Digitalisation, dynamic pricing and micro-fulfilment can help posts, execs say

Geopolitical uncertainties, the rising cost of living and fluctuating volumes will continue to have a big impact on the delivery sector this year – but firms need to stick to their strategies and remain agile ready for growth to return.

Those were the key messages coming out of the Leaders’ Forum panel session, “Digital, sustainable, efficient: logistics in a post-Covid world,” held at the Leaders in Logistics Summit in London earlier this week (March 28-29).

The panel, which included senior figures from Geopost, Zencargo, Open Pricer and Pos Malaysia, discussed the impact of geopolitical uncertainties on business strategy and investment, how digitalisation can improve operations and consumer experience, and the need for agile pricing methods to help reduce losses.

“Growth will return”

Reflecting on 2022, Thiemo van Spellen, Group Global Accounts Managing Director at Geopost, said: “At the start of 2022 we were still experiencing a normalisation following the Covid situation which saw volumes and business grow like crazy. Then came Russia’s invasion of Ukraine, which has accelerated negative trends in the delivery sector. Looking at Europe, consumer online spending is down, which is having an impact on our volumes.

“However, this is a temporary situation and not a permanent decline of e-commerce,” he continued. “Growth will return so it’s important for us to continue to focus on our long-term perspectives, which include growing our core business and diversification, such as strengthening our presence in the food market, out-of-home delivery, and growing our cross-border business.”

Marketplace insourcing

Charles Brewer, Group CEO of Pos Malaysia, noted how inflation is rising in Malaysia leading to a “considerably softer market and lower parcel volumes.” The postal operator is currently seeing a 30% year-on-year reduction in parcel volumes, which is a combination of the macroeconomic environment and increased competition.

“Two very large e-commerce platforms cover Southeast Asia, and they represent about 60% of the market,” Brewer said. “About five years ago, they were doing about 4-5 million parcels a month with us, but yesterday [March 27] they did just 21,000 parcels. They have insourced their logistics quite considerably.”

AI-based customer service

Brewer took over as Group CEO of Pos Malaysia in 2021 to drive transformation at the post. One of the key pillars of its transformation strategy is digitalisation. “When I first walked into Pos Malaysia, digital concepts didn’t really exist, so we were starting off from a very low base,” he explained. “Our transformation plan aims to fix the basics first and then transform into Pos Malaysia 2.0.

“We are currently looking at the customer journey and how this can be improved. For example, we have recently introduced chat bots to handle customer enquiries as we found that customers didn’t really want to pick up the phone. We are now using ChatGPT to answer questions. 48% of our enquiries now use this method. This has also helped us to reduce costs and provide a better experience,” Brewer added.

Other digital investments made by Pos Malaysia as part of its transformation plan include moving systems to the cloud, which has reduced associated costs by about 40%, and using data to identify performance issues.

More dynamic pricing needed

Another key topic discussed during the panel session was pricing and whether it can be used to offset any losses coming from higher operational costs and lower volumes. Daniel Rueda, Chief Executive Officer at Open Pricer, a tech company specialising in pricing, believes that postal companies need to be more agile when it comes to pricing methods.

“It is difficult to pass on cost increases to customers, especially as today the industry pricing methodology is done on a yearly basis,” he said. “I think one of the most important points is that the industry should move toward more dynamic pricing.”

To be able to achieve this, Rueda noted how delivery firms need to better measure capacity utilisation. “Just like some airlines do, carriers should be able to increase prices when there is a lot of demand and less capacity and decrease them when there is less demand and more capacity. In other words, prices should be decided based on available capacity. The more dynamic pricing can be, the better.”

Pos Malaysia, meanwhile, has been able to offset some of its mail volume losses due to price increases for unregulated mail, according to Brewer. “We currently handle about one million mail pieces a day, which is down 14%, but revenue is constant because we use price to maintain it as best we can,” he said.

Brewer added that tough competition in the parcels market, from “heavily funded” private companies offering competitive prices, makes it very hard to put parcel delivery prices up. “We would just lose more market share,” he said.

Micro fulfilment benefits

The panellists also discussed demand for micro fulfilment solutions. Alex Hersham, Co-Founder and Chief Executive Officer at Zencargo, a digital freight forwarder, noted how the micro fulfilment model “makes a lot of sense,” especially when considering downstream delivery, but complications come when you look at how to get the inventory to these locations in the first place.

“You also need to ensure that inventory is flexible and can be moved quickly if needed,” he said. “The right technology can help with that, and overall micro fulfilment can benefit the consumer and the environment, due to faster delivery.”

Brewer noted how Pos Malaysia is looking at its 631 postal points can be better utilised for micro fulfilment. He commented: “Many of these points have large warehouses at the back, which have become less utilised, so we are looking at how we can leverage these. We are targeting D2C brands and talking to them to see how we can place products closer to the consumer.”

Meanwhile Geopost’s van Spellen noted how delivery companies are well positioned to combine smaller brands’ products to build up micro fulfilment. “This model is interesting, but it is still in the early stages. We are exploring it already in some countries, such as France which is at a much higher level than others. It is important to remember that every country is different and may have different requirements.”

Geopost sustainability whitepaper

Meanwhile, alongside Stella Vatcheva, Global Head of Innovation at Euromonitor International, van Spellen also presented the first findings from Geopost and Euromonitor’s new whitepaper – Sustainability in Times of Uncertainty – which is due to be released next month. One of the key findings from the whitepaper is that 77% of companies surveyed have expanded their sustainability initiatives when compared with 2019.

The paper will also reveal how sustainability should be a shared investment between businesses, investors, customers, suppliers and consumers in the future and that collaboration is needed to support and set standards and regulations.

The whitepaper sets out a blueprint for navigating sustainability through economic headwinds, which highlights how partnerships are key, data-focused dialogue with customers is essential, and a focus on in-house and social sustainability is needed.