Google delivery's shrewd diversification strategy
Written by David Upton (pictured right), Managing Director at leading provider of mobile data solutions for the transport, retail, healthcare and field service sectors, DA Systems.
Have you heard the one about same day couriers, driverless cars and robo taxis? - it’s all about the (Google) tech. Whatever’s next, flying cars? (Well perhaps automated drones are the future of deliveries, but that’s another story).
Online retailing in the UK is set to reach a total sales value of £87 billion in 2013, a 12 percent year-on-year growth, according to researchers IMRG Capgemini. As e-commerce matures and customer demand mushrooms, same-day delivery services will become more commonplace and are likely to become more cost-effective as competition grows. Increasing numbers of courier companies are now entering the same day delivery market. And established courier companies are diversifying with new collections services. YodelDirect for example has just announced that for the first time it will collect from homes and individuals rather than just businesses.
Courier companies either compete on price, or by offering a more exclusive service than their rivals - perhaps by providing very accurate delivery time windows or a luxury, ‘branded’ service to match the goods being delivered.
Regardless of the courier company’s individual business model, the key ingredient for a profitable same-day delivery or collections service is technology. As Google excels at exploiting this, the company’s anticipated move into this market is less surprising than it first appeared. In fact many brands are looking at the ‘get it now’ attitude, including eBay that offers a same-day delivery service with a one-hour window in selected cities in the US. Offering a same-day delivery option is essential for any e-commerce company/retailer and having this level of convenience is helping to make e-commerce more mainstream. One key driver behind the consumer demand for such fast delivery services is the rise of m-commerce (mobile commerce). If you can buy goods anywhere on the go it becomes a natural expectation to have them delivered almost immediately too.
Reports of Google’s strategy were originally published earlier this year and it is now expanding operations in the US, so look out for announcements in Europe in the near future. Maybe. Given the USA has over 39 times as much land as the UK, and its population density is over seven times lower – this means the average distance that goods have to travel are far greater. If they can make it work in the US, then surely there’s a great business case for the UK.
Google’s broad growth strategy means the brand touches many parts of our business and home lives, and it as adept at applying the technology to specific problems, whether perceived or not. However you look at it, Google will soon ‘own’ the complete ecommerce buying process, from search and browsing, through checkout and payment to fulfilment, and final delivery to your doorstep. Same-day delivery also opens the door to selling advertising and other technology to retailers, and building a loyal following of consumers who see Google or eBay as their daily shopping destination.
It seems the so-called Google Shopping Express service is not only perfectly viable, but demonstrates a logistical diversification strategy focussed on technology and data. Technology underpins a profitable same day courier service - from the courier logistics side right through to the communication with the consumer. You need real-time data feeds to manage the doorstep interface and real-time integration between retailers and delivery agents to make it work. Of course Google is already ahead of its e-commerce rivals with mapping technology – something that most courier and delivery companies use anyway.
In addition, Google can now merge online and offline data. A delivery service provides Google with the ability to merge offline consumer data with the comprehensive data it already captures about consumer behaviour online. Consumers can expect more targeted product advertising and relevant communications in future.
So how do you fund a same-day delivery service? The rationale behind Google’s business model seems sound – a subscription-based delivery programme - directly aimed at Amazon’s Prime service, but for slightly less. In growing their respective same-day delivery programs it has become a fierce race between the US tech giants.
By linking this with existing Google technology, that of driverless cars, and the predicted ‘connected car’ future, does this mean we will have driverless couriers in a fully automated process? More recently it’s been reported that Google is planning robo-taxis, so don’t dismiss the idea immediately. Separately to Google, a network of automated drones could feasibly be delivering your small packages, but it remains to be seen if this idea will ‘take off’(!).
It’s certainly exciting times for doorstep deliveries - increased competition, diversification, better and faster customer service, new opportunities for e-commerce brands and interesting predictions for an automated future - all ‘driven’ by technology, in a quite literal sense.
Driver shortages: Why the industry needs to be worried
While driver shortages are a global problem, with a recent survey from the International Road Transport Union suggesting that driver shortages are expected to increase by 25% year-on-year across its 23 member countries, the issue has very much made itself felt for UK businesses in recent weeks.
A perfect storm of factors, which many within the industry have been wary of, and warning about, for months, have led to a situation wherein businesses are suddenly facing significant difficulties around transporting goods to shelves on time, as well as inflated operating costs for doing so.
What’s more, the public may also see price rises as a result due to demand outmatching supply for certain product lines, which in turn brings with it the risk of customer dissatisfaction and a hit to brand and stakeholder reputation. Given that this price inflation has been speculated to hit in October, when the extended grace period on Brexit customs checks comes to an end, the worst may be yet to come.
"Steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole"
That said, we have already been hearing reports of service interruption due to lack of driver availability, meaning that volumes aren’t being transported, or delivered, to required schedules and lead times. A real-world example of this occurred on the weekend of 4-6 June with convenience retailer Nisa, with deliveries to Nisa outlets across the UK affected by driver shortages to its logistics provider DHL.
But where has this skills shortage stemmed from?
Supply is the primary issue. Specifically, the number of available EU drivers has decreased by up to 15,000 drivers due to Brexit alone, and this has been further exacerbated by drivers returning to their home country during the COVID-19 pandemic, as well as changes to foreign exchange rates making UK a less desirable place to live and work. This, alongside the recent need to manage IR35 tax changes, has also led to significant inflation in driver and transport costs.
COVID-19 complications have also meant that there have been no HGV driver tests over the past year, meaning the expected 6,000-7,000 new drivers over the past year have not appeared. With the return of the hospitality sector we understand that this is a significant challenge with, for instance, order delivery lead times being extended.
It is little surprise, therefore, that the Road Haulage Association (RHA) earlier this month became the latest in a long line of industry spokespeople to write to the government about the driver shortage for trucks. The letter echoed the view held by much of the industry, that the cause of this issue is both multi-faceted and, at least in some aspects, long-standing.
So, many in the industry are in agreement as to the driving factors behind this crisis. But what can be done?
Simply enough, outside of businesses completely reorganising their supply chain network, external support is needed. In the short-term, the government should consider providing the industry with financial aid, and this can also be supported more widely with legislative change.
Specifically, immigration policy could be updated to place drivers on the shortage occupations list, which would go some way towards easing the burden created by foreign drivers returning to their home countries. Looking elsewhere, government should also look for ways to increase the availability of HGV driver tests after the blockage created by the coronavirus lockdowns.
Looking more long-term, steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole. As it stands, multiple sources suggest that the average age of truck drivers in the UK is 48, with only one in every hundred drivers under the age of 25. We must therefore do more to increase the talent pipeline coming into the industry if we are to offset more significant skills shortages further down the line.
On the back of a turbulent year for the supply chain industry, it has become increasingly clear that the long-foretold shortage of drivers is now having a tangible and, in places, crippling effect on supply chains.
Drivers, and the wider supply chain industry, have rightly been recognised for the seismic role they played in keeping the nation moving and fed over the past year under unprecedented strain. If this level of service is to continue, we must now see Government answer calls to provide the support the sector needs, and work hand-in-hand with the industry to find a solution. If we do not see concrete action to this effect soon, we are likely to be in for a turbulent few months.
Rob Wright is executive director at SCALA, a leading provider of management services for the supply chain and logistics sector