Tuesday, January 20, 2015

Life is tough for some?

January usually brings with it a number of retail companies in trouble calling in the receivers or administrators, particularly in the retail industry.

Typically, retail firms have the quarterly rent bills to pay and have been totally dependent on the success or failure of the pre-Christmas sales period.  

And these days we all like a bargain.  More and more of us wait for the January Sales and more and more of us search the Internet for the best deals.  Price comparison is now easy and less time-consuming.

The Internet has diminished the importance of traditional December sales periods with the introduction of “Black Friday” and “Manic Monday” after the Thanksgiving US holiday – extending the pre-Christmas selling period.  

However, it is not only retailers who are vulnerable.  Many printing businesses are dependent on retail activity and there is another industry that has a direct strategic impact on the online digital and document print industry – the parcel business.

With such a growth in volumes you would think that most parcels businesses would be booming.  But margins are pretty thin.  We have just received a letter informing us of an increase in our contract rates from March this year.

The universal rate for parcels from Royal Mail means it is still economical for us to use Special Delivery for the very small print orders.  However, their costs also seem to be becoming uncompetitive.

This week I went to the local Post Office with four small packages.  I sent two small jiffy bag orders that were cheaper than my courier costs.  The two others I held onto – because the cost had now increased to £11 each.  

Sadly, paper is a heavy commodity and if the weight is in excess of 1kilo then there is usually quite a price premium.

So I went back and sent them with our other courier parcels.  

Within a couple of hours our reliable courier driver - “Parcel Pete” according to the side of his UK Mail van (although his name is Martin!) – turned up as usual and took them away for me at a fraction of the Royal Mail cost.

Later that day – after I had been home, changed, had an evening meal and was walking to the pub; I noticed “Parcel Pete” trying a very dangerous three point turn in the main road outside my house.  

A couple of cars that nearly collided with him made their displeasure known with their horns – even though it was later than the 7pm deadline recommended in the Highway Code.

I couldn’t help thinking what a long day it must have been for “Parcel Pete” – there are no tachographs or driving hour restrictions for vans below 7.5 tons.  He has probably been working for more than twelve hours in pretty miserable weather conditions.  And I can’t remember more than a week in the last few years when he has had a holiday.

The same day we had a new client who pulled out of an order at the Shopping Cart stage of our order process system because a delivery charge was applied on a “small order”.  

He emailed me the screen capture with the £15 delivery charge circled in red and said this was “Bad Business” and claimed this cost was exorbitant and he would not be placing any more orders with Direct2Print.

The order was for a 34 page wire-bound booklet printed full colour on 150gsm gloss paper with colour covers on 350gsm card – and the print cost (with his 50% first time order discount) was £4.45 including VAT.  However, a £15 delivery charge was applied because the order was below our minimum cost for free delivery.

Incidentally his location was within Zone C and would have cost nearly £40 for next day courier delivery.  

I have been caught out with this before sending some printed prayer books to a monastery in the Highlands & Islands of Scotland.

Even with Royal Mail it would have been at least £11 cost for carriage – let alone the cost of the packaging!

So the whole job next working day would have cost this potential client £19.45 including VAT (£16.20 nett in my account!).

Rather than email back - I picked up the phone to explain that the courier cost alone would be more than the value of the order and regretfully the only option was to rely on second class Royal Mail post to deliver sometime in the days ahead.  

What options were available that would have been cheaper – surely not the cost of driving to a copy shop in the nearest city!  I would like to think by speaking directly to him his anger was placated but I’m not sure.

Then I thought of “Parcel Pete” and his attempts to forge an income with long hours. 
The TV News that evening showed images of gale-force winds hitting Scotland and all trains being cancelled north of Perth and I felt quite relieved we didn’t get this job.

At the same time I also remembered that City Link had been pushed into receivership and made staff redundant at the worst possible time between Christmas and the New Year. 
Some of these people would put in long hours and often in a cold and uncomfortable environment.

City Link offered the lowest cost parcel service that I could ever find but somehow they never offered reliability – which is far more important than cost.

But what can you expect – they were once managed by the guy who caused the collapse of Prontaprint and he had the same price-driven mentality to success.

About ten years ago and the whole lot was sold “as a going concern” for £1 to a venture capitalist some months before.  

Yes, they invested some money but they chased volume at unrealistic rates.

Commercial pressures are forcing a reduction in costs in every part of every business. 
But there comes a time when we have to be realistic about this vital part of any business – the actual price we charge.  

When we started our online document printing service in 2003 delivery was always free.
Now we have to pass on costs rather than take on uneconomical orders.

Eventually we may even see some of our other costs falling.  Oil drifts to a price when petrol actually seems like good value again.  The supermarkets are desperately fighting for market share are putting extra pressure on their suppliers.  

There aren’t many costs that are going up and being accepted by customers.

However, we all need to survive and grow in order that we can invest in our service and innovate in a very competitive market.

And the conclusion…

As a result, we are not immune to the risks of business, but we have spread our risks and have built up sufficient funds to weather most storms that will come our way in 2015.

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