Unfair delivery practices are a long-standing issue affecting people in Scotland, with the majority being in remote and rural areas of the country. Although delivery to those areas has additional costs, consumers in these areas have experienced unjustified surcharging, delays and refusal to deliver. In November 2018, the Scottish Government released an action plan. Two of the eight actions described in this key policy document were: (i) the development of an interactive data hub, and (ii) the development of the Scottish Parcel Delivery Map.
Aims and structure of the report
Alma Economics was commissioned by the Scottish Government to undertake an econometric analysis of postal delivery pricing in Scotland. As a first step, Alma Economics collected a novel, comprehensive dataset on delivery prices, area and company characteristics from the websites of delivery companies and retailers covering all 1,029 postcode sectors in Scotland, automating a “mystery shopper” approach using Selenium, an open-source web automation tool. An extensive stakeholder engagement exercise was also conducted through interviews with key representatives from umbrella bodies, national organisations, MSPs, couriers and retailers, providing a better understanding of their views and insights on different aspects relating to delivery charges in Scotland as well as examples of unjustified surcharges.
Following the data collection and stakeholder engagement exercises, our team estimated econometric models for parcel delivery prices and availability of online retailer home delivery as a function of a wide range of postcode sector and delivery characteristics. These models allowed us to identify the impact each factor has on delivery prices, then predict prices for a specific combination of parcel size, delivery options and postcode. Differences between delivery prices predicted by our model and actual prices quoted by delivery companies provided an indication for which postcodes face unfair prices. These results serve as a credible benchmarking of delivery pricing in different areas of Scotland that will enable the Scottish Government to develop an interactive data hub and the Scottish Parcel Delivery Map. However, our results are not definitive in terms of classifying a particular delivery price as fair or unfair – our model does not capture all relevant characteristics that delivery companies must consider when pricing the cost of delivery (such as labour and fuel costs), and observed surcharges could be justified due to factors that we do not include in our model.
The report is comprised of the following sections:
Section 2 introduces the issue of unfair delivery charges in Scotland and discusses in detail drivers of high delivery costs, reasons for delivery surcharges, key consequences and general policy context.
Section 3 covers all aspects related to the stakeholder consultation. It includes information on interview participants and briefly discusses the topics covered during the semi-structured interviews. The section also focuses on case studies of unfair parcel delivery service, including unfair pricing, unjustified delays, refusal to deliver and misleading advertisements of the above.
Section 4 explains the approach the Alma Economics team used for collecting data on postcodes, postal companies and retailers. It also provides information on the “mystery shopping” method employed to automate data collection; by writing a custom Python program for each retailer or delivery company we were able to request shipping quotes from websites and combine them into a database for further analysis. In addition, this section provides details on the econometric model specification. We estimated one primary model each for delivery companies and retailers, with a range of alternate specifications as robustness checks. Using different regressions, the econometric model was used to estimate the average delivery price for each postcode/address based on area and parcel characteristics.
The final section presents the findings of our research and report’s descriptive statistics and the results of our econometric analysis. A detailed discussion of the results is included, describing variation of prices across companies, parcel types, delivery times and type as well as geography.
In this report, we use the terms “delivery company”, “parcel operator” and “postal operator” interchangeably. In addition, the terms “delivery price”, “shipping quote” and “postal charge” all refer to the price charged by delivery companies to deliver a specific parcel or retailers to deliver a product ordered online to a particular postcode. This only refers to the base price of delivery and excludes any add-ons selected by the consumer.
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