The demand for drop-off services is primarily being driven by e-commerce-related needs, e.g. as e-commerce business continues to grow and the outbound package volumes continue to grow, there is also a strong increase in package return volume. According to eMarketer, the United States e-commerce market is forecast to reach over $843 billion in 2021, number two behind China. And according to OBERLO, out of the 7.87 billion people in the world, 27.2% of the global population is now shopping online. Enter the age of pickup and drop-off (PUDO) networks.

UPS first started deploying its U.S. PUDO program in 2013 and built up a network of approximately 5,000 independent locations in urban environments. FedEx entered the market in 2018 with its Walgreens partnership; at this point, there was an overnight doubling of PUDO services in the U.S.

The way that couriers are increasing their rates for residential deliveries is quickening the pace of PUDO locations. UPS Air and UPS Ground rates increased an average of 5.9% late last year, and FedEx Express and FedEx Ground rates also increased an average of 5.9% in January. These rate hikes give the retailer a serious incentive to provide a PUDO option at each of their commercial locations e.g. they can save a lot of money on shipping costs.

In addition, couriers have a particular interest in increasing the number of PUDO locations because they want to get out of the business of making singular, last-mile deliveries. Couriers prefer to deliver 10 packages to one PUDO location rather than having to deliver 10 packages to 10 individual residential locations.

Racing Toward PUDO

PUDO is a positive benefit for brick-and-mortar locations because they will see an increase in customer traffic and sales. In fact, it’s estimated that one in three PUDO users make an additional purchase while they're picking up their items. There are two basic trends that are pushing retailers to embrace PUDO:

1. The cost of home delivery. With the price of gas increasing, the cost is quickly rising. The ability to avoid the added courier cost of residential delivery is going to be key to retailers saving money.
2. Tight capacity among the couriers during peak season. Couriers are now placing caps on residential volume deliveries from retail locations. Case in point: In October 2021, the U.S. Postal Service announced that it will slow its targeted delivery time by 30% between Oct. 3 and Dec. 26. The U.S. slowdown notification was a pre-holiday warning because the prior year they saw a record-breaking 25% increase in package volume.

Embracing PUDO services enables any retail location to effectively manage its inventory while also providing a high-quality customer experience to buyers who come into the store to retrieve their items.

Win-Win

Simply put, PUDO creates synergies. It creates a symbiotic relationship between the retailer, courier and e-commerce buyer.

From the buyers’ perspective, they have the opportunity to select a place where they can pick up a package at a time when it's convenient for them — with no risk of the package disappearing off their porch. It's extremely convenient and secure. 

From the couriers’ perspective, it's a great way to avoid putting undue burdens on their network during the busiest times of the year. In addition, it's also an opportunity for couriers to partner with their bigger retail customers to become members of the PUDO network.

From the retailers’ perspective, they have an upside benefit of increased foot traffic and the opportunity for more sales. Perhaps the most interesting benefit is that the retailer now has an opportunity to create a shadow fleet of shops where customers can pick up their packages at any time. 

A Successful PUDO Ecosystem

Retail locations are concerned with inventory management and properly training staff members. An effective PUDO technology makes it easier for the retailer to manage their inventory and locate the correct item when the customer comes to retrieve it. Customers do not want to stand in line and wait, they want to get their item and go. If a retailer’s packages are disorganized and it takes several minutes to locate the right item, it will promote a poor customer experience. One of the main reasons a retailer gets frustrated and leaves a PUDO network is because they have difficulty managing their inventory, and as a result, they receive negative customer reviews. Having a technology that solves these problems makes it easy to manage inventory and also makes it easy to return items back.

The bottom line is that couriers should not be slowing down service delivery and consumers should not have to wait and wonder where their items are upon attempting retrieval. PUDO is an elegant solution that solves the primary problems faced by courier services, retailers and consumers. PUDO networks are not an unproven solution. Canada is currently offering FlexDelivery, a sign-up service allowing consumers to choose from over 6,000 post office locations to have packages delivered at any time. Couriers and retail organizations need to give customers the option of retrieving items at a location of choice., e.g. close to work during weekdays, near the home on weekends, on vacation, and everywhere in between. Embracing PUDO networks is a clear win, win for all parties involved.

Dan O'Connor is vice president of pickup and delivery options at Position Imaging.