Automated down to the last mile

The Russian instant payments operator Qiwi has put into service a series of terminals that will distribute packages to consumers. The postal kiosks are vying with courier and ordinary postal services for the attention of the increasing number of Russians shopping online.

“We want to cut down our last mile expenses, which are incurred at the most cost-intensive stage of the logistics chain, when goods are handed over to the client. One terminal can do the work of several deliverymen,” said Andreas Pregowski, the C.E.O. of Qiwi Post. The new company was founded jointly by three partners: Poland’s Integr.Pl, the iTech Capital investment fund and Qiwi. Andrey Romanenko, Qiwi’s C.E.O., is the founder and owner of both Qiwi and ITech.

The Qiwi Post terminals make it possible for online buyers to pick up their orders themselves, using personal identification numbers. The terminals allow online shops to cut their costs by up to 20 percent, while other types of long-distance sales outlets such as catalogue companies and network marketing firms can lower their shipping times. In Moscow, Qiwi Post has already installed several dozen metal lockers equipped with drawers of various sizes and cash acceptors, and intends to commission an additional 400 units in 2012. The company plans to invest $30 million in the project over three years.

QIwi’s interest in this market is its connection with the company’s core business – payment processing services, which it provides to a number of clients, including online shops. The regional development of Qiwi Post will be promoted by Qiwi partner network companies operating payment terminals.

Qiwi Post is not the only player in this market, however. PickPoint and Logibox launched approximately 200 automated postal kiosks throughout the country last year, with the overall market capacity estimated at 3,000 to 6,000 units. PickPoint forecasts indicate that postal kiosks will be serving 15 to 20 percent of all business-to-consumer dispatches in the near future.

Vladimir Solodkin, C.E.O. of the Spsr-Express delivery service, indicated that last mile logistics – the final stage of goods handover  from seller to buyer – accounts for 30 percent of total shipping costs. Self-service postal kiosks make delivery cheaper by reducing last mile issues. Each courier can cut time and fuel consumption by taking several parcels at a time to the terminal he or she serves, following the same standard route. Moreover, delivery recipients turn down 10 to 12 percent of all parcels delivered personally in Russia, where the vast majority of online purchase are C.O.D., while self-service terminals demonstrate a significantly lower rejection rate of 3 percent. Market players believe this phenomenon ensues from the great degree of convenience connected with returning a parcel directly to the delivery person.

There is no doubt that price plays a role for both buyers and sellers. Often a buyer will chose to pick up an order from a sales outlet directly to avoid shipping costs altogether. The price benefits of automated parcel terminals are not so great as picking up directly from the seller, but they are cheaper. A buyer generally saves 10 percent on shipping costs by using an automated terminal rather than a delivery service. 

For their part, online retail outlets can save 20 percent on shipping if they deliver their goods to a parcel collection terminal instead of using courier services. “The price our partners pay should be significantly lower than that for courier delivery but it can be higher than the cost of ordinary postal services, since our system makes use of courier services, too,” said Andreas Petrowski.

Tatiana Lyubimova, head of DHL Global Mail Russia explained: “Part of the delivery costs is transferred to the clients, so we can often obtain a certain reduction in costs.”

Convenience is also an issue. Automated parcel terminals are most popular in off-hours, when some express delivery services do not work. According to Qiwi Post estimates, 37 percent of clients in Europe pick up their deliveries from self-service between 6 p.m. and 8 a.m. PickPoint clients in Russia collect 34 percent of all parcels from 7 p.m. to 11 p.m.

Additionally, automated postal terminals eliminate the need for personal contact between couriers and clients. The very possibility of skipping this stage and enjoying independence from delivery personnel is seen by clients as a major advantage. Intimshop which sells sex toys and other intimate goods, delivers 25 percent of its purchases through self-service terminals in cities where they are available, whereas the average online store delivers between 8 and 10 percent of purchases this way, according to PickPoint estimates.

First published in the Expert magazine.

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