The Parcel Delivery Industry: Collapsing Under its Own Weight
To put it simply, the e-commerce industry is enormous. According to analysis, the market is expected to reach $10.19 trillion this year and be worth $21.22 trillion by 2030i.
While this presents massive opportunities for online retailers, it also creates a logistical nightmare. The parcel delivery industry, struggling with ever-shrinking margins and ballooning overheads, is starting to crack under the pressure. 530 delivery firms in the UK went out of business in 2023/24, up 14% from the previous yearii.
We sat down with Isabella Wayte, co-founder of YOVOY, to delve deeper into the issues plaguing the delivery sector.
How Cheap Delivery is Killing the Parcel Delivery Industry
The parcel logistics sector is in turmoil at present, with tight margins that continue to shrink.
Isabella doesn’t hold back when explaining the reasons. “Retailers are addicted to cheap delivery. It’s all about squeezing as much profit as possible. It’s leaving both senders and drivers in an untenable situation.”
This short-term thinking driven by razor-thin margins has created a toxic cycle. Retailers push delivery prices down, expecting lower fees to translate to higher profits. But what’s left in the wake of this is that delivery firms are unable to keep up with ever-increasing overheads while still being expected to maintain a top-notch service.
Isabella continues, “As retailers and e-commerce vendors face increasing pressures including rising people costs, they continue to demand cheaper and cheaper options, and it just increases the squeeze.”
“They’re unknowingly accelerating the decline of parcel delivery firms. If this continues, we might end up with only a handful of major players.”
Unrealistic Consumer Expectation
This pressure from retailers has fostered a widespread, unreasonable expectation among consumers when it comes to the parcel delivery industry. They now demand everything to arrive at their doorstep immediately, at little to no cost, regardless of the reality behind the parcel logistics.
“Retailers have created this situation,” Isabella explains. “Consumers now believe in same-day or next-day delivery at no cost to them, without understanding the complex, often expensive, operations that go into making that delivery happen. The truth is, it’s just not sustainable.”
“Did you know that parcel delivery prices have barely risen since 1991, but inflation has doubled? That tells quite a story. With retailers facing economic challenges and consumers having less disposable income, the last thing they will be doing is looking to increase delivery fees. The sad reality is someone has to pay for it.”
Someone Always Pays
At the bottom of the parcel logistics food chain, drivers are the ones who bear the brunt of the system’s failures and the squeeze retailers feel at the top of the chain.
Despite being the backbone of the system, delivery drivers are considered as much a commodity as the delivery companies. Their working conditions have deteriorated into a grind of long hours, low pay and little recognition.
As Isabella puts it, “Drivers are treated like a cog in the machine. You’re expected to deliver more and more, but your compensation doesn’t reflect the workload, and there’s little loyalty from the companies you work for.”
Many drivers are paid a low rate per parcel drop, leaving them hoping for routes with multiple deliveries to make ends meet. However, they often have to search endlessly for routes that disappear too quickly. Often, jobs are so ridiculously underbid that they become unprofitable to drive. Even when delivery drivers win a courier job, they risk ending up far from home. That can mean sleeping in a layby, as well as paying for their own empty return journey.
Alternatively, they may be on a day rate. If so, they are often still expected to work marathon shifts with more and more parcels, longer and longer routes, and lengthening days – often past 12 hours. To make matters worse, drivers are expected to load and unload their vehicles, manage returns and spend extra time picking up parcels from depots, on their own time.
And, as Isabella points out, there’s also the added challenge of delayed payments. Extended payment timescales can see courier drivers waiting 60 days or more – effectively funding other people’s businesses at the expense of their own. “Let’s not forget that these drivers don’t even get the benefit of getting paid on time. The only thing they get fast is exhaustion.”
“It’s simply not fair. These are the people who make the system run, but they’re often the ones who end up being taken advantage of.”
Someone Always Loses
In the quest for cheaper and faster deliveries, someone else loses too: the businesses that rely on good delivery to their customers.
When delays or damages occur, senders can quickly face significant reputational damage. The frequency of these issues is alarmingly high. A report covering the first half of 2024 revealed that 67% of parcel recipients experienced delivery problemsiii. With customers already feeling the pinch, it’s critical to find ways to entice them into making purchases. The last thing businesses need right now is delivery mistakes, but given the current state of the industry, what can we realistically expect?
“With delivery drivers asked to manage an ever-growing number of packages under ever-shrinking time frames, problems occur. They’re expected to handle everything from perfectly-sized, easy-to-pack items to awkwardly shaped or fragile goods,” Isabella explains. “The current system is designed for perfectly fitting boxes, and when that system meets irregular packages, poor service often becomes inevitable.”
“Take a small online hardware business, for example. Their biggest battle isn’t sourcing quality products or running effective ad campaigns, it’s delivery. The delays, lost packages and damaged goods are suffocating so many businesses. Customers expect flawless service without paying extra, but the reality is the system can’t keep up with the diversity and complexity of what’s being shipped.”
“And there’s another layer to this,” she adds. “Damaged goods fuel overpackaging as retailers try to protect their products from the fallout. The environmental impact is staggering, and unless things change, it will only get worse.”
It’s time for something better.
The Future of Delivery
With the current situation utterly unsustainable, cutting out the middleman — the carrier — could mean lower prices for retailers and manufacturers and better service for customers, while also ensuring better pay for drivers.
This shift toward a more direct connection between senders and drivers is where YOVOY comes in, offering a more accessible, flexible and affordable solution. It paves the way for an enduring hybrid model to emerge in the delivery sector.
“Could a virtual delivery fleet that senders can use at any time work? Absolutely,” Isabella shares. “Traditional carriers can still be relied upon by larger retailers and high-volume e-commerce sites. However, for everyone else, the current delivery system doesn’t meet the flexible demands of modern e-commerce. That’s why we’ve built YOVOY. It connects senders and drivers directly, reducing the need for large carriers and making delivery smarter, faster and more cost-effective.”
YOVOY is set to revolutionise the delivery space by empowering makers, sellers and senders with a smart digital logistics network that’s always at their fingertips.
Businesses can either offer fixed-price routes or switch to get fair market pricing from drivers for their deliveries. It is a model which should finally deliver the reliable service they deserve, no matter the size, shape or number of packages, or the geographical location they are being sent from. It will also offer delivery drivers access to profitable same-day delivery routes while ensuring a more reliable and efficient service for small businesses. YOVOY is here to help drivers find jobs that are really worth the time and cost of the fuel. To achieve this, optimised return routes that include deliveries on the way back, where possible, ensure that drivers can reduce empty mileage.
In closing, Isabella reflects “It’s time to rethink the delivery landscape. YOVOY is the solution that’s ready to change the game.”
