Statement of principles for parcel deliveries: review

5. Retailers Perspectives

An online survey was undertaken to better understand levels of awareness of, and views on, the reach and impact of the Statement of Principles among businesses in Scotland, particularly those that trade online.

The Scottish Government issued an email introduction with the survey link to various contacts, and sought help in promoting and distributing the survey on its behalf to business contacts and members (e.g. emails, social media, newsletters). This included Business Gateway, Chambers of Commerce, Federation of Small Businesses, Scottish Rural Network, Glasgow Etsy Team,^[29] Craft Scotland, and a sample of rural Business Improvement Districts (BIDs).

A total of 107 responses were received.

5.1 Retailer Profile

The survey attracted responses from businesses based in 12 local authority areas. Just over half were based in the Highlands and Argyll and Bute - Figure 5.1.

Base number (N)=94. Map: Datawrapper

Given that respondents were self-selecting (i.e. they chose to take part in the research), it is not surprising that a sizeable proportion were located in areas where parcel delivery surcharging is known to be an issue.

Some 90% of businesses reported that they were based in an area of Scotland that is impacted by surcharging. Only 7% said they were not.^[30] This has heavily influenced the nature of responses received, with most businesses negatively impacted by surcharging and able to recount their personal experiences of it.

Businesses operated in a diverse range of business sectors. Table 5.1 breaks this down, with 23% in the creative and craft sector and 12% in retail (not elsewhere classified).

Table 5.1: Business Sector

	Sell Goods Online	Do Not Sell Goods Online	Total
Creative & crafts	16%	7%	23%
Retail - not elsewhere classified	10%	2%	12%
Agriculture, forestry & land	0%	11%	11%
Hospitality	0%	7%	7%
Food and drink producer	7%	0%	7%
Accommodation	1%	5%	6%
Construction	1%	5%	6%
Manufacturing - not elsewhere classified	3%	2%	5%
Vehicle repair/sales	0%	4%	4%
Personal services	1%	3%	4%
Equipment hire	1%	2%	3%
Community organisation	0%	2%	2%
Other	2%	9%	11%
Total	40%	60%	100%

N=107. Sector grouped by EKOS from open entry responses.

The vast majority of businesses were micro businesses (less than ten employees), many of which were sole traders (51%).

5.2 Trading Online

Nearly all businesses trade online in one shape or form (94%).

Almost all order goods online that are delivered to their business premises (93%), with a lower proportion selling goods online (40%) - Figure 5.2.

Among those businesses that sell goods online that are then delivered to customers, 59% reported that this represents up to 50% of its total sales. Sixteen percent of those that sell online said that all of their sales are made this way - Figure 5.3.

Figure 5.4 shows that almost all businesses that sell goods online (98%) said that they send items through Royal Mail/the Post Office network, which is covered by the Universal Service Obligation and offers same price delivery to any destination in the UK (below 20kg).

The next most common delivery operator used was Parcelforce (42%), which is also part of the Royal Mail Group, but is not covered by the Universal Service Obligation.

N=43

Responses under "other" included Woody's Express Parcels (Stornoway), Mundells (Islay), Hebrides Haulage, Skye Express Parcels, Deveron Express (Banff), and M&H Carriers (covers the north-east and Highlands and Islands).

Among those businesses that sell online, 30% said that they face higher costs when sending goods to remote and rural areas - Figure 5.5. This relatively low figure is likely to be due to most being located in a surcharge area, and the high proportion using Royal Mail to send items.

Retailers that face higher costs were asked if they pass this cost on to the customer, or absorb the cost themselves.

More than two-thirds said they cover the extra cost themselves (69%) - Figure 5.6. However, a high proportion of retailers are already based in a rural area, which is likely to influence this. Those that answered "other" said that it depends on the circumstances (e.g. the scale of order).

Businesses based in an area impacted by surcharging were asked if they typically face surcharges when receiving deliveries. The vast majority responded that this is the case (97%) - Figure 5.7.

N=92

Detailed comments were provided on the impact that this has. Overall, the main themes which emerged were similar to those covered within the existing evidence base (Chapter 2). This included poor delivery coverage that prevents items being ordered, extra costs (particularly for specialist items), and having to pay extra for services such as one day or 48-hour delivery, that then take longer than specified.

Taken together, these issues were reported to have a negative impact on business viability (running costs and profit margins). A selection of comments which reflect these themes are shown in Figure 5.8.

Figure 5.8: Impact of Delivery Surcharging - Examples

"Our primary supplier uses DPD as a courier. Our supplier charges free next day delivery to most mainland addresses, but we face delivery charges of up to £15 per box for our deliveries.We are required to make orders of over £500 to bring down the delivery to £8.50 per box."

"Equipment takes longer to arrive, and in some instances products are not available because the firm has a no delivery policy to Highlands & Islands which, for some, curiously, includes Aberdeenshire."

"I live on an island so rely 100% on deliveries to run my business. Excessive delivery charges add to my overheads which I can't afford and means extra time shopping around. Luckily, I can use the CalMac address in Mallaig for companies that won't deliver to island addresses or charge excessively."

"There have been times I've ordered a small part for a machine that would fit in an envelope at a cost of no more than £3, only to find that the postage was going to come to £14 on top of it. Sometimes we contact a company and see if they could just post something Royal Mail instead (which itself isn't that cheap). Sometimes that works, most of the time not, so we search for companies that use Royal Mail or Parcelforce, but they are few and far between. We tend not to use companies that surcharge, on principle (we are only 15 minutes from Inverness, not remote) but if there's no avoiding buying from a company that surcharges, we only put in big orders once a year to make the surcharge worth it."

"We can either pay extra or seek out another supplier that does not charge higher charges, which takes time - both options impact our profitability/competitiveness."

Source: Survey responses, Oct/Nov 2019.

5.3 Awareness of Existing Actions

Just over half of businesses reported to have at least some awareness of work undertaken by the Scottish Government, CAS, Trading Standards Scotland and other partners to tackle the issue of excessive and unfair parcel delivery surcharging in remote and rural areas of Scotland (52%).

In contrast, 20% had at least some awareness of the Statement of Principles - Figure 5.9.

N=105

Businesses were asked for thoughts on how the Principles could be improved or have more impact - Figure 5.10.

The key theme that emerged was that while the existence of the Principles and their content are viewed positively, businesses feel that they are not being widely adhered to by retailers. It was suggested that there is need for stronger regulation in this area.

Some comments also highlighted that the root cause of the issue lies with delivery operators and not retailers.

Figure 5.10: Suggestions for Improving the Principles

"If they were made compulsory or legally binding in some way: running a small business in remote rural Scotland is hard enough without being made to pay over-the-odds for deliveries, the principle of national cross-subsidisation with more urban/profitable routes ought to apply (as it does for Royal Mail)."

"The principles are great but the carriers don't comply. In some cases the sender just refuses to send and cancels. We are discriminated against in the Highlands. We are in Glencoe but everything routed via Inverness now. When it was Glasgow or Paisley we did get tracked next day delivery and a better service."

"If the code has been in existence since 2013 then it hasn't worked. Improvements are unlikely because it is voluntary. It is time to consider some form of subsidy for carriers that are prepared to service this area properly."

"I'm not really sure who they're designed for. Every other small business and sole trader I know, charges only the cost that their shipping options cost them... it's the parcel and delivery services (excluding Royal Mail) that charge additional fees for shipping to the Highlands and Islands."

"While these principles are laudable, they are no use if they aren't backed up by law. Businesses and couriers are not here to follow principles, they are here to make money. If you can make more money and avoid these principles, business will act with their coffers in mind. I personally think it should be illegal to discriminate price of delivery by location in the country. This should be enforced for both couriers providing delivery services and the businesses that utilise the couriers. Royal Mail manages to do this fine - why can't the other private couriers do the same? It should be a priority of the Scottish Government to take these principles and make them law."

"Nice principles, don't know when they were formulated, but my experience is that they have absolutely nil effect… I have no thought on how the principles could have more impact, as Englishcompanies and couriers don't care about the Scottish Government's principles."

"A voluntary approach does not appear to be working. Enforcing the principles through legislation would be more effective (or a geography lesson that Inverness is on the mainland!)."

Source: Survey responses, Oct/Nov 2019.

Among retailers that sell online, more than half reported that their own delivery policy reflects all of the Principles (55%), and 31% that it reflects some of them - Figure 5.11.

Around 90% said they would be very likely or likely to adopt the Principles - Figure 5.12.

Retailers provided information on how their existing delivery policy reflects the Principles:

• most specified that they do not surcharge as they use Royal Mail to despatch items;
• some mentioned that delivery information/pricing is clearly stated on their website, including for international orders;
• others specified that they try to keep delivery costs to a minimum, but that their options are limited by their location e.g. limited range of carriers, making meeting Principle 4 difficult;
• some businesses mentioned keeping customers informed of delivery options before checkout and/or about delivery schedules or other relevant information about their purchase at an early stage (e.g. potential delays);
• one business mentioned offering a local pick-up option for people in the immediate area; and
• one business highlighted that calculating postage at an early stage can be difficult, as they often produce custom items.

A couple of businesses mentioned that they do not "actively" capture information from customers about their delivery experience.

Retailers also explained why they would be "likely" or "very likely" to adopt the Principles, with most commenting that they already adhere to them (albeit not all provided further detail on how they do this or provided examples), that it makes good business sense, gives customers confidence, and/or that they think fairness is important.

5.4 Barriers to Adoption of the Principles

There appears to be a number of factors at play when consideration was given to why the Statement of Principles has not been more widely adopted by retailers - Figure 5.13.

The top four responses were: the voluntary nature of the Principles, that delivery pricing is out of the hands of retailers, limited awareness of the Principles, and while retailers are likely to be aware of the surcharging issues, it is not a major enough concern.

N=104

Responses under "other" barriers included that retailers do not understand the geography of Scotland, and they think the market that is impacted by the issue is insignificant.

5.5 Further Action

There was relatively strong support among businesses for the development of a simple pledge that large and small online retailers can sign up to, showing their commitment to fair deliveries (67%), Figure 5.14.

The vast majority of businesses also felt that the Principles should be extended to cover delivery operators (91%), Figure 5.15.

Businesses that felt the Principles should be extended to cover delivery operators generally reported that pricing discrimination should be prohibited by law. Wider feedback was that there should be accreditation or licensing of couriers with flat pricing as a condition, and there was general frustration with how postcodes are classified by couriers.

The handful of businesses that did not think the Principles should be extended to cover delivery operators (or were unsure) made comments including that they recognise delivery prices are higher to rural areas, that often more than one carrier is involved (pushing up the cost), and that volumes are lower.

One business commented that they did not believe extending the Principles would be worthwhile, as it "hasn't worked (with retailers), and the voluntary nature of the scheme will ensure that remains the case".

Two-thirds of businesses felt there would be value in trying to raise further awareness of the Principles, Figure 5.16. Suggestions included:

• greater communication with businesses, including through membership organisations and other mechanisms;
• promotional campaigns, including social media, online, press and television;
• writing to large sellers (although one comment was that the "problem is often more acute with small sellers" - this also reflects the feedback from stakeholders);
• "naming and shaming" businesses that go against good practice;
• introducing the Principles during Business Gateway training for new businesses - "get them involved at the start";
• asking delivery operators to formally adopt the Principles; and
• more direct intervention e.g. regulation, enforcement, or forcing retailers to offer Royal Mail as an option, which may "encourage couriers to be more creative in response".

N=104

Businesses were asked for any other ideas they have to tackle the issue of unfair or excessive parcel delivery charges and policies. Many reiterated the need for legislative action to impose flat pricing across the UK, with other suggestions including:

• greater incentives for couriers to avoid surcharging e.g. tax breaks or subsidies;
• encouraging collaboration among logistics/delivery operators e.g. shared drop-off points, having a single carrier for designated postcodes;
• clearer information on the rationale/financial basis for surcharging;
• legislating for standard or maximum delivery rates;
• better use of Royal Mail as an option for last mile delivery by other operators; and
• defining what an excessive charge is.

5.6 Final Comments

Businesses provided a range of additional comments:

• many expressed their general frustration with the issue, citing experiences where companies have refused to deliver items to them or imposed surcharges the respondent felt was unnecessary, and the impact that this has on their business ("Surcharges have been a stressful, annoying, expensive and almost unavoidable part of my business and of Highland life since we started buying online".);
• in general, businesses felt that their suppliers in other parts of the country have a poor understanding of both the issue itself and the geographical composition of Scotland, leading to confusion over postcodes and shifting of blame between couriers and retailers ("We have been in discussion with sellers saying they will post things Royal Mail and they then try and charge more as it's to a Scottish island. Having to go back and say Royal Mail do not charge more for islands is frustrating".);
• several businesses commented that surcharging and a lack of delivery options has limited their own growth and harms economic opportunities in rural areas ("I do not sell items online or post items because of the difficulty of finding a courier and of course the cost - I would have to find a courier because the Post Office will not insure pottery".); and
• they are appreciative that steps are being taken to address the issue ("Thank you for taking this issue seriously, it's been ignored for too long".).

5.7 Wider Desk Review

This section summarises the views and recent actions of a number of significant retailers on the issue of surcharging and unfair delivery policies, sourced from existing evidence as well as consultation with industry body the Interactive Media in Retail Group (IMRG).

Amazon had 280,000 registered sellers trading on its UK marketplace in September 2017, which has likely grown since then. It previously did not have an option for marketplace sellers to surcharge (which they highlighted during evidence to the Scottish Affairs Committee February, 2018) but revised this in May 2019.^[31] This was viewed as a retrograde step by several stakeholders. When raised in Parliament in 2019, the then Minister for Small Business, Consumers and Corporate Responsibility, Kelly Tolhurst, said she would "raise the matter directly with Amazon".^[32]

eBay has around 200,000 professional sellers registered on its UK marketplace in September 2017, mostly small businesses. eBay previously referenced and linked to the Statement of Principles in its guidance for sellers - it highlighted this during evidence to the Scottish Affairs Committee in February, 2018.^[33]

eBay encourage its sellers to offer free delivery, favouring these items in their search results and adding a 'Fast and Free' badge where this applies (although buyers in "Shetland and the Hebrides" will not see this badge displayed). eBay has said that it shares frustrations about unfair delivery costs and that it is "always trying to push our sellers, in a nudging way rather than through strict enforcement".^[34]

Argos abolished surcharging in 2016, although it remains for larger items (with the exception of the Isle of Lewis, where they operate a shop).^[35]

The IMRG is a trade body for the UK's online retail sector. Written input was provided by the IMRG's Delivery Retailer Advisory Board comprised of representatives of major online retailers including John Lewis, eBay, New Look, and Missguided.^[36] This commented on the issue of surcharging, highlighting the retailers' view that surcharging is applied to only a very small proportion of total UK orders (estimated 0.8%) and that those living in affected areas generate "up to only 2% (29 million) of the UK's online order volume".

The submission goes on to explain:

• why surcharging can be justified: it reflects the reality of higher costs and lower volumes;
• retailers should be able to charge different prices for different items and services;
• retailers should be able to restrict services/deliveries to some areas if it is unviable or cannot be physically achieved;
• retailers should not try to profit from the application of excessive surcharges;
• retailers should reveal and explain any surcharges as soon as possible - although sometimes this is not possible until at checkout;
• customers in surcharge areas have a responsibility to check the delivery policy before placing an order - going into detail about surcharges on home/product pages is "not consistent with providing a good retail experience for the consumer"; and
• if surcharges were to apply to more specific postcodes, the cost of the surcharge, currently aggregated across a higher volume of parcels, would increase significantly.

While shifting some of the focus towards consumer's own responsibilities and the pricing put in place by delivery operators, the IMRG submission does not directly contradict the Statement of Principles. This is in part a reflection of the difficulty of defining what an excessive charge is and what is fair - what may appear transparent and justifiable to a retailer could well appear discriminatory and excessive to a customer.

The IMRG take the view that larger retailers are already complying with the Principles, which are seen as being "common sense".

In terms of further developing the Principles, for instance by adopting a pledge/badge scheme, the IMRG was able to draw on its own experience of running similar quality assurance schemes for ecommerce: Internet Shopping Is Safe and Internet Delivery Is Safe.

First developed in the 2000s, it was aimed at increasing confidence in ecommerce (which many consumers were using for the first time), with retailers required to prove they would trade in a "legal, decent, honest, truthful and fair manner", with an "efficient, reliable, safe experience on their sites".

The programme was subsequently merged and replaced by the "Trusted Shops" mark, and the IMRG is no longer involved in running it.

However, it did highlight the following from its experience:

• checks were only carried out when a consumer complained - so effectively the same as the current situation with parcel deliveries;
• they found that the logos were being lifted from websites and used by companies that were not authorised to do so; and
• it was sometimes the case that really good retailers were not interested in signing up, but less reputable businesses would.