There’s no denying that the adoption of out-of-home (OOH) delivery is gaining momentum. While at home delivery remains the standard, a recent report conducted by Last Mile Experts found that the preference for at home delivery has dropped 9% in the past year among European shoppers.
At the same time, carriers are investing heavily in expanding their out-of-home delivery networks, with the number of parcel lockers up by 29% and service points up by 6% in 2023 alone.
It’s clear that even in a well established industry like logistics, big changes are underway. For online retailers looking to stay competitive, out-of-home delivery is less of an optional alternative and more of a strategic necessity.
“Offering a strong alternative to home delivery is not just an advantage; it’s essential for staying competitive.” – Sabi Tolou, Co-founder at Sendcloud
Not only does OOH delivery help address growing consumer demand for flexibility and convenience, but it also offers significant operational advantages. From higher delivery success rates to lower last-mile costs and increased conversion, online retailers who implement out-of-home options at checkout are already reaping the benefits.
But what is driving this shift to out-of-home delivery? And how does offering OOH options at checkout give retailers a competitive edge?
Read on to find out how out-of-home delivery is shaping the future of e-commerce:
- The meaning of out-of-home delivery
- Meeting customer demand for convenient and sustainable shipping options
- Making last-mile delivery more efficient
- Cost-effective shipping solutions make e-commerce more profitable
- Why retailers who offer out-of-home options will win more customers in the future
The meaning of out-of-home delivery for merchants and customers
Out-of-home delivery is the delivery of a parcel to a secure pick-up location other than the recipient’s home address. The most common methods of out-of-home delivery include:
- Pick-Up Drop-Off (PUDO) points: staffed parcel collection points often located in a retail location such as a neighborhood shop, supermarket, or pickup at a retail store.
- Parcel lockers / Automated Parcel Machines (APM): Autonomous, self-serve collection points that are often accessible 24/7. Recipients can pick up their package by scanning QR or similar digital code to unlock the locker containing their package.
Out-of-home has become an increasingly popular delivery (and return) method over the past few years.
For merchants and carriers, out-of-home options are a more efficient and cost-effective way to meet growing delivery demands. For customers, out-of-home delivery offers a convenient alternative to waiting at home for a package, and is also perceived as a more eco-friendly alternative to home delivery.
Customers want convenient and sustainable delivery solutions
As the e-commerce industry adjusts to rising prices and economic inflation, the era of ‘fast & free’ delivery is being challenged by customer preference for convenient and sustainable delivery options. While speed and price are still two of the most important factors driving customer buying decisions, the way customers view convenience has shifted post-COVID.
There’s no ‘one-size fits all’ for parcel delivery
Getting something delivered to your doorstep is no longer the best option if you’re back at the office or out and about. In fact, waiting at home for your delivery to arrive can be quite inconvenient.
In Sendcloud’s recent 2024 Out-of-Home Delivery Survey, we asked online shoppers what factor would persuade them to choose out-of-home delivery over at home delivery. The convenience of not having to wait at home for a package was the top choice with 55% of the vote.
Alongside this need for convenience, there is an increasing ‘anywhere, any time’ mentality of digitally native shoppers. Our survey revealed that younger customers (ages 18-30) and serial shoppers (2 or more online purchases per week) are more likely to buy from online stores that offer flexible delivery options, such as the ability to adjust delivery time and location and choose a secondary delivery method if the first attempt is unsuccessful.
This demand for flexibility and convenience means there’s no ‘one-size fits all’ for parcel delivery. Out-of-home options, particularly 24/7 automated parcel lockers, have gained popularity as a convenient alternative for many shoppers to get packages delivered on their terms – improving the overall customer delivery experience.
“As people’s lives get busier, the convenience of picking up a package on your own time without having to wait at home will make [OOH] the preferred option, especially among younger consumers.” – Jordy Holthuijsen, CCO at XXL Nutrition
A growing need for sustainable delivery
Sustainability is a key topic across many industries, and e-commerce is no exception. According to our 2023 E-commerce Delivery Compass, 54% of customers expect online stores to offer eco-friendly delivery options at checkout and 37% are willing to pay more for sustainable alternatives.
This marks a shift in the way shoppers are thinking about their purchases. While our Out-Of-Home Delivery Survey indicates cost and convenience still outweigh sustainability when it comes to delivery preferences, 41% of customers believe that the increase in online shopping is a problem for the environment.
This number increases to 56% for respondents under 35 years of age, pointing to the fact that this concern will only become more pressing as younger generations gain purchasing power.
While the overall environmental impact of out-of-home delivery is difficult to measure, our survey shows that 45% of customers see out-of-home delivery as a more environmentally friendly option than home delivery.
C2C shopping is increasing demand for out-of-home
Conscious consumerism has also fueled the rise of C2C second-hand commerce platforms like Vinted. According to Geopost’s most recent trend report, almost 3 in 4 European shoppers regularly shop on C2C sites in an effort to save money and support more sustainable shopping habits.
In addition to fighting fast fashion, these C2C platforms operate using primarily out-of-home as a more sustainable and cost-effective delivery method. The rise in C2C commerce has increased the adoption and use of parcel lockers and PUDO points among consumers and helped solidify OOH as a viable alternative to standard home delivery.
Last mile delivery solutions need to become more efficient
Customers may still expect fast and free shipping, but this way of doing business has proven unsustainable for all but the biggest retailers. For most e-commerce brands, maximizing operational efficiency is key to making the most of slim shipping margins.
According to the Last Mile Experts Report, the e-commerce market in Europe is showing signs of recovery after facing a downturn in 2022 – growing 2% last year. This growth has been partially driven by the expansion and adoption of out-of-home (OOH) delivery solutions, which are proving to be both financially and operationally beneficial for online retailers and delivery partners.
Out-of home delivery helps reduce last-mile emissions
The adoption of out-of-home makes last-mile delivery more efficient by consolidating the number of stops a delivery driver needs to make. Instead of making 50 stops to deliver each parcel to individual homes, a driver can make one stop at a PUDO point or parcel locker and deliver everything at once.
“Parcel lockers are important to the city government because they don’t want too much traffic coming in and out. So if a delivery driver can drop all their parcels in one place, it’s beneficial for the neighborhoods and environment.’ – Sem Geurten, Account Manager Strategic Partners at DHL
Use of out-of-home delivery networks has several advantages during last mile delivery:
- Reduces city traffic with less delivery vehicles in city centers
- Less CO2 emissions (if delivery fleet is not electrified)
- Helps manage labor shortage, especially during peak shopping periods
While out-of-home is not a sustainability silver bullet, it does improve carrier efficiency during last mile delivery and reduces the number of delivery vehicles on the road.
“If we can consolidate the last mile by delivering 50 parcels at an out of home delivery point, then we can reduce 25% of the CO2 emissions. So if we can cut this and people collect it in a sustainable manner, then of course it’s more sustainable overall.” – Sem Geurten, Account Manager Strategic Partners at DHL
Parcel lockers and service points increase delivery success
On average, failed deliveries cost e-commerce businesses about $17.20 in the US and £11.60 in the UK. Out-of-home delivery increases the rate of successful first time deliveries, whether a customer selects the option at checkout or it serves as a secondary delivery location when a home delivery fails.
“It’s never beneficial for any party if we don’t deliver on the first attempt. It costs more for us, it’s a more hassle for the customer, and it’s more pressing on the environment. So if we can deliver it right the first time, it’s always better.” – Sem Geurten, Account Manager Strategic Partners at DHL
Service points and parcel lockers serve as a reliable safe place for packages to await pickup, reducing the need for multiple delivery attempts. This higher ‘hit rate’ helps carriers and merchants cut unnecessary shipping costs while providing a better experience to customers.
Cost-effective shipping solutions make e-commerce more profitable
In order to maintain profits amid rising costs and labor shortages, both carriers and merchants need to invest in more cost-effective shipping solutions. While customers are willing to pay for delivery, our 2024 Out-of-Home Delivery Survey indicates that the cost of shipping is still the most important factor for 85% of online shoppers when making a purchase decision.
So how do carriers and merchants maintain margins while still keeping costs low for customers? By encouraging the use of out-of-home delivery networks to improve the efficiency of last mile delivery.
Because OOH delivery is more efficient than home delivery, carriers often offer OOH options at reduced rates. This gives merchants more control over their initial shipping costs and helps them avoid unnecessary fees and surcharges.
“As a logistical carrier, it’s our job to build the most efficient network and make sure that we can keep on delivering all these parcels in the future. At the same time, we also have to account for tight labor markets, rising costs, and the aim for more sustainability. A parcel locker can really help to solve these challenges because in the end, delivery to parcel lockers is more efficient than home delivery.” – Matthijs Pluimers, Lead Parcel Lockers at PostNL
Out-of-home delivery is cheaper than home delivery
For carriers, automated parcel lockers and PUDO points help them consolidate deliveries, operate more efficiently, and reduce repeated delivery attempts. This allows them to offer online retailers cheaper shipping rates for out-of-home delivery.
While shipping costs vary by market and carrier, according to our data online retailers can save an average of 10¢ on every €1 euro when customers choose out-of-home delivery at checkout. In France, where out-of-home delivery is most widely adopted (77% of online customers have selected delivery to a service point at least once), online retailers can save up to 30¢ per €1.
That might not sound like much at first, but if you’re shipping 1000 parcels per week, that adds up to €5,200 in savings annually. And that’s before you factor in the additional savings OOH options offer, such as reducing surcharges from repeated and failed deliveries.
Low-cost shipping increases conversion at checkout
By encouraging the adoption of OOH at checkout, online retailers can entice shoppers with low-cost shipping. Retailers who use out-of-home as a standard delivery option can also significantly increase conversion and reduce shipping spend.
“We conducted an A/B test where we changed the order of delivery options. Surprisingly, we observed an improvement in the conversion rate when we made out-of-home delivery the primary option. It’s not just cost-effective for us, it’s what our customers prefer.” – Jordy Holthuijsen, CCO at XXL Nutrition
Parcel lockers and service points reduce repeated and failed deliveries
Up to 20% of e-commerce packages aren’t delivered on the first attempt. In 2022 alone, failed deliveries cost UK retailers £68,084 and German retailers €144,354. This makes reducing repeated delivery attempts a key way to maximize last-mile profitability.
Parcel lockers and service points have a nearly 100% first time delivery success rate thanks to the flexibility and convenience they offer customers. In the event of a failed home delivery, they also provide a secure secondary location for parcel pickup rather than making a second delivery attempt. This means that both carriers and merchants save on surcharges, while customers gain more control over their delivery experience.
Retailers who offer out-of-home delivery will stay competitive in the future
Looking towards the future, we predict that out-of-home will become the standard method of delivery and home delivery will become a premium product. This shift is already underway, with delivery partners like Budbee stopping home delivery altogether and merchants like Wehkamp charging more for home delivery options.
“[The future of delivery] might look like what organizations in the Netherlands like Wehkamp are piloting. Where home delivery is a premium product. Do you want to have it delivered at home? That’s let’s say €1 more than being delivered to a PUDO location or locker.’ – Jorin Aardoom, Director Out of Home BeNeLux for DPD
The increased investment in the expansion of out-of-home delivery networks points to the effect it has on making logistics more efficient. Global e-commerce sales are projected to grow 39% over the coming years and are expected to surpass $8 trillion by 2027. For retailers and carriers, adopting flexible and cost-effective delivery methods is essential to keep up with in demand and compete with industry behemoths.
“Consumers want control over where, when, and how their parcels are delivered. The shift toward flexibility is undeniable, and retailers who provide multiple delivery options, including service points and parcel lockers, are positioning themselves to lead in the evolving e-commerce landscape.” – Sabi Tolou, Co-founder at Sendcloud
Out-of-home delivery options help retailers meet customer expectations while adapting to sustainability and operational requirements. Online shops that are slow to implement these options will find it harder to control costs and risk disappointing their customers with poor delivery experiences.
Want to know more about European delivery expectations? Check out our latest insights in the 2024 Out-of-Home Delivery Survey.
