B to C deliveries under threat

Livraison Paris

Why the worrying title, I hear you cry?

In these turbulent times, it is easy to forget the impact of the dramatic changes that punctuate our day-to-day lives. The world of transport is no exception; many changes are taking place that will impact upon e-commerce.

So let’s step back for a moment to look at what has been happening in the world of French transport over the past few months and the different branches within the sector. This should give us a better idea of the risks facing online retailers.

Home deliveries

– In late 2011, Colissimo, the leading delivery product for online retailers, changed its approach to not only distinguish more clearly between its various services but also to limit compensation costs for delays. This change in policy for Colissimo includes ending its 48 hour delivery guarantee and introducing a less favourable compensation policy for delays. This has had a direct impact on some retailers, who were previously able to reclaim a significant portion of their transport expenditure through LA POSTE’S generous reimbursement policy. This way of operating is now greatly restricted and it is unlikely that rates will be lowered as competitors are finding it difficult to make a profit in this market.

– ADREXO was facing severe financial difficulties before changing hands in early 2012 and great challenges still lie ahead for the new company, Colis Livré. Given that this company is the only alternative postal operator to LA POSTE for envelopes and parcels, the months ahead will be important in preserving competition against LA POSTE.

How will this impact on online retailers?

These delivery services are vital to e-commerce as they meet the needs of many retailers who sell products of low value or weight, for whom delivery costs will influence whether or not a customer will empty their basket.

Courier services

Courier services have been plagued by financial difficulties for years. What is interesting is that the effects of the 2008-2009 crisis are only now becoming apparent.

– 2011 saw the takeover of MORY.

– SERNAM went into administration in 2011 and was subsequently taken over in 2012.

– Ducros Express (previously DHL’s courier division) underwent restructuring in 2011.

– Cooljet was taken over by GEODIS in 2009.

This list is by no means exhaustive but it clearly demonstrates how the courier sector is becoming concentrated under a few major companies, a trend which is likely to continue.

How will this impact on online retailers?

Courier services? They don’t really affect e-commerce, you say. Yet we often forget that they directly impact on certain categories of distance selling, such as household appliances, DIY, gardening, furniture, wine and car parts. Retailers in these areas should expect to see an increase in transport costs and a more limited choice of delivery solutions.

Transporting bulky goods

There is a separate market for the delivery of bulky products and related services (such as installation, connecting up, assembly, removal of old products, and so on). Few companies are involved in this market and it is difficult to have coverage of the entire country without resorting to partnerships or subcontracting.

It can be difficult, particularly in e-commerce, to make a profit in this area. Costs can easily soar for a delivery requiring two people (for example fridges, freezers, furniture, etc.), while the price of the goods themselves is not always high enough to allow for a large delivery budget. The problem becomes apparent in the case of, for example, a 288L fridge (150cm high and weighing 70kg) costing less than 300 euros with delivery included…

– The difficulties encountered by GIRARD with its Agediss operations, which led to it going into administration and subsequently being taken over in 2010, serve to illustrate these challenges.

How will this impact on online retailers?

To compete with shops and the delivery and installation services they offer, online retailers must have a national distribution solution. The current state of the market means that this remains a very real challenge for us, particularly outside of the main consumer centres.

Pick up points

In this area too many changes are taking place and ensuring profitability can be risky. We should expect more changes to the pick up market in the medium term.

The future of delivery via pick up points remains uncertain and there will no doubt be many developments to come as there is no shortage of challenges:

A crowded market:

How can all these networks exist alongside that of La Poste (the Réseau Pick Up, which covers the Coliposte, Chronopost and Exapaq products)? There probably is room for one alternative network to La Poste, but not necessarily any more than that (Kiala, Relais Colis, Mondial Relay, etc.) as it is difficult to make a profit in this market.

Indeed, in order to attract customers these companies have to offer rates that are lower than those for home delivery by the postal service. To do this, they have to ensure that a minimum number of parcels are dropped off at each stop within the pick up network to avoid spiralling costs. And so the price war will continue.

Poor coverage: What is paradoxical about the point above is that despite the plethora of competing networks, a large part of the country still does not have sufficient pick up points, as there are not enough parcels to sustain them. From the customer’s point of view, however, a pick up point has to be within easy reach. If it is not then they will always opt for home delivery.

High turnover:

Each network is subject to an uneven geographical distribution in the number of deliveries it handles across the area it covers. Certain areas are overloaded while others are hardly worth covering. Some traders therefore find the workload too heavy for the money on offer, while others don’t see the point in providing a pick up point in quieter areas. In both cases this leads to a high staff turnover in the pick up points, which is not good for service quality and can undermine e-customers’ loyalty to a particular pick up company. 

I hope :) that this overview has given you a better understanding of the challenges facing us in delivering goods to customers in France. Without wanting to be all gloom and doom, it is important to be aware of the realities in this market, as without distributors there is no e-commerce. In the next article we will see that it is not a case of discouraging foreign online retailers from Europe’s 3rd largest e-commerce market, but rather of seeing how we can best understand it in order to minimise the risks inherent in its transport market and to use it to distinguish your business from competition.

In the meantime, I hope that this article will encourage you to share your view of the market or your experiences of working with French transport companies in your own business.

More about deliveries in France.

 

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