This executive summary presents the main conclusions and recommendations arising from secondary and primary research commissioned by the Scottish Government's Consumer and Competition Policy Unit to help understand the impact and reach of the Statement of Principles for Parcel Deliveries (2013).
Awareness of the Statement of Principles
Research undertaken a few years ago found that awareness of the Statement of Principles was low among businesses in Scotland. In part, this reflects the fact that the Principles had only recently been launched. Our research confirms that awareness of the Statement of Principles continues to be limited.
One in five businesses that responded to our survey had at least some awareness of the Statement of Principles - albeit the proportion with a "good" or "high" level of awareness was very much lower. Consultation with key partners and stakeholders highlighted a perceived low level of awareness of the Principles among retailers.
This is not to say, however, that unfair or excessive parcel delivery surcharging is not considered to be an issue or not well understood among businesses (or parcel delivery operators) - it continues to be a source of much concern. Indeed, just over half of businesses said that they were aware of wider action undertaken by the Scottish Government and partners to raise awareness of the issue, and most had personal experience when they ordered goods online for their business. There has been some press coverage of the Statement of Principles (albeit not recently), and it is promoted on some partners' websites.
Recommendation 1: There has been limited proactive promotion of the Statement of Principles (e.g. using a mix of channels) or actions to increase awareness of, obtain buy-in and support for, and ultimately increase adoption of the Statement of Principles among retailers. A more widespread adoption of the Statement of Principles is something which should be addressed by the Scottish Government and partners.
If the Principles are to achieve reach and impact, then specific action is called for to increase awareness of the Principles among retailers. Some potential options include:
- engagement with agencies and organisations that have a business-facing function - e.g. Business Gateway, Chambers of Commerce, Federation of Small Businesses, Scottish Enterprise, Highlands and Islands Enterprise, Skills Development Scotland. There is particular need to raise awareness and engage smaller businesses.
- promotional campaigns - not limited to press, but making greater use of social media and other channels.
Content of the Principles
On the whole, there was broad support for the rationale behind the development of the Statement of Principles - both among the stakeholders consulted and businesses.
Firstly, stakeholders were supportive of the general spirit of the Principles. The main feedback was that it has been a positive step that the Statement of Principles exist, that it has helped to continue to raise the profile of the issue, and that the Principles have complemented wider action that has taken place.
However, the general view of stakeholders was that the Principles have not been regularly used or reinforced for some time now, and that there has been no specific focus on encouraging online retailers to adopt the Statement of Principles. Taken together, this has limited their potential overall effectiveness.
There was particularly positive feedback provided by businesses in some aspects:
- the vast majority of retailers that sell online and responded to our survey said that their own policies reflect some or all of the Principles (86%);
- more than three-quarters of businesses rated each Principle as either very useful or somewhat useful in helping to drive behaviour change among online retailers; and
- around 90% of retailers that sell online said that they would be very likely or likely to adopt the Principles.
Recommendation 2: No major issues or concerns were raised by stakeholders or retailers around the content, wording or phrasing of the Principles, albeit there was some feedback that it could be simplified and clarified in places and contradictory wording removed (as detailed in Chapter 4). The Scottish Government could consider a review of the Statement of Principles to ensure they reflect the findings of this report.
Effectiveness of the Principles
It should be noted that the overall effectiveness of the Principles in changing behaviour is much harder to determine in practice. There are likely to be a number of factors at play.
Firstly, the Statement of Principles is a set of good practice principles, and adoption is voluntary. As such, assessment of levels of adoption and the extent to which it has changed the behaviour of retailers is somewhat challenging.
Secondly, most businesses that responded to the online survey were based in areas impacted by surcharging. Therefore, they have a particular interest in tackling the issue, and the findings need to be viewed in this context.
The general sense from businesses was that those on the receiving end of surcharging do not think there should be any price discrimination at all, and that the Statement of Principles does not go far enough.
On the other hand, delivery operators were adamant that their surcharges reflect the actual additional cost of delivery, and that it is up to retailers whether they want to pass this onto the customer. While generally supportive of steps to raise consumer awareness of the issue and encourage best practice among retailers, they do not see direct intervention in the courier market as a way of solving the issue.
The delivery sector is (self-reported as) highly competitive and couriers argue they take all steps possible to keep costs down. However, this works both ways - a strong emphasis on volume (which is inevitably concentrated in urban areas) and keeping costs down as much as possible means that remote and rural areas are unlikely to be a major consideration when negotiating contracts. This is supported by the IMRG's comment that those impacted by surcharging in Scotland and Northern Ireland generate "up to only 2% of the UK's online order volume". Ultimately, retailers and delivery operators alike will not make decisions that do not make commercial sense or put them in an uncompetitive position.
Some retailers that responded to the survey highlighted that while there may be a case for surcharging, they do not believe it should apply to their area, as they are based on the UK Mainland, near a major city/town, or near a main road.
The fault line between the AB and IV postcode areas in the north-east has been highlighted as an example of this - with those on the IV side often facing surcharging. However, there is some risk that by making the surcharge area more specific, the extra cost for those affected could increase as the geography covered will be - on average - more remote.
While some customers would benefit, others could face even greater detriment.
Recommendation 3: There is no current formal mechanism in place to routinely assess the effectiveness of the Principles. On the basis that action will be taken to increase awareness and adoption of the Statement of Principles, then this could form the basis of regular stakeholder engagement to measure progress.
Extent of Behaviour Change
There are inherent challenges in assessing the extent to which retailers have altered their behaviour as a result of the Principles. Aside from a lack of awareness of the Principles, there is also an attribution issue at play.
The Statement of Principles has been one of a number of actions and activities that have been progressed to help address the issue of unfair parcel delivery surcharging. It is therefore difficult to specifically pinpoint the individual contribution the Principles have had in driving behaviour change.
Nevertheless, feedback from stakeholders confirms that the collective efforts of partners, including work on the Principles, has played its part in progress achieved to date. Here, it was reported that improvements continue to be made in terms of ensuring transparency of charges, having clear information about deliveries, and minimising misleading information. The extent and fairness of any surcharge was, however, considered to be more complex and less well understood (partners are, however, continuing to focus on this). There is also a view that more must be done with changing the behaviour of smaller retailers in particular.
Recommendation 4: While noting the difficulties in evidencing behaviour change, joined-up, co-ordinated and collaborative efforts should continue to maintain a high profile of the issue, as well as to support activities to make more consumers aware of their rights and of retailers' responsibilities.
Recommendation 5: While there is recognition that higher retail costs are a common feature associated with living in remote and rural areas, there is continued frustration with unfair delivery charges. Efforts should focus on developing a better understanding of what constitutes a fair surcharge, and how this can be made transparent to consumers and businesses. Actions that would support this are a key part of Fairer Deliveries for All: An Action Plan.
Barriers to Adoption
The Statement of Principles is not a code of practice, form of regulation or endorsed Kitemark. Rather, adoption by retailers is on a voluntary basis. Indeed, the voluntary nature of the Principles was the main barrier to adoption identified by retailers (i.e. the key target group).
Further, there has been no real promotion, encouragement or incentive for retailers to formally adopt the Principles. The feedback from stakeholders was that retailers, and in particular large retailers, would say that they already adhere to the Principles and many will likely have their own policies in place.
Fundamentally, a key barrier to adoption simply relates to the lack of awareness of the Statement of Principles among retailers. This was raised by stakeholders and businesses alike.
Wider issues raised by businesses that were felt to limit adoption of the Principles included that: a) retailers do not control courier pricing, and b) while there is awareness of the parcel delivery surcharging issue, it is not a top priority or major concern.
Views were mixed regarding whether there would be value in developing a "pledge" that retailers could sign up to (based around the Principles). Stakeholders raised some issues regarding:
- the number of other pledges that already exist; and
- the extent of its relevance when the issue only relates to a small proportion of a retailer's total sales.
There was stronger support for the development of a pledge among businesses (67%).
The Statement of Principles is limited in its effectiveness, given its status as a voluntary code of best practice. This issue was raised by some stakeholders, but more so among businesses that felt that there should be stronger legislation in this policy area.
The focus of partners' efforts should move to other actions detailed in the Fairer Deliveries for All: An Action Plan (e.g. developing a greater understanding of what a fair delivery price is; improving postcode classifications).
Recommendation 6: Retailers were particularly supportive of the creation of a business pledge or endorsed Kitemark (or similar). Feedback was mixed from other stakeholders. More research and dialogue on the issue should be undertaken to explore the benefits and challenges of such an approach.
Extending the Principles to Delivery Operators
The Statement of Principles is aimed at retailers.
Our research found that views were mixed regarding whether the Principles should be extended to apply to parcel delivery companies. In part, stakeholders felt that there is some "buck-passing" between retailers and delivery operators regarding where responsibility lies for the issue of parcel delivery charging.
On the one hand, some stakeholders were supportive, while others were less so - however, overall it was generally not considered to be a key priority area for action.
On the other hand, businesses felt particularly strongly that the Principles should be extended to apply to parcel delivery companies. Some 91% of businesses that responded to the survey said that the Principles should apply to both retailers and delivery operators. The strength of feeling is in part likely to reflect the issue highlighted above however, the main feedback from businesses was that pricing discrimination should be prohibited by law.
Recommendation 7: Our view is that there would be no measurable value in extending the Principles to apply to parcel delivery companies - in the absence of promotional activity to raise awareness of the Statement of Principles among delivery operators in the first instance, or indeed tracking of adoption, etc.
That is not to say that delivery operators do not have a role to play, and they should continue to be encouraged to be involved in collaborative discussions and efforts to help address the challenges identified in this and existing research.
However, if a business pledge approach was developed this could be extended (eventually) to the delivery companies as well as the retailers.
The issue of unfair parcel delivery surcharging is long-standing, and one that continues to be a source of frustration and public concern for residents and businesses alike. Indeed, it is recognised that there is no "magic or single bullet" to tackle the issue, and that change will not happen overnight. The overall view of stakeholders is that there has been some traction and improvements.
First and foremost, the main message from stakeholders is that everyone has a role to play in continuing to shine a light on the issue, and for a collaborative and collective approach to be taken to identifying and implementing solutions. This includes the Scottish and UK Governments, retailers, delivery parcel operators, consumers, and wider partners. Considerable activity has, and continues to take place, however, the challenge reported by stakeholders was around ensuring a more co-ordinated and joined-up approach.
Where Does Best Practice Exist?
Among businesses surveyed as part of this research almost all said they use Royal Mail for despatching orders so avoid surcharging. Where they do face any extra costs, more than two-thirds said that they cover/absorb this cost themselves. While this is in part a reflection of the self-selecting nature of the survey, it does nonetheless demonstrate that some businesses are aware of the issue and taking steps to mitigate its impact.
The importance of encouraging businesses to at least offer Royal Mail as a delivery option for customers was also highlighted by MSPs during the Members Debate on Delivery Charges in December 2019. Royal Mail also has exclusive access to the Post Office network, which has 1,388 branches across Scotland in 2019, of which 68% are in rural areas.
A number of high-profile businesses have also announced that they have stopped surcharging. We have also mentioned some specific examples of businesses that have stopped surcharging (Argos, Wayfair) and others that have taken a step backwards (Amazon Marketplace).
Recommendation 8: Any engagement or promotional activity undertaken to increase awareness of the Principles among retailers should incorporate examples of good practice, with a clear articulation of the benefits for both the business and the consumer.
Issues of rurality and the associated additional costs of living in remote areas are not unique to Scotland or Northern Ireland.
Recommendation 9: While it was outside the scope of this research study, it may be worthwhile looking at what (if any) solutions other countries have found to the issue of higher parcel delivery costs.