Collaboration Forum Series 4: Optimism in tough times (Week-9)

There’s no doubt in my mind Yodel has been a beneficiary of the pandemic because we’ve gained business as a result. But volumes don’t always equal profit.

If I cast my mind back a year, to the early days of March 2020, there was quite a lot of fear about exactly what the virus did and how you could catch it. We weren’t really sure what was going to happen. We put salary sacrifice systems in place and started to see costs come through with the requirement for protective clothing and masks.

We put new processes in place to make sure customers felt safe with the delivery experience. Our priority at that point was purely the safety of staff and customers. If I’m honest, we weren’t too worried about profitability initially; we just wanted to keep the operation going safely. Of course, one of the challenges of the pandemic is that absence can kick in very quickly. We had as many as 1,000 people off at one time.

But as a business, we have ultimately grown. I don’t know what the real number is for the industry, but I’ve heard that e-commerce has experienced between three and five years of growth in a year. It certainly feels like we’ve done two years’ work in one year. Our parcel volumes have increased by about a third. The turnover has been lifted significantly and we will make a substantial profit. The business is going from strength to strength.

Capacity has been a challenge for the past 12 months. We’ve had to cleanse our network and make sure the parcels going through are suitable for the automated systems we’ve got. When I got to Yodel, I discovered we were carrying all sorts of shapes and sizes of parcel, and not necessarily charging the appropriate prices. It was adding cost to the business, but importantly, it was slowing down operations.

So, in the early days, we had conversations with some customers about either paying the right price or finding somebody else. With the benefit of hindsight, that was a real turning point. It allowed us to carry more appropriately sized parcels, which means we can move more of them through the network each day.

For new drivers, the training period was also too long to get them up to speed. We’ve used technology to guide people and help them be more effective at delivering parcels. When I joined, there were jokes about drivers throwing parcels over fences, but I think all the carriers hear that. We’ve made a real effort to make sure our drivers understand the importance of customer experience. We’ve put customer service at the heart of our turnaround and our Trustpilot rating has consistently moved up.

One thing I can see is the use of pick-up and drop-off sites coming back. At Yodel we have a partnership with Collect+ at 6,500 stores across the UK. It was certainly a growing business before the pandemic, but it’s not really grown in the past 12 months. I think the convenience of these locations will continue. It also plays a little bit towards the green agenda, with fewer vans travelling up and down the street.

The environmental focus is really important. We talk about it a lot. My initial priority was to first recover a loss of £45m but now we’re moving into profitability there are obvious things to do. We’ve been trying to reduce energy use wherever we can. In addition to the drop-off sites I mentioned, technology has also allowed drivers to plan their tours better, and reduce the overall mileage that Yodel vehicles travel. I also think we have one of the most modern fleets of all of the carriers.

We’re doing what we can without major capital investment at the moment, while we get the business into profit. The next stage will be to start to look at alternative fuels. Even in the last two weeks, we have been looking at gas powered vehicles, and are starting to make some decisions about alternative fuel types.

Ultimately, I think we’ve got a period of consolidation ahead of us. We’ve got into profit incredibly quickly and we want to keep growing. I’m a target-driven person and I can see Yodel getting to £1bn of sales within a sensible period. I think growth will keep coming. If we can maintain our profitability at the same rate we are now and keep customer service at the heart of everything, we will carry on being successful. It would be a genuine reward for the shareholders who’ve stuck with the business through thick and thin.