How Parcel Lockers Will Transform Last Mile Delivery

This study explores customer value in relation to parcel lockers, a self-service tool that reshapes the delivery and returns experience in the context of e-commerce last mile delivery. Parcel lockers offer a response to retail and last mile delivery challenges provoked by the rapid growth of e-commerce worldwide. Retailers, logistics service providers, communities, and other stakeholders now face issues due to increased volumes of goods sold online. The introduction of parcel lockers to service algorithms is intended to address these issues by involving consumers in the service process. However, the existing research fails to provide knowledge about the customer’s view on this new technological solution. This study followed a focus group design and built on grounded theory to provide insights into customer value in relation to parcel lockers. These insights can contribute to both research and practice.

We consider the problem of designing a outdoor parcel locker network as a solution to the Logistics Last Mile Problem: Choosing the optimal number, locations, and sizes of parcel locekers facilities. The objective is to maximize the total profit, consisting of the revenue from customers who use the service, minus the facilities’ fixed and operational setup costs, the discounts in the delivery costs for customers who need to travel in order to collect their parcels, and the loss of potential customers who are not willing to travel for service. The problem is expressed as a 0–1 integer linear program. We show that it is equivalent to the well-known Uncapacitated Facility Location Problem. We then solve the modified problem, and apply it to an industrial-sized network.

Parcel delivery lockers are fast becoming a familiar sight in malls, stores and train stations as the boom in online shopping leads retailers and logistics providers to look for new ways to deliver orders as quickly and efficiently as possible.

Global sports retailer Decathlon is rolling out indoor parcel locker in its 1,500 stores as part of its click-to-collect service, while Amazon has had lockers in supermarkets, post offices and transport hubs across Europe for the last few years.

Online shoppers select the lockers as a delivery option during checkout, then receive a QR or SMS code that will open the locker once the parcel is delivered.

“Parcel lockers are becoming popular because of the convenience,” says Tessa English, Director, Industrial and Logistics, at JLL. “Consumers have more control over when they pick up their shopping, rather than having to wait for deliveries or risk parcels being left in the wrong place.”

As online shopping continues to rise across Europe, shoppers are increasingly expecting fast, flexible delivery. DHL has a network of 340,000 lockers in Germany, accessible by 90 percent of the population, while many retailers, such as ASOS in the UK, also allow customers to return orders via a locker.

“This gives customers greater flexibility over their shopping, especially as lockers located in transport hubs often offer public access 24/7,” says English.

For retailers, parcel lockers are also a means to tackle the challenges – and costs - of last mile deliveries from warehouses to homes and offices. Trying to deliver packages to customers who aren’t home can cause delays on delivery routes, while getting orders to individual addresses often means putting vehicles on the roads before they’re full, raising costs and contributing to city centre congestion and air pollution.

“Delivering to parcel lockers means a van could drop off dozens of orders at each delivery point, rather than just one,” says English. “This reduces vehicle movements and the number of vehicles required, which offers retailers and operators better route and cost efficiencies.”

The right location

Parcel lockers tend to be placed in areas with high footfall, such as supermarkets and train stations, although varying consumer habits in different countries – or even different areas of the country – have a big impact on location decisions.

“A good location depends on retailer customer profiles – how frequently customers order and where they live. This is where big data can provide insight into the most effective locations,” says English.

“What’s key is that customers can pick up the parcel along their usual journey, without a detour. As soon as the convenience factor is lost, electronic locker become a less effective investment and potentially also a less sustainable solution.”

Furthermore, lockers need to be in secure locations with good surveillance to minimise the risk of theft or vandalism.

Future building must-have?

Across Europe, clothing retailers as well as technology and lifestyle brands have already partnered with logistics firms to deliver to lockers. And with more than half of UK customers predicted to shop for groceries online by 2021, refrigerated lockers for food orders could also become popular fixtures.

Down the line, new residential and mixed-used developments could include a block of lockers, accessible by all residents as well as retailers.

“In terms of convenience, this is probably the ultimate - a safe place for parcels that can’t fit into individual mailboxes, allowing people to pick up orders when they’re home,” says English.

For landlords, providing that convenience could be an additional perk that attracts commercial and residential tenants – especially as online shopping across Europe continues to grow.

“With many more goods going through the parcel network, there will be increased demand for convenient last-mile delivery options,” says English. “Retailers want to enable a more seamless, easy delivery. Parcel lockers are one part of the solution.”  

In this article, we have the Founder and CEO Dr. Arne Jeroschewski of Parcel Perform sharing his views on the state of the last mile delivery landscape and how the smart implementation of parcel lockers can be the way forward for the e-commerce world to meet the delivery expectations of consumers.

There are many last mile delivery innovations in the market. So why am I focusing on refrigerator locker and collection point networks as the innovation that will transform the last mile?

Imagine this scenario 50 years ago:

The postmen making their rounds in your housing estate would only deliver letters to your doorstep. They will not release your letters without meeting someone at the doorstep. If you weren’t at home while the postman was making their rounds or missed them ringing your doorbell, you’ll need to collect and sign off your mail from your nearest post office.

Understandably, this experience is frustrating, wastes valuable time and inefficient for everyone involved. This is why we have letterboxes in central locations that are accessible 24/7 for us to pick up our mail at our convenience.

Surprisingly, we accept this frustrating experience for parcel deliveries even today decades after we solved it for letter delivery. Well, that is why parcel lockers are bound to innovate parcel delivery in the not so distant future.

With parcel lockers, logistics carriers can deliver orders to a set parcel locker location, eliminating the annoyance and cost of failed first deliveries, rescheduling deliveries and the uncertainty of having someone at home to pick up an item within a vague timeframe.

Likewise. consumers enjoy the convenience of 24-hour accessibility. With parcel lockers located closer to their home than post offices, they can pick up and return items at their convenience with minimal queueing and indirectly lowering service costs at the same time. Logistics carriers also see higher first delivery success rates, more parcels delivered per trip and improved efficiency – enjoying up to 5 times more parcels delivered per courier with the use of parcel lockers.

The parcel locker system strengthens the global last mile delivery experience. In a recent analysis on the global parcel locker market by Belgium-based International Post Corporation, parcel lockers are already heavily used in Finland, Denmark and China – with a usage rate of up to 43%  Consumers prefer the storage locker method citing the 24/7 availability, ability to select delivery locations and lower delivery prices as reasons.

Perhaps in a few years, we’ll look back and wonder how we could have managed our deliveries without the superior convenience offered by parcel lockers.

Therefore, for parcel locker networks to be an effective solution to our parcel delivery challenges, they should be carrier-agnostic; where locker providers and delivery companies work together seamlessly across the industry. Likewise, locations of locker sites should be carefully analyzed for proximity to prospective consumers to help drive route density within the delivery network.

An example of such a coordinated approach can be found within Singapore. In December last year, we at Parcel Perform had the pleasure in working with the Singapore government and the Info-communications Media Development Authority (IMDA) to launch the Locker Alliance programme; a collective parcel locker system allowing different locker operators, end-consumers and merchant partners to use the network seamlessly.

Lockers are situated in several transport hubs near public housing estates around Singapore, allowing consumers to access their deliveries at their convenience. This project offers a vast range of benefits to consumers and the logistics industry:

Parcel lockers at a network density that is impossible to achieve for any logistics player alone while simultaneously bringing the convenience of these lockers closer to the consumer.

Higher utilization of all deployed parcel lockers that results in lower operating costs and therefore lower prices for carriers and consumers.

Open access logic to allow all players to effectively operate and use parcel lockers regardless of their size and capacity to make significant infrastructure investments

Parcel Perform are honoured to have worked closely with IMDA to develop the Interoperability Platform that unites all key e-commerce industry players to improve the last mile experience in Singapore.