REVOLUTION OF E-COMMERCE LOGISTICS SERVICESCASE STUDY OF ESTONIA

Peep Kuld

Barcelona 06.2012

My background

Founder / shareholder of the e-retailer (Furniture and home appliances) ON24.ee in Estonia and ON24.fi in Finland.

Member of the Supervisory Board of E-commerce Association of Estonia

E-commerce in Estonia

Small country with 1,3 million inhabitants Member of EU Very good internet availability and high

usage of internet Wide selection of services (state and

private) available and used in internet

Relatively low level of e-retailing (3% of total retail sales)

Reasons for historically low e-commerce level

Weak supply side Small market and not interesting for big

players

Low quality level of e-commerce logistics State-owned Post has been dominating Low speed Inconvenient receiving the orders High level of uncertainties Relatively high price

Situation on e-commerce logistics market in 2008

Delivery to post offices. Estonian post had the only

network.

Delivery to home by couriers. 5% share of competitors of

Estonian Post

Estonian Post had 95% market share. Nearly monopolistic position

had negative impact on the quality and price of the service.

100% of the e-commerce deliveries were made by traditional services

Problems of e-commerce delivery using post-offices.

Post offices are located inconveniently Poor parking possibilities Not on the everyday routes Inconvenient opening hours

Time waste Additional trip Standing in the queue Filling the papers Time waste up to 40 min in peak-hours

Unpleasant customer service experience Making a return is a headache

Problems in e-commerce delivery using couriers (home-delivery)

Relatively high price For every delivery a person has to make a trip

Giving up some freedom and wasting time Need to wait in home for courier uncertainty about the exact time of the

courier visit.

Problems with traditional e-commerce delivery from E-retailers point of view

Prices are increasing Nearly monopolistic position in price-negotiations

Slow or not existing innovation and quality improvements. Need to adapt the fast developing e-commerce processes to

slowly developing delivery services.

Many delayed or damaged parcels Need for additional customer-service work

Low quality and high prices of delivery services were among the most important barriers for growth of e-commerce.

Recent changes of e-commerce in Estonia

In last 2-3 years the growth of e-commerce Estonia, has become very rapid 25-35% annual turnover growth The number of e-commerce companies grows ca.

20% annually

Main reason for the rapid growth of e-commerce in recent years is the drastic improvement of quality- and rapid decrease of price of e-commerce delivery services. There is a new format of delivery services implemented.

New format of e-commerce delivery services

40-50% of e-commerce deliveries are made by using a new delivery service – Automated Parcel Terminals (APT-s)

How the automated parcel terminal service works?

1. Ordering online 2. Delivery to APT

3. Text message notification ..

.

How the automated parcel terminal service works?

4. Inserting the PIN + payment

5. Collecting the parcel

6. The customer is happy

..

.

What is a network of automated parcel terminals?

Parcel terminals

Software solutions

Business processes and business model

Pricing of e-commerce delivery today

Prices of delivery have fallen sharply. Operation costs are

lower.

Traditional E-commerce delivery services have to compete with APT-s, and the prices have been reduced remarkably.

Quality of e-commerce logistics services today

No queues for receiving parcels Pick-up from APT takes only 15 sec.

Convenient locations Very close to everyday routes of consumers. In

supermarkets.

No paperwork Notifications move through e-mail and text message.

No need to fill any papers.

No need to wait at home for the courier No time-waist for the activity.

Quality of e-commerce logistics services today

Access freedom. The delivery point can be chosen from all possible

locations, not only home- or work address Receiving the parcel goes by using PIN-code, which is

received by text message. So the PIN-code can be forwarded and somebody else can pick-up the parcel.

Speed of delivery is high The text message goes immediately after inserting the

parcel into locker. So it’s possible to pick up the parcel immediately.

The price for the service is lower

Feedback from users: „I will never use courier or post office again“

Impact of the new delivery service to traditional delivery

services

Post-offices started to move to more customer-friendly locations.

Staff of post-offices has become more customer-friendly.

Couriers have become more accurate and faster

Text message notifications are implemented also for courier- and post-office deliveries

Impact of the new delivery service to traditional delivery

services

Courier- and post-office deliveries have become remarkably cheaper

Traditional service providers have started to care more about the e-commerce needs.

Despite the quality improvements of traditional services, the loss of customers continued. A competing network of APT-s has been implemented

by Estonian Post in 2011 in order to try to stop losing the market.

Situation on e-commerce logistics market today

Two networks of automated parcel terminals, covering the whole country, are competing on the market.

The winners are e-retailers and their customers.

Estonian Post since 2011

Itella SmartPOST since 2009

Future of e-commerce logistics

The concept of automated parcel terminals has been proved. Desirable for final consumers. Profitable for service providers

The changes in broader scale are coming In many countries logistics

companies are building and starting to implement APT networks.

Amazon started to test their own network of APT-s called „Amazon Locker“

Amazon locker in USA

It’s evident that automated parcel terminals are the future of E-commerce logistics.

Opportunity on the market

We know that the new delivery service can have very positive impact on the e-retailing in every country where it will be implemented.

What to do to make the service available as soon as possible? Demand the service from existing service providers To be the implementer of the service (like Amazon)

You can find more info about the business model and technology on the web page of the technology- and business model developer Cleveron Ltd. www.cleveron.eu

Peep Kuldpeep.kuld@on24.ee+372 5123337

Thank you, questions?