Parcel-Delivery Firms and Retailers Experiment With Package Pickup Points
As online shopping grows, they seek new ways to deal with ‘failed’ package deliveries to homes
Mr. Azam’s pharmacy is one of a growing number of UPS Access Point locations—small businesses like drugstores, dry cleaners or cafes with a small storage area where UPS drivers can leave packages for customers to retrieve later.
The managers at Greenfield, which sits just a block from the neighborhood’s main subway station, have set up a storage rack in a backroom where a pharmacist offers health consultations to customers. Mr. Azam scans packages with a device provided to him by UPS, collects a small fee for each one, and holds them until their owners come, show photo ID, and take them away.
But for UPS, Access Point locations solve the more crucial problem of failed deliveries: When recipients aren’t home to receive packages, drivers have to make costly second and even third return trips. UPS said last month that it will expand the number of Access Point locations from just a few thousand now to 20,000 in North America, including new ones in Boston and the San Francisco Bay and Washington, D.C., areas, by year-end.
As online shopping becomes more common, parcel-delivery services and retailers plagued by the failed-package-delivery problem are experimenting with ways to eliminate the often inefficient, maddening “last mile” of the supply chain.
E-commerce hasn’t turned out to be as profitable as delivery companies had hoped. Dropping off items purchased online at homes scattered across a neighborhood adds time, miles and costs to each delivery, while Amazon.com Inc.AMZN-0.28% and its peers are able negotiate low prices based on their huge volumes.
Dropping off packages in bulk and creating incentives for consumers to fetch their parcels at nearby retailers or locker banks dramatically improves the economics of delivery.
As a result, UPS, FedEx Corp.FDX0.67% and Deutsche Post DHL Group’s DHL unit are investing heavily in new systems geared toward getting e-commerce customers to collect their orders anywhere but their homes.
FedEx offers a 24-hour locker system called “Ship&Get” in 31 cities in Texas, as well as Memphis, Tenn., situating most lockers outside FedEx stores or Walgreens pharmacies. In August of last year, the U.S. Postal Service installed 17 “Gopost” lockers in New York and Washington as part of a pilot program. DHL, whose “Packstation” lockers are ubiquitous in Germany, is testing lockers in Plantation, Fla., and it plans to install more of them in Orlando, New York and Miami this summer.
In Chicago, UPS is testing brown-and-yellow, ATM-like smart lockers adjacent to a Staples store and an Aldi supermarket. Customers enter a numeric code to retrieve their packages.
Self-service pickup stations and lockers have been popular for years in Europe, where home delivery can be difficult and more of the population lives in dense urban centers than in the U.S.
Andrej Busch, chief executive of DHL Parcel Europe, said the cost of maintaining locker banks is offset by the savings that result from not having to deliver each package to an individual customer’s address. Most business-to-consumer deliveries are paid for by the shipping fees on each package. By leaving as many as 100 packages at a time at bulk drop-off points, DHL can spread the cost of each delivery over many shipping fees.
“The more parcels you can deliver to a single location, the lower the cost,” Mr. Busch said. In the U.S., however, the challenge is finding the right place for pickup stations. “It’s very, very early to say if this is going to work” in the U.S., he said. Fewer Americans than Europeans commute by train, he said, and more Americans visit shopping centers as part of their regular routines. DHL is exploring putting lockers at shopping centers to “better cater to the American lifestyle.”
For brick-and-mortar retailers, adding lockers outside stores for after-hour pickups would help eliminate the need to pay to ship online orders often covered by free shipping offers.
Several locker makers are actively pitching their products to U.S. retailers and parcel carriers, hoping to replicate their success on the other side of the Atlantic. InPost Ltd., a Polish company that designs lockers that open using a code sent to customers by text message, recently presented its lockers at a logistics industry conference in Atlanta. The company has installed lockers that, it says, can save online retailers 30% a package on shipping costs in Poland, the Czech Republic, Russia and Ukraine. It recently installed about 1,000 of the lockers in the U.K.
Ultimately, InPost and its competitors hope that big-name retailers will commit to the “click-and-collect” locker model and implement it en masse in the U.S. Although few retailers have actually adopted locker technology, some say they are considering it.
“The idea of a locker concept is very much on our minds,” said Terry Lundgren, chief executive of Macy’s Inc.,M0.32% in a recent interview with The Wall Street Journal, although a spokesman said the company has no immediate plans to start using them.
Any parcel carrier or retailer experimenting with lockers is to some extent following the lead of Amazon, which began putting Amazon Lockers in drugstore outlets and grocery and convenience stores in Seattle, New York state and near Washington in 2011.
But some logistics-industry experts doubt the need for lockers and pickup points. Satish Jindel, a longtime industry consultant and the president of the data firm ShipMatrix Inc., said that failed deliveries aren’t a big enough problem to warrant the investment parcel companies are making. A ShipMatrix analysis of 300 million deliveries from shippers to consumers by the major carriers found that only 1.5% of all parcels require a second delivery attempt, and only 0.8% of all parcels require a third one.
Mr. Jindel called UPS’s Access Point program “an operations-driven initiative, not a market-driven” one. “It’s only for deliveries in a bad neighborhood,” he said. “What works in Europe is not going to work here.”