the duties etc. that will be payable, but

collection of the monies due is made at the time of final delivery. Tracking of the parcel also

simplifies (from the consumer’s perspective) the return of the item since return and outward

item can be correlated (by means of the seller’s order number) and electronic

communication used to reclaim duties etc. and thus refund the consumer.

The use of a Landed Cost Calculator and tracking by merchants is of benefit to delivery

operators as it is likely to simplify processes (particularly trouble-free customs clearance and

hence better delivery reliability) and reduce refused deliveries. However, although a delivery

operator may encourage the use of such software (and invest time and money in training a

sales force to sell the application to e-retailers) the decision (and subsequent web site

design) rests with the distance seller. The incentive for an e-retailer to use the software is

not necessarily immediately apparent: research by one North American postal operator

suggests that 60% of consumers purchasing from another country to which import duties etc.

apply, and who are presented at check-out with the total (delivered) cost of their item,

abandon their purchase.

It is clear from the foregoing that there are many areas in which delivery operators have, and

can, implement solutions that better respond to consumers. The most obvious are to offer

consumers a wider choice of delivery possibilities (notably transit times and delivery

locations – see Annex 3); the next (and perhaps most exciting) opportunity is to connect

these possibilities with the ability to communicate information as nearly as possible in real

time, both before and during the delivery (and returns) process. To derive the greatest

benefit from the technological options requires three things: delivery operators with the funds

and expertise to make and deploy the necessary investments; e-retailers with the skill to pick

(on behalf of their customers) the appropriate options, to present these on websites, and to

integrate data from delivery operators and customs authorities; and consumers who have

15

access (via smart phones or computers) to the information surrounding their order and

delivery.

Generating Funds for Investment – Controlling Costs In general the most effective ways of reducing the average delivery cost of a package are to

deliver many packages to one address at the same time (“drop concentration”), to not

require a signature at delivery, and to be able to plan delivery routes in advance so as to

ensure capacity loading and minimisation of time and distance.

Relay Points and parcel drop boxes allow many packages to be delivered to one address at

one time. Carriers and postal operators in Europe, Australasia and North America are also

developing (or negotiating access to) parcel lockers. Many retail chains are now offering

consumers a choice of delivery, or collection from a retail outlet (the same principle as a

Relay Point, but vertically integrated within a firm’s operations), and some carriers (including

postal operators) offer collection from a “parcel shop” or post office. From the perspective of

a small distance selling enterprise the most promising of these initiatives are collection from

a retail outlet or a parcel locker where the carrier is responsible for access and commercial

arrangements.

To not require a signature requires first the consent of the purchaser, and secondly (for

items that cannot fit into a letter box) some instruction to the carrier about what to do with

items that cannot be delivered if nobody is available to receive them. It is more efficient to

collect the consumer’s preferences at the time of order: for example, “leave parcel in the

garage”, “deliver to a neighbour”, “notify me of attempted delivery and make parcel available

for collection at local post office/Relay Point” etc. All but the first of these options are equally

applicable to parcels that require a signature upon delivery.

In a domestic market it is relatively easy to indicate, to the carrier, some of these options

upon the address label of the parcel. It is very much more difficult for cross-border traffic

flows, simply because of differences in language and what may, or may not be, acceptable

in particular countries.

Advance planning and optimisation of delivery routes are becoming widespread amongst the

larger domestic and international “integrated” parcel carriers, and in the domestic operations

of postal operators. Some of the latter (and domestic parcel operators) are able to collect the

necessary information when a cross-border import item enters the domestic network:

however, further investigation needs to be done in the area of pre-advice of delivery route

16

information. It should also be noted that, should there be a need to exchange information at

this level, the methodologies adopted need to be applied on a worldwide basis.

At present most carriers make at least one, and sometimes two or three, redelivery attempts

at no cost to the receiver. Equally parcels are stored for two or three weeks without charge,

and often can be redirected without charge. The process of redelivery is peculiar to goods

sold at a distance: there is no equivalent for goods bought in a shop.

The opportunities, already noted, that can give consumers delivery options and almost real

time pre-advice of delivery will tend to minimise the need for redelivery and so ultimately

help to control operators’ costs. On the other hand, in terms of economic and environmental

efficiency, redelivery costs should be properly reflected in prices (see Annex 4).

Interconnection Across Borders and with Customers IPC is primarily concerned, for its members, with the interconnection across borders of mail

and parcel services. The analysis thus far in this Strategic Perspective has been of the e-

Commerce delivery market in general, on the basis that the development of cross-border

services are often dependent upon domestic capabilities.

To understand the present state of interconnection in the parcels market it is necessary to

give a brief overview of current practice. The “integrated” operators are, by definition,

integrated (at a worldwide, not just country, level). These operators all offer electronic

interconnection to shippers and operate standardised tracking systems. The carriers that

operate within one country or on a regional basis offer tracking and, if providing cross-border

services, can exchange tracking information with partners – and on a similar basis with

shippers. For postal operators, for tracked services across borders (whether inside or

outside the EU) standardised unique parcel identifiers (currently barcodes) are used, and

tracking points (where the barcodes are read in the logistics chain) are also standardised.

Amongst postal operators standards for electronic data transfers, labels, address databases,

tracking points and much else exist (and have done so for many years). Furthermore the

standards are designed for application on a worldwide basis. The governance of such

standards is undertaken by two bodies: IPC and the Universal Postal Union, which work

closely together – IPC members often pioneering development and adoption.

For example, IPC facilitates the E Parcel Group (EPG) which connects twenty-seven

countries within and outside the EEA. The network is based upon standardised tracking

17

events and barcodes and incorporates an Easy Return Solution that interfaces with the e-

retailer, and a customer service process built around response standards that are monitored.

In addition IPC and its members are developing (for deployment in 2013) an Easy Collect

Solution which responds to the requirement of customer choice of delivery location. IPC will

host the consolidation of national databases of alternative delivery locations and make the

information available to IPC’s worldwide membership. In addition the majority of IPC

members offer electronic interconnection to shippers (see Annex 6).

Apart from interconnection across borders IPC’s member postal operators devote

considerable resources – with an estimated present value of some Euro 100 million2 - to

promoting e-commerce, providing advice and building partnerships with customers (see

Annex 5). In a dynamic and developing market, the promotion of awareness and best

practice amongst e-retailers is an essential enabler for improving the choice of delivery

options, and the delivery experience, of consumers.

2 Based upon an average spend of Euro 0.5 million per IPC member over a period of five years.

18

Annex 1

Clarity of Presentation of Delivery Information - Ugg Boots, USA

19

Annex 2

Landed Cost Calculator in action – an example of best practice (Nieman Marcus, USA)

20

Annex 3

Australia Post – Delivery Options

21

Annex 4

Australia Post – Redirection Prices

22

Annex 5

PostNL - support for e-commerce

THE NATURAL PARTNER FOR THE POSTAL INDUSTRY ________________________________________________________________________________________________________

Annex 6

Canada Post – web site integration of shipping tools