Why PUDO is cheaper than home delivery?
In today’s environment, convenience is everything. Millennial and Gen-Z customers play by a different set of rules and retailers need to constantly innovate to adhere to the needs of their customers. PUDO networks are one of the more popular solutions that e-commerce retailers offer to their customers to increase convenience.
Retailers offering PUDO networks to their customers provide a large variety of locations for picking up e-commerce orders and dropping off returns. Adding PUDO as a distribution method in e-commerce not only provides convenience to consumers, but also increases revenue for businesses. PUDO networks are more cost-effective when compared to exclusive residential distribution because of three main factors:
Lower fuel costs
Delivering parcels collectively into PUDO points instead of to residential addresses results in a reduction of delivery journey time and overall fuel consumption. This in turn reduces cost while the delivery process is optimized.
More importantly, due to reduced fuel consumption, less greenhouse gas emission are produced. This is an important environmental argument that substantiates the use of PUDO distribution. In 2030 the use of PUDO networks will have cut down emission by 10% and congestion by 30%, as shown in Figure 1.
Moreover, through utilizing PUDO, the cost to deliver a parcel to a customer is forecasted to decrease by 30%.[1] As mentioned, costs are predominantly saved by means of load pooling to parcel lockers. Load pooling entails consolidating a pool of shipments and delivering them to specific PUDO points.
In contrast, final-mile / residential deliveries increase traffic volume, accelerating ethanol and fuel consumption. This does not only contribute to congestion and carbon dioxide emissions but also increases fuel and vehicle costs.
Residential deliveries are considerably more expensive because the average number of parcels delivered per shipment is around 1.2 to 1.3 for a typical E-Commerce home delivery. For a PUDO delivery this is 10 to 50.[2] Therefore, PUDO networks can save both time and money while it has significant environmental benefits as well.
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Reduction of labour costs
Since fewer miles are driven using PUDO, less manpower is needed. Fewer drivers are required as delivering 100 parcels to one or two locations is more effective than delivering 100 parcels to 100 locations.
Due to the reduction of workforce retailers will eventually face a 4% reduction in costs and 8% increase in profit margin.[3] For many companies this is considered another reason to add PUDO as a distribution method.
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Cost-reduction by avoiding next attempt deliveries
Retailers can also save costs through PUDO by avoiding multiple next attempt deliveries. During approximately 1/3rd of all E-Commerce delivery attempts there is no one at home to receive the parcel.[4]
Now imagine what happens when logistics providers perform home deliveries and encounter this situation. In these circumstances, drivers are frequently instructed to return the unsuccessful delivered parcels to the warehouse. The days after that, a second or potentially third delivery attempt will be made. Aside from slowing down the delivery process, companies will also pay for extra fuel and manpower.
The E-Commerce market in the United Kingdom is a typical example, showing a loss of 1 billion pounds for re-deliveries due to first-attempt delivery failures.[5] As a solution, re-routing to PUDO locations prevents unnecessary re-deliveries on occasions when consignees are not at home to receive their parcels. This method ensures packages are delivered at retailers and customers’ earliest convenience, and thus maximise efficiency.
To sum up, the use of PUDO distribution does not only offer high convenience to its users, PUDO is also an important channel for retailers to reduce costs.
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[1] (PUDO Point Counters, 2020). “The Future of the Last-Mile Ecosystem”. The PUDO Point.
[2] (Parcel and Postel Technology International, 2020). “The PUDO News”.
[3] (Escher, 2019). “The Future of Posts 2019 Report”.
[4] (PUDO Point Counters, 2020). “The Future of the Last-Mile Ecosystem”. The PUDO Point.
[5] (Orderwise, 2018). “Missed deliveries make for a £1.6 billion problem for UK businesses”.