The balance of power is shifting in Britain’s parcel delivery market. And yet again Amazon is the main disrupter as it challenges market leader Royal Mail in what is expected to be one of the toughest Christmases for UK couriers.
With the labour market the tightest in four decades and worker availability expected to determine the success or failure of deliveries this season, Amazon has taken the initiative with bonuses of £1,000 to attract staff.
The US technology giant has also increased its Christmas workforce to about 75,000 people this year, leaping from less than a third of Royal Mail’s peak headcount before the pandemic to almost half the size.
The UK market’s two main groups are both taking on an extra 20,000 seasonal staff to cope with record orders after the online surge during the pandemic as they battle with rivals Hermes, DHL, UPS, DPD and Yodel.
“The issue between now and Christmas is one of labour availability,” said Tom Forbes, senior vice-president of carriers at Metapack, whose software links distribution hubs with delivery companies.
The spread of the Omicron variant has also exacerbated the recruitment challenges, with Royal Mail worker absences almost double those of Christmas 2018, causing severe problems at delivery offices.
Indeed, recruitment has become increasingly vital with the pandemic supercharging ecommerce and condensing years of growth into months. UK carriers delivered 5bn parcels last year or 14m a day, up a third on 2019, according to Pitney Bowes, a technology group.
That is expected to grow to about 5.7bn this year and early signs indicate that this Christmas peak could come close to challenging last year’s volumes. Orders increased 11 per cent year-on-year on technology provider Metapack’s system during the Black Friday week that kicks off the peak season but then fell behind the previous year in the most recent weeks.
Yet the spike in demand comes as coronavirus-induced retirements or career changes and Brexit have sucked workers out of the British labour force, most notably lorry drivers. And no pool of furloughed workers is ready to step in this year.
The shortages prompted Yodel to raise the salaries of drivers by 16 per cent in October in an extra effort to retain them ahead of the busy period, said chief executive Mike Hancox.
But workers on the frontline are still feeling the pressure, with cracks starting to show.
Metapack said some carriers were reporting a 20 per cent fall in the rate of processing deliveries at some depots because of labour shortages and poor weather.
At Royal Mail’s Jubilee Mail Centre in west London, with Chuck Berry’s ‘Go, Johnny, Go!’ blasting on the radio, postmen were frantically, but methodically stuffing post and packages into delivery bags at sorting stations purpose-built for letters, the company’s legacy product.
“It’s hectic. It’s a mad rush and we’re overwhelmed today,” said Paul Bishop, one of the postal workers preparing to go out and deliver goods in the week after Black Friday.
MJ Sebastian, a delivery driver who works for an Amazon subcontractor in Milton Keynes, said the parcels he has to deliver have doubled since last month to 300 a day.
“It’s busy, it’s raining and there’s nobody helping us. They’re not thinking about how much pressure they’re putting on their staff,” he added.
On top of its recruitment drive and bonus offers, the US group is using technology in locations such as Milton Keynes to push drivers to deliver more with a system that aggregates multiple addresses under a single “stop”.
Although drivers say many of the addresses are beyond walking distances from each other, the group insists it sets realistic expectations and makes efforts to prevent workers coming under too much pressure.
Other groups are also actively recruiting. DPD said it was focused on hiring permanent staff ahead of the peak and cited its £150m investment in an automated parcel sorting hub in Leicestershire as a big help.
“The real potential headaches at this time of year are generally those things that are out of our direct control such as the traffic and weather,” it added.
Marek Różycki, managing partner at consultancy Last Mile Experts, said recruitment problems in the UK were made worse by relatively poor infrastructure that made courier work labour-intensive. Unlike countries such as China and Poland, few lockers and parcel shops are available to help ease strains.
“The only way to deal with massive growth, given the current state of infrastructure is to take on more people,” he said. “Everyone has peak problems, it’s just a question of how big.”
However, Royal Mail has tinkered with routes in an effort to improve delivery efficiency. The group, which split from the Post Office retail network in 2012, said it needs 13,000 fewer flexible workers after the changes, which include replanning its routes.
The 505-year-old company has taken on families and friends of employees, relying on referrals rather than bonus incentives to attract workers during the seasonal peak, said Shiona Rolfe, the company’s service delivery director.
“This was going to be a tougher market to attract people into the operation because we were well aware of the number of employment opportunities that existed in the UK,” she said. “We took the opportunity to start our recruitment activity early.”
Royal Mail is making changes, such as hiring dedicated parcel delivery drivers, but it needs to go further to modify its “feet-on-the-street” model.
With the parcel arm now the main profit driver, it can no longer rely on a system built to cope with much smaller letters, particularly with the increasing size of packages, some as large as 8ft long.
“The biggest challenge is keeping up with the pace of change,” Rolfe said. “The important part about making those changes is bringing everybody with us,” she added, referring to the need to improve efficiency without alienating workers.