What is out-of-home (OOH) delivery?
- January 4, 2024
- 5 mins
As online commerce continues to redefine how we shop, it also changes the way we receive our parcels. The increasing demand for efficient delivery services has led to a fast growing and increasingly used innovation in the logistics sector: out-of-home (OOH) delivery. But what exactly is out-of-home delivery, and how does it differ from traditional delivery methods?
This innovative delivery method offers numerous advantages, yet it is not without its unique challenges. In this article, we will delve into the world of out-of-home delivery, exploring the factors that have driven its adoption, as well as the benefits it provides to businesses and consumers. Discover how OOH delivery has emerged as a response to the growing demand for flexibility and convenience in the logistics sector and how it is transforming the way we receive our purchases.
What are OOH, PUDO and APM?
Out-of-home delivery, often referred to as OOH delivery, is a dynamic approach to delivering goods that involves transporting parcels to a convenient location or automated system for the customer, distinct from their residential address. This method is characterized by its increasing focus on consumer convenience and flexibility whilst also offering potential cost benefits to carriers.
There are two primary forms in which OOH delivery networks are commonly deployed:
- Parcel Lockers (APM – Automatic Parcel Machines): These are unattended, self-service collection points, often accessible 24/7. Recipients can unlock these lockers using a digital code, QR code, or a mobile application. There are two sub types within lockers:
- Lockers owned and operated by individual carriers or locker pure play operators. These will only be used by these operators and businesses within their group.
- Open network lockers. These lockers can be accessed and are used by a range of carriers.
- Pick-Up and Drop-Off Points (PUDO): These are staffed, designated, normally retail locations established for parcel collection and drop-off. PUDO locations can include parcel shops, neighborhood stores, supermarkets, in-store Click&Collect stations, or micro depots.
Out-of-home delivery has become synonymous with a more consumer-centric and convenient delivery experience, allowing recipients to actively participate in the process by retrieving their parcels from easily accessible OOH points within specified timeframes. This transformative approach has brought greater efficiency and flexibility to the world of parcel delivery, meeting the evolving demands of modern consumers.
Who are the key players in out-of-home delivery?
OOH delivery services are made possible through the involvement of various participants:
- National postal operators, historically the primary last-mile infrastructure providers, typically employ a combination of traditional postal outlets, third-party agency/PUDO points, and increasingly, automated lockers.
- Courier and express delivery companies (either international operators such as DPDgroup, DHL, InPost/Mondial Relay, UPS, Evri/Hermes, GLS, FedEx, or local players like Matkahuolto, Sameday, Zasilkovna, or Colis Privé), have established their own pickup and drop-off facilities.
- Dedicated Locker providers such as InPost, Quadient and Swipbox whose primary business is the operation of locker networks
- E-commerce giants like Amazon and AliExpress also act as OOH service providers.
- Retail point owners contribute by offering parcel pickup and drop-off locations.
- Infrastructure owners, including public transport, railway companies, local and city authorities, and more recently, private parking infrastructure owners/operators, play crucial roles in facilitating OOH delivery networks.
- IT platforms, third party integrators and consolidators are transitioning toward IT solutions that integrate multiple delivery methods and establish physical PUDO points.
These diverse participants either singularly or collaboratively to establish comprehensive out-of-home delivery networks, providing customers with flexible options for parcel pickup and drop-off.
What has driven the adoption of out-of-home delivery?
The adoption of out-of-home (OOH) delivery has been significantly influenced by a convergence of factors, reshaping the landscape of last-mile logistics. Delivering to home risks no one being present to accept and the item having to be redelivered at a cost to the carrier and reducing the carrier’s delivery capacity. As employment levels continue to increase failed deliveries rise in line with this trend.
A further key driver has been the driver shortage and rising operational costs. As the availability of labor becomes scarcer, and fixed costs continue to climb, traditional door-to-door (D2D) courier services are undergoing a transformation, becoming pricier and increasingly considered a premium alternative. Carriers and end recipients are increasingly turning to out-of-home delivery, which proves to be more cost-effective and profitable.
Another significant factor is the growing trend of re-commerce, particularly in the realm of second-hand goods, championed by platforms like Vinted and Vestiaire Collective. With the rise of customer-to-customer (C2C) e-commerce, OOH delivery has found its niche, offering a cost-effective solution for both the first and last miles.
Environmental sustainability is yet another driving force. The logistics industry faces mounting pressure to reduce emissions and embrace carbon neutrality. Deliveries to PUDOs and parcel lockers prove to be more eco-friendly options, reducing carbon emissions by minimizing unnecessary vehicle mileage, noise, and congestion.
Moreover, the ever-growing expectations of e-shoppers have pushed the envelope for delivery services. Predictability, parcel tracking, and the flexibility to choose delivery times and locations have become the new normal. In this evolving landscape, OOH delivery has emerged as a versatile solution, meeting these escalating customer demands and providing a seamless delivery experience.
What is the outlook for out-of-home delivery in Europe?
According to the 2022 Out-of-home delivery in Europe report by Last Mile Experts, the total number of unique OOH (Out-of-home) points experienced a year-on-year growth of 36% in 2021. This increase was particularly evident in the number of Automated Parcel Machines (APMs), which surged by 82% compared to 2020, reaching a total of 79,710 APMs.
The other key measure we should quote is the volume of items delivered to PUDOs. The growth in APMs in 2021 was probably a result of investment decisions made before the pandemic.
The year 2022 continued this impressive trend, with a significant upswing in the total number of OOH points. Indeed, there were 120,390 unique APMs recorded during this year, marking a 51% increase compared to 2021.
Simultaneously, the total number of Pick-Up and Drop-Off (PUDO) points also experienced growth, albeit more moderate, with a year-on-year increase of 7%. This expansion underscores the growing significance of out-of-home delivery in Europe and the increasing adoption of these points by both consumers and businesses.
Germany leads in PUDO locations, slightly ahead of France, boasting an impressive count of over 51,000 such points. Meanwhile, Poland stands out with nearly 30,000 parcel locker locations, which is twice as many as those in the UK or Germany.
Here are some key unique PUDO markets:
- Germany: 51,090
- France: 49,200
- Italy: 47,740
- UK: 45,340
- Poland: 29,520
Here are some key unique APM markets:
- Poland: 28,880
- UK: 15,460
- Germany: 13,450
- France: 8,750
- Czech Republic: 7,480
You can find more details for each country in this report. Out of the 28 countries analyzed, only five have attained the ideal benchmark of 10 delivery points per 10,000 individuals. Notably, Finland stands out as the sole EU nation with over 20 OOH delivery points for every 10,000 residents, greatly enhancing the convenience of online shopping for its population. Furthermore, when it comes to the density of pick-up and drop-off (PUDO) points, Finland, Slovenia, and the Czech Republic lead the rankings among EU countries.
OOH locations offered by key multinational carriers in countries analyzed (including partners and shared points):
- Deutsche Post/DHL: 100,300 PUDOs, 23,930 APMs, totaling 124,230 OOH points.
- DPDgroup: 66,860 PUDOs, 14,040 APMs, totaling 80,890 OOH points.
- GLS: 52,090 PUDOs, 5,800 APMs, totaling 57,890 OOH points.
- InPost: 24,420 PUDOs, 28,240 APMs, totaling 52,660 OOH points.
- UPS: 41,910 PUDOs, 5,700 APMs, totaling 47,610 OOH points.
What are the benefits of OOH delivery?
Out-of-Home delivery offers a host of benefits that enhance the overall experience for both delivery companies and recipients. Compared to traditional home delivery, OOH delivery presents numerous advantages:
1. Operational and cost efficiency: OOH delivery streamlines operations by consolidating shipments, allowing for a significantly higher number of deliveries per stop. With an almost perfect rate of first-attempt deliveries, it proves to be a cost-effective solution, reducing last-mile delivery expenses and enhancing operational efficiency. This cost reduction is reflected in the price paid by the end recipient: with the right network design, OOH deliveries are generally cheaper than home delivery.
2. Convenience: OOH places a strong emphasis on customer convenience. Parcel lockers and PUDOs extend the window for parcel retrieval, enabling recipients to collect their packages at a time and location that suits them best. Parcel shops and lockers equipped with drop boxes and label printers simplify the process of sending parcels and making returns, making it more affordable and hassle-free.
3. Reduced environmental impact: According to Last Mile Experts’ Green Last Mile Europe report for 2023, transitioning courier transport to efficient OOH delivery can lead to a substantial reduction in CO2 emissions, up to two-thirds in urban areas and even more in rural regions. However, this environmental advantage fully materializes when recipients choose eco-friendly modes of travel, such as walking or cycling, to pick up their parcels or combine the trip with other planned activities.
4. Proximity to customers: The best OOH delivery networks work to ensure that delivery points are conveniently located, often within a short distance from recipients’ homes. This proximity allows individuals to pick up their packages on their way to daily activities, such as shopping or returning from work.
5. Extended hours and accessibility: Many OOH delivery points, particularly parcel lockers, offer 24/7 accessibility, making it possible for recipients to retrieve their parcels outside regular business hours. Additionally, PUDOs often have extended opening times, further enhancing accessibility.
6. Contactless options: The best APMs (Automated Parcel Machines) provide a contactless delivery option, particularly valuable during circumstances where health and safety are paramount concerns.
7. Efficient returns: OOH delivery facilitates the process of returns, offering more flexibility and extended storage periods, typically up to five days, at most PUDO locations.
Home delivery is convenient for the recipient, who does not have to make any effort to retrieve their parcel since it comes to them. However, the risk of delivery failure is much higher, especially if the recipient is not at home. Contact with the delivery personnel does not always meet customer expectations, which can be challenging for carriers that outsource a majority of their last-mile deliveries.
With delivery to pickup points, the delivery failure rate is nearly zero; however, recipients may have negative experiences at these pickup locations (unpleasant service, lost parcels, etc.). Automated locker delivery also achieves an almost perfect success rate and offers the best customer experience (except in poor design or management situations: machine malfunctions, lack of available assistance, full or too small lockers).
In summary, OOH delivery not only optimizes operational and financial efficiency but also prioritizes customer-centricity, convenience, and sustainability. When done well and optimised to balance the operational benefits to the carrier and the needs of the recipient customer, it provides a compelling alternative to traditional home delivery, aligning with evolving consumer expectations and environmental consciousness.
