Royal Mail to “significantly increase” smart OOH network over next two years

UK postal operator Royal Mail has reinforced its commitment to developing a stronger out-of-home proposition by unveiling plans to significantly increase the number of smart pick-up and drop-off (PUDO) locations in its delivery network over the next 12-14 months.

The plans were discussed by Royal Mail’s Chief Commercial Officer, Nick Landon, and Out of Home Director, Anna Malley, at the Leaders in Logistics Last Mile event held in London last week.

“We already have a huge network of drop off points across the UK,” said Landon. “In total, our network consists of around 130,000 locations including post offices, parcel post boxes, etc., but the proportion of those available for unmanned pick up is only a couple of thousand today. This is our main focus for expansion, and as soon as we decide on the strategy going forward, we will go after it fast.”

Royal Mail is already working with parcel locker start-up YEEP! with around 1,000 lockers due to be added to the post's OOH network from January 2025. The postal operator also has a partnership with Quadient and has launched a commercial agreement with Collect+, the UK’s biggest parcel shop network.

Overall, by early 2025, there will be more than 21,000 locations where Royal Mail customers can send and receive parcels, including over 2,500 lockers, 11,500 Post Office branches, 5,000 Collect+ stores, 1,200 Royal Mail Customer Service Points and 1,200 parcel post-boxes.

A harmonised approach

At the Leaders in Logistics event, the Royal Mail executives also stressed that although the focus is on expanding the firm’s OOH network, it is also essential that the organisation continues to meet the requirements of its universal service obligation. “We can’t turn that off, so a harmonised approach is necessary,” Landon added.

Speaking in a panel discussion on “Boosting the uptake of out-of-home delivery” Malley noted the importance of choice for consumers. “Home delivery is what we are known for,” she said. “We see our volumes heavily skewed towards that, but without a doubt the market is beginning to change, so as the UK’s largest parcel carrier we need to offer our customers choice.

“It is really important that we make sure we are embracing the growing demand for lockers and for PUDO stores, as well as continue to offer a first-class home delivery service,” she added.

PUDO expansion

Royal Mail’s huge drop-off network gives the firm a “big starting advantage” when it comes to developing an OOH network, according to Landon. “There are still opportunities to expand this further,” he says. “But we must do this in a cost-effective way alongside significantly expanding unmanned OOH and locker locations.”

Landon noted that Royal Mail plans to continue expanding the number of PUDO points in its network thanks to partnerships with carrier agnostic network providers, such as YEEP! and Quadient. “In terms of what the penetration needs to be for smart solutions, where people can pick up and drop offer bigger items, then I believe we will need somewhere between 50,000 to 60,000 locations across the UK.

“We are currently working out what we need to prioritize and who we should be working with,” he continued. “We want a big PUDO network, but we don’t want to make any stupid choices. The network needs to have a good return on investment, especially bearing in mind that we will still need to operate the USO.”

Customer trends

During the Leaders in Logistics Last Mile event, Landon also discussed some of the key customer trends shaping the e-commerce and delivery markets currently. In terms of parcels growth in the UK, he believes that the market will grow by around 2-3% every year “up to a ceiling of about 60% market penetration,” he noted. “After this, parcels volume growth will be much closer to GDP growth.”

Landon also highlighted how consumers are increasingly buying goods on social media platforms and a growing number of parcels are now coming from marketplaces, especially from fast growing Chinese e-commerce sites such as Temu and Shein.

“One trend accelerating the growth of the PUDO market is the growing preloved sector,” Landon continued. “The consumer-to-consumer market is using lockers and OOH locations for parcel drop off and collection, and this will further drive the requirement for a strong OOH network, which will hopefully discourage the likes of Vinted Go from launching its own carrier network!” he added.