Evolution, not revolution likely to broaden delivery options for consumers

Somewhere between the alternative delivery services of dot-com bust-outs such as Kozmo.com and traditional delivery services offered by major carriers, shippers are looking for middle ground on the last mile: greater flexibility for consumers, and a way to make it economically feasible for the shipper.

“A lot of the funding for alternative delivery companies fell through when the Internet bubble burst. Then it was back up to the big carriers like UPS, the Postal Service and FedEx. Now they, too, have been looking at different ways to get better at delivering packages to consumers,” says Chris Kelly, Forrester Research Inc. analyst.

One of the most recent examples is UPS’s rebranding of some 3,000 Mailboxes Etc. retail-shipping locations as The UPS Store. Mailboxes has been a subsidiary of UPS since 2001, but the rebranding effort went forward only in April after tests of consumer response proved favorable. For now, one of the immediate benefits to consumers shipping packages–-including those returning goods to e-retailers--is that they have access to consistent, low-cost UPS pricing. Prices can vary widely among retail shippers outside the branded network.

But UPS has its eye on the future as well, and broadening package delivery options for consumers might one day become the compromise between the revolutionary last-mile alternative delivery model that felled the likes of Kozmo and traditional package delivery, says Kelley. The stores could be a benefit for consumers who aren’t home to accept delivery on any of UPS’s three attempts. “Instead of consumers having to go out to the industrial area outside of town where the UPS warehouse is to pick up the package, there may one day be UPS stores in the neighborhoods that will serve more of the function of a traditional post office,” he says. “It’s approaching a more flexible model where the economics work for UPS and consumers would have things more convenient than in the past.”

Kelley notes that over the past 3-4 years, most online shoppers responding to Forrester’s surveys have said UPS delivers their packages. But though UPS is already strong in the consumer space, UPS Stores are not likely to become the default pick-up location soon, analysts say. UPS prides itself on timely delivery, but Kelley characterizes the logistics and data required to make delivery to a local store work under its current system as “staggering.”

“We’re not doing this now, because of the demands of information management,” says a UPS spokesman. “But it’s one of the things we’re looking at. The possibilities are enormous for the different things we can do. There is no question that there are opportunities in the Internet world for UPS Stores to play a part.”