August 19, 2015
special report | Demand-Driven Distribution

"Just drop it in my locker"

"Just drop it in my locker"

Consumers are embracing parcel lockers, where they can retrieve (and often return) parcel shipments at their convenience. Delivery firms are taking note.

By Mark B. Solomon

Can Nigel Thomas become New York City's parcel locker king? The odds are clearly stacked against him. Major players like UPS Inc., Amazon.com, and the U.S. Postal Service (USPS) would seem poised to claim parcel locker supremacy in the nation's biggest market. By contrast, Thomas's company, Brooklyn-based GoLocker, less than a year old, has lockers in just five locations in the New York borough.

But Thomas, 39, is thinking big. He has set his sights on densely populated areas like Manhattan's Lower East Side, an area packed with multi-unit apartment buildings that generally don't have doormen or concierges to accept packages. He believes that GoLocker's business model, which is based on setting up urban distribution centers where the big delivery firms can drop off packages and avoid making costly and time-consuming residential deliveries, will gain substantial traction. Thomas is also banking on his 14 years of experience as a system engineer at FedEx Corp. to work in his favor because he brings an understanding of logistics practices that he thinks his rivals don't have. GoLocker charges a flat fee ranging from $1.99 a package to $14.99 for unlimited monthly deliveries to lockers. There is no charge to drop off a package.

Thomas may never rule New York's parcel locker domain. But he could carve out a profitable niche. That's because the U.S. market is still uncharted territory. Since November, UPS has pilot tested self-service lockers at nine locations in Chicago; a decision on whether to expand or modify the program, continue as is, or pull the plug will likely be made by the end of October, according to Kalin Robinson, director of new product development for the Atlanta-based shipping and logistics giant. USPS has manual lockers—units that are opened with a key—inside many of its post offices. Since 2012, it has run a pilot program using automated lockers located around post offices in the Northern Virginia suburbs of Washington, D.C. The program, called "GoPost," was expanded in 2013 to Brooklyn and Manhattan. FedEx Corp. has 80 locker locations in Dallas and its home base of Memphis, Tenn., through its "FedEx Ship & Get" program. Amazon launched its locker program four years ago and today has lockers in six states. The Seattle-based e-tailer pays retailers a fee to place its lockers in their locations.

A MATTER OF CONVENIENCE

Parcel lockers operate on the fringes of logistics and will likely continue to do so. But in a world where digitally obsessed consumers want as many options and as much convenience as possible, no one expects the model to disappear. In a 2015 survey commissioned by UPS, one-third of U.S. online shoppers said they want packages sent to locations other than their home, compared with 26 percent in the 2014 survey. A rising preference for alternate delivery locations could become a factor in which retailer a customer selects and which delivery company handles the goods.

The normal locker pickup process works like this: Once a package is delivered to a locker, the customer receives a digital pickup code via e-mail or text message. The customer enters the unique pickup code, as well as personal identification, on a touchscreen at the kiosk. At that point, either the assigned door will open automatically for package collection, or the customer will be prompted to enter the compartment number once it appears on the touchscreen. Generally, customers have up to three days to retrieve the parcels once they receive initial notification.

Parcel lockers today are often used as a backstop delivery option in the event a customer cannot accept a package at the primary location, or if the main delivery point is not secure. Yet that isn't always the case. UPS's "My Choice" program, which allows end customers to direct their own deliveries, has an option for users to redirect their packages to a locker location as long as it's within a predetermined distance from the residence, according to Robinson. USPS has a similar program, according to Kelly Sigmon, vice president of retail and customer service operations. USPS and Amazon also accept returns at locker locations.

Present-day parcel-locker strategy is based more on customer convenience than provider cost. But that may change at some point. For example, UPS sees parcel lockers and "access points" like retail establishments that are open late as important tools to drive down costs by reducing the frequency of repeat attempts at delivery, according to Robinson. "Consumers should keep in mind that they, too, benefit from the parcel carrier's lower operating costs, since the delivery companies base pricing in part on costs," said Rob Martinez, president and CEO of Shipware LLC, a consultancy.

There are few boundaries to selecting parcel locker locations. They can be placed in bodegas, subway systems, condominiums, convenience stores, dry cleaners, or any establishment that provides access during off hours when most people pick up their packages. Or they can be gleaming standalone structures like the UPS prototype in Chicago. There is even talk of developing temperature-controlled lockers that can accommodate shipments of perishables.

THE PUSH INTO CANADA

Although the parcel locker model is relatively new to the United States, it's a familiar one in other parts of the world. For a number of years, parcel lockers have been part of the landscape in Europe, where densely populated and space-constrained urban centers make the lockers relatively popular.

The biggest splash in North America is occurring in Canada, where InPost Canada, a joint venture of UCAN Post Inc. and Polish firm Integer.pl group, a major European parcel locker company, is working on a pilot project with Canpar Courier, one of Canada's largest couriers, to use lockers for second-delivery attempts if the end customer is not present at the primary location. InPost Canada deployed its first locker last November and handled its first parcel in early August. It has received $127 million in financing from various parties; most of the financing went to easyPack, the operating name for the European parcel locker concern. InPost Canada started with 200 locker locations and plans to operate 1,000 nationwide by the end of 2016, the company said in late May.

Tony Jasinski, InPost Canada's CEO, says the company's business model is "agnostic," meaning it will make its equipment available to retailers, delivery firms, or just about anyone willing to pay for it. According to Jasinski, InPost Canada offers a ready-made network that enables users to avoid the hassles and expense of site selection, operation, and maintenance. Some companies will try to build locker networks on their own but may find they've underestimated the work involved just in finding suitable locations, not to mention the ongoing costs and resources to market and operate the equipment. At that point, they may decide to turn to a company like InPost Canada with a core competency in the segment, he said.

Jasinski said, and Robinson of UPS confirmed, that the companies are in advanced talks about a partnership in Canada.

InPost Canada has also developed a "virtual address" program for Canadian consumers that want to order from U.S. retailers that currently don't deliver in Canada. Under the program, Canadians can have merchandise delivered to a specially designated InPost Canada U.S. address. InPost Canada will then transfer the parcels to a locker in Canada for pickup. Consumers will pay a fee for the program, Jasinski said.

About the Author

Mark B. Solomon
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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