Introduction to Out of Home Delivery and How It Works
Explore the New Normal for Last Mile Parcel Delivery
The rise of online shopping has transformed how we receive our purchases, leading to a surge in demand for efficient parcel delivery services as well.
To adapt to this changing landscape, delivery companies started incorporating out-of-home (OOH) delivery as part of their efforts to improve the effectiveness of their last-mile delivery operations.
OOH delivery gives parcel recipients a lot more control over when and where they will pick up the goods they’ve ordered, increasing the convenience of placing an order, leading to more repeat businesses, and boosting customer experience.
The other side of the equation is just as rewarding. A single OOH location makes it easier for last-mile delivery companies to serve a larger number of people, from a single location, cutting down fuel costs, and improving delivery times and route optimization.
But implementing OOH delivery network comes with its own set of challenges and expenses. To provide quality service and establish a truly successful network, several factors must be taken into account.
In this post, we guide you through the key ideas of out-of-home delivery, including the main drivers behind its adoption, benefits, and tips for success. Read on to learn about the proven and tested ways to get started.
What is out-of-home delivery?
Out-of-home delivery refers to delivering a parcel to a machine or location other than the recipient’s home. The recipient plays an active role and travels to collect their parcel from the OOH point within a specific time frame.
This collection of all “other than the recipient’s home” locations is referred to as an out-of-home delivery network. These include:
- Parcel lockers (also called Automatic Parcel Machines or APMs) - Unattended self-collection points, often available 24/7. Recipients can unlock them using a digital code, QR code, or a mobile application.
- Pick-up and drop-off points (PUDO) -Staffed designated locations for parcel pick-ups and drop-offs, such as parcel shops, corner shops, supermarkets, in-store Click&Collect stations, or micro depots.
Why is out-of-home delivery getting popular?
According to the Out of Home Delivery in Europe 2024 report, 1 million people each year switch from parcel to out-of-home delivery, across Europe as a whole. This figure is telling of customers’ changing habits — as well as a signal to last mile delivery companies and postal operators on what to focus next to make their operations more efficient.
And we’re already seeing this focus shifting, as many parcel delivery companies and national postal operators are working on increasing the density of their networks. The Out of Home Delivery in Europe 2024 report also found a 29% rise in unique APMs year-on-year, with PUDOs going up by 6% over the same period.
Several factors contributed to this, including:
- Capacity issues — The global parcel shipping volume is expected to reach approximately 262 billion parcels by 2026. However, the last-mile industry is experiencing labor shortages and rising expenses. With the projected growth in volume and operational problems, OOH delivery is becoming a crucial component to achieving capacity.
- The pressure to go green — By 2030, the demand for urban last-mile delivery will result in a 36% increase in delivery vehicles and a one-third rise in related emissions. The pressure to be carbon neutral in logistics is stronger than ever. Deliveries to PUDOs and parcel lockers generate fewer carbon emissions than home delivery, as they minimize unnecessary vehicle mileage, noise, and congestion impact.
- Customer-to-customer (C2C) e-commerce — According to Geopost, 70% of e-shoppers buy or sell products on C2C marketplaces. OOH delivery can sustain the increase in parcel volume from C2C e-commerce while making deliveries and returns more convenient. Potentially, it can bring C2C trade to an international or even worldwide level instead of just local.
- Growing customer expectations — Even though e-shoppers are buying less than last year, their expectations continue to grow. The previous source shows that predictability and parcel tracking is becoming expected, as well as choosing when and where the parcels will be delivered.
- Lack of labour and rising fixed costs — According to the Out of Home Delivery in Europe 2024 report, door to door delivery is likely to decline and give way to OOH delivery, due to insufficient available labour and increasing fixed costs.
The benefits of OOH delivery
Compared to home delivery, out of home delivery has many advantages for last mile delivery companies and recipients:
- Operational and cost efficiency — By consolidating shipments to achieve substantially more items per stop and with a nearly 100% first-attempt delivery, OOH delivery presents an efficient way to reduce last-mile delivery costs and achieve operational efficiency.
- Convenience — OOH provides a more customer-centric approach. Parcel lockers and PUDOs offer a more extended storage period, allowing recipients to pick up their parcels at a convenient time and place. Parcel shops and lockers with a drop box and label printer make sending parcels and returns cheaper and easier.
- Reduction of negative environmental impact — The Green Last Mile Europe report 2023 states that shifting all courier transport to close and efficient parcel lockers can reduce CO2 emissions by up to 2/3 in urban areas and more in rural areas. However, this can only be achieved if recipients travel by foot or bike to collect their parcels or combine the trip with another already planned one.
The recipe for OOH success
While OOH delivery is highly beneficial for delivery service providers, building and managing the network can still be costly. That is why it’s crucial to know which steps to take to set yourself up for success.
Plan your locations strategically
Location is one of the most critical factors for efficient utilization and profitability. Choosing the right locations leads to a greater network reach and a competitive delivery service.
Studies show that the recipients’ travel distance to the parcel lockers greatly influences the success of OOH networks. As a result, most delivery companies recommend choosing locations within “slippers distance” or around 300 meters from the recipients’ homes.
However, proximity to recipients isn’t the only factor to consider.
Finding ideal locations calls for a more detailed analysis involving multiple data layers, including:
- demographics
- movement patterns,
- locations of points of interest,
- and even shipment data.
Track and improve network performance
Positioning PUDOs and parcel lockers is just the first step in building a successful OOH network.
You need to track the network's performance and adjust the inefficient processes — continuously.
This can be challenging if you monitor only the number of shipments related to a PUDO point or parcel locker, without other data to provide more context.
To truly understand the network performance, you must track the utilization rate, dwell times, time before delivery, and more. Only through a comprehensive insight into your entire network, can you make the changes needed for efficient delivery network management and growth.
Optimizing delivery processes
Efficient delivery operations are crucial for the success of OOH delivery networks. This involves not only optimizing delivery routes but also streamlining the pickup and drop-off processes. Parcel lockers are a good example of this, as how couriers approach the location and even how they fill the lockers can significantly affect their efficiency.
Creating awareness
The number of parcels delivered to parcel lockers and PUDOs will increase only if people are aware of out of home delivery as an option and understand its benefits. The choice of OOH delivery needs to be available for consumers during the checkout process on e-commerce websites.
Additionally, informing shoppers about the environmental and convenience benefits of OOH delivery at checkout can encourage them to opt for this type of delivery more often.
This is part one in the Mily Tech series of resources on out-of-home delivery. Through these resources, you will explore all the parts of your OOH delivery journey, whether you’re just starting to build your OOH delivery network or are already heavily investing and scaling your last-mile delivery efforts.
