DHL recently kicked off the month of March with the opening of a “game changing” parcel sorting centre near Poznan in the west of Poland. The facility can handle an impressive 1 million parcels per day at full capacity, and is set to serve consumers both in Poland and Germany.
The opening of the new sorting centre comes as the battle for parcel delivery supremacy is hotting up in both markets.
This was clear during the press conference that marked the opening of the facility, in which Agnieszka Świerszcz, CEO of DHL eCommerce Poland, stated that Poland’s DHL eCommerce market had been growing by 20% year-on-year.
Dr Tobias Meyer, CEO of DHL Group, also remarked that this growth was obviously something DHL would want to be part of. “This is why it’s [the parcel sorting centre] in Poland, for domestic reasons, as well as to enhance international connectivity,” said Meyer.
Among other things, the centre has been designed to significantly increase the speed of parcel processing.
However, according to Pablo Ciano, CEO of DHL eCommerce, speed is not everything when it comes to the eCommerce delivery experience.
Speaking to trans.iNFO at the opening of the new International Logistics Centre, Ciano praised Poland’s eCommerce delivery performance, and also answered questions on pressing topics like qCommerce, the growth of Chinese online marketplaces, expectations from e-tailers and e-commerce platforms, as well as his thoughts on the closed vs open parcel locker network debate.
How does Poland’s eCommerce delivery experience compare?
First off, we were keen to get Ciano’s thoughts on the eCommerce delivery experience in Poland. Is it really one of the leading countries in this area?
Asked for a score out of ten, the CEO of DHL eCommerce replied:
“I’d give Poland a very high score. The country has a very well developed market that has for a long time invested in developing the user and consumer experience. It is ahead of other countries in terms of optionality, including the availability of delivery options, as well as user interfaces in digital tools. So I’d give Poland 9 or 10 compared to others.”
In Ciano’s opinion, it’s these delivery options that are one of the main differentiators. It’s also an area where Ciano believes Poland’s eCommerce and parcel delivery sector has exceeded in.
Moreover, the DHL eCommerce CEO is of the view that this optionality now trumps speed when it comes to what consumers really value:
“Consumers look for many different attributes in their delivery experience. Ease of rescheduling a delivery is of course one of them, as well as speed. However, those delivery options have now surpassed speed in terms of importance. Today, consumers are more interested in having the option to choose whether to have a doorstep delivery, or pick it up from a locker, or re-route it to a different location, rather than the actual speed of the delivery itself,” Ciano told trans.iNFO.
Open versus closed parcel locker networks
One of the reasons for Poland’s eCommerce delivery experience having a positive reputation is its abundance of out-of-home delivery options, including countless parcel lockers operated by a variety of different players.
The situation has nonetheless spawned a debate about whether this is all necessary, and if open parcel locker networks could be better for all concerned.
In Ciano’s view, the situation is not clear cut, and “depends country-by-country and market-by-market”.
The CEO of DHL eCommerce also made the point that parcel locker delivery is about so much more than the locker itself:
“We haven’t seen much success in open networks that aren’t connected with bigger logistics infrastructure. The locker itself is a very important part, but it’s one piece of the puzzle. Just as important as the locker is the first-mile and the middle-mile moving volumes for eCommerce. These services require a lot of sorting capacity as you can see here in this Poznan hub. That’s why some companies that have only deployed lockers have not had as much success,” Ciano told trans.iNFO.
So what would be optimal in most cases then? Ciano believes that having the right amount of players is key here:
“Too many locker providers and 5, 6 or 7 different locker networks in 1 country will crowd the market too much, and none of them will be efficient enough to utilise their assets. If there are very few networks, that can also lead to a monopoly, and of course a gatekeeper situation that’s not favourable. I think we are more in need of having 1-3 local networks that will maximise capacity, and if those are open to different users or companies, we’ll be open to that. In many countries, we open up our network to other competitors, and we have no problem doing so,” said Ciano.
Meeting the demands of eTailers and eCommerce platforms
The rise in the use of parcel lockers and PUDO points throughout Europe has seen online retailers come to realise the importance of providing their clients with a range of delivery options.
Ciano believes that this is now a “key component” of an online retailer’s value proposition. He also observes that many online marketplaces have transparent delivery ranking systems that can be a springboard for some carriers to expand their volumes substantially through positive feedback.
Citing the Turkish market as an example, Ciano told trans.iNFO:
“In many ways, that ranking leads to companies getting more or less business. For example, we acquired a company in Turkey a few months ago. We are one of the main providers there for logistics services in the Trendyol marketplace, which is one of the largest in the country. We have seen our consumer preference ranking going from 7th to 2nd. Now, when we’re number 2 in the list of companies based on the consumer rankings, there has been a significant expansion in the amount of business.”
Ciano added:
“It’s all highly correlated with consumer experience. It’s clear what consumers are opting for and that accommodating these preferences leads to growth. The retailers want that transparency, and they want to have the consumers being the ones deciding who provides a good service as well as having the option to decide. That’s a very important part of the online ecosystem, and of course marketplaces and eTailers are focusing on that too.”
Fulfilling orders from China
Another trend that is visibly growing in the world of eCommerce is the success of Chinese online marketplaces. Although AliExpress has been around for some time, there are now other players on the scene like Temu, which in turn has seen more parcels being shipped into Europe all the way from Asia.
Has the recent disruption in the Red Sea affected these deliveries? In Ciano’s opinion, not so much, as most of these parcels arrive in Europe directly via air:
“Usually Chinese eTailers like Temu, Alibaba and AliExpress have such volumes that they can source their airline haul capabilities themselves. They’ll fly their parcels outbound from China and bring them into Europe that way. They’ll also very likely do the clearance themselves, and then pass parcels onto us for last mile delivery. This is perfectly fine because it’s exactly where we specialise. These Chinese platforms are today the fastest-growing sector in our portfolio of customers.”
This isn’t to say that completing the process of these deliveries is a piece of cake. One significant challenge comes in the shape of sudden demand surges that can happen suddenly during sales promotions.
“The only main issue that we’ve seen with those types of big marketplaces in general, not only Chinese ones, is that you need to have the last mile delivery capacity to flex volumes very rapidly. The gap between a normal week or a normal day versus the volumes we receive when this marketplace is doing a promotion, could well be over 100%. So coping with that capacity has meant that first and foremost we had to expand our out-of-home to have flexible last mile delivery options,” DHL’s eCommerce CEO told trans.iNFO.
Ciano added that this not only means conventional options like parcel lockers and PUDOs in stores, but also innovations such as ‘social points’.
“In countries like the Netherlands, we’re now piloting what are being called ‘social points’, which involve someone in a neighbourhood who is willing to serve as a delivery collection person. We will then deliver to this social point, and the person will handle the package in exchange for a payment. Having the ability to flex all of that is becoming a core capability of companies like DHL eCommerce.”
Viability of qCommerce
Finally, there was also time to ask Ciano about the future of qCommerce, which has gone through a rather turbulent period of late.
Since the heady days of the pandemic, a number of express deliveries companies have either gone bankrupt or been acquired by competitors in cut-price deals. Meanwhile, scrutiny of the sector has brought about changes in legislation to protect worker’s rights, putting additional pressure on costs. This has inevitably led to fierce debate as to whether qCommerce is actually viable.
Asked for his opinion on the outlook for qCommerce, Ciano told trans.iNFO:
“We don’t think that it’s sustainable. We all know what happened in the pandemic. It distorted a lot of things in our day-to-day life, and there was some appetite at some point in time to have those super fast deliveries. However, except for very few niches like food delivery, it is no longer required to have goods delivered so quickly, for example within 20 minutes.”
Ciano continued:
“It’s not sustainable because of the availability of resources, working conditions and economics. A lot of the companies that were specialised in qCommerce, or were trying to focus on quick deliveries, are probably no longer in business because they’ve all struggled with the economics. It was extremely complicated to make the financials work.”
The difficulties referred to by Ciano thus indicate that qCommerce will end up being a niche service contributing to a fraction of the last mile deliveries made on a daily basis.
“We believe that that type of operating model is going to make up a very small percentage of the deliveries. The majority of eCommerce is going to be normal 1 or 2 day deliveries, and they’ll be more focus on delivery options, out-of-home, as well as sustainability and decarbonisation,” concluded DHL’s CEO of eCommerce.