Hermes UK will press ahead with its digital innovation strategy and aims for another year of double-digit growth after a strong performance in 2018, CEO Martijn de Lange told CEP-Research in an interview.
The B2C specialist, which sees itself as the second-largest delivery company in the UK behind Royal Mail, delivered some 335 million parcels last year compared to 296 million in 2017. This 13% rise with an additional 39 million parcels was the sixth year in a row of double-digit volume growth.
“We will be aiming for double-digit growth again,” the Hermes boss said at The Delivery Conference in London on Tuesday. “But it is getting harder if you are a bigger business. We are going to be growing by, let’s say, 30 million to 40 million, and a couple of years ago we were growing by 22 or 24 million. So it’s in that range again of maybe 30 million parcels. It will be the same kind of growth with low double-digits.”
But with British online retail growth slowing over the last few months, the Dutch-born manager cautioned: “There are more uncertain economic times. Brexit is definitely holding the economy back and the economic environment is tougher, even for a growth industry like online (retail).”
Pure players who had seen “huge” growth over the last few years “cannot be doubling their business all the time” while some traditional retailers were facing serious difficulties, he pointed out. “I would say the most likely scenario is that we will still be growing well in absolute terms but in percentage terms it might be a couple of percent less.”
However, Hermes benefited from a mixed customer base of retailers, e-commerce players and international clients. The company is the main carrier for about 80% of British retailers, resulting in a “big” share of the UK B2C market, he underlined.
Addressing more than 1,200 conference delegates earlier in the day, de Lange said that Hermes had seen particularly strong growth last year in next-day deliveries (+43%), deliveries to parcel shops (+31%) and international shipments (+66%).
Importantly, the 2018 peak season proved very successful with 1.9 million parcels delivered with a service level of over 99%, resulting in a seven percentage point rise in the Net Promoter Score to 72%.
Under its ‘Digital Futures’ initiative, Hermes last year introduced various new products and services, including a 2-hour ETA for deliveries, real-time tracking and new options to divert parcels to alternative locations such as a safe place.
This year, the company will step up the pace with more innovations. Top of the list is a new app that features more delivery options including diversions to parcel shops and parcel lockers (operated by new partner InPost); more proactive notifications; details of the courier delivering the parcel; and user pictures of their preferred safe place. In addition, users with return parcels are given an ETA for the courier collection or can drop the items at a parcel shop or parcel lockers.
Another innovation is the launch of Hermes Play, which aims to ‘personalise’ parcels by enabling the sender of a parcel to connect with its recipient through a recorded personal video message. The sender can upload the message through the Hermes Send app. A 2D barcode (similar to a QR code) is then created which is added to the parcel label. The parcel recipient is invited to scan the code and watch the video message on their phone or tablet.
Initially for private senders, this will be rolled out later this year to retailers who can use the function to personalise their service, offer sales promotions or highlight other offers.
In the international market, Hermes UK grew its small cross-border business strongly last year. “Export has been brilliant, it’s the strongest year we ever had, we doubled the size of the business,” de Lange told CEP-Research. “We’ve grown from around three million parcels to six million, and gained some really big clients,” he said. In contrast, import growth had been much slower, however, possibly due to European retailers not pushing UK sales ahead of Brexit, he suggested.
Asked about operational planning for a possible ‘hard’ Brexit, de Lange said Hermes would continue to truck most international shipments via Dover given that the cost of flying would be “completely uncompetitive” and there were few other options.
“I cannot create contingency planning for getting to the other side of the water. That has to be something that the government organises for us. And if not, then everyone is in the same boat. It’s not something that Hermes can specifically resolve,” he commented.
But in terms of what it can do to prepare for Brexit, Hermes is encouraging its clients to ship goods with ‘Delivery Duty Paid’ (DDP) to reduce potential customs issues for recipients, upgrading IT systems, doing general operational planning and ensuring that its EU nationals have all relevant UK residency and working permits.
Hermes will also invest further in its network this year, increasing the capacity of its Rugby hub by 50%, opening a new depot in Nottingham and launching its Tech Hub in Leeds.
