The new box on the block

InPost Canada’s headquarters, in Toronto’s west end, backs onto a vast, 310,000-sq.-ft. warehouse it shares with the distributor Ucan Universal. The warehouse stretches off into the distance, vaguely reminiscent of Hangar 51 in Raiders of the Lost Ark.

Steven Spielberg’s 1981 blockbuster was ostensibly about a search for the Ark of the Covenant, a historical artifact said to contain the stone tablets bearing the 10 Commandments. InPost was created to address a more informal, but no less crucial, commandment of 21st century retail: Thou shalt not displease the customer.

InPost is among a growing number of automated parcel locker networks that have sprung up around the world, their arrival coinciding with a meteoric rise in e-ommerce. In Canada, the company’s lockers are popping up in front of grocery stores and gas bars. Is this the future of e-commerce delivery? And if so, what role will supermarkets play?

John Clarke is chief revenue officer at InPost Canada. His background includes time at Google Canada and ScribbleLive, a content marketing software provider. The way Clarke sees it, the growing number of online orders in Canada places enormous burden on retailers and delivery services to get products to customers fast and hassle free. One of the fundamental problems arises during business hours. If a customer isn’t home (and many are not), their parcel might be taken to a central depot. The customer must then trek miles to stand in line while an employee tracks down their delivery. It can be a time-consuming process that negates one of the key benefits of online ordering: convenience.

InPost figures there’s an easier way: Have people’s online orders—whether books or a new pair of shoes—sent to an Inpost locker near their home. They can pick it up whenever is easiest; on the way home from work, for example. InPost currently operates 76 regular lockers (or “automated parcel machines,” as they’re formally known) in the Greater Toronto Area. It aims to grow that network to as many as 1,000 within 12 to 18 months. The company has contracts with Loblaw, Petro-Canada and Shell to place its lockers on their properties. It has also obtained approval to install units in 10 sites within Montreal’s transit system. Ottawa, Calgary, Edmonton and Vancouver, and possibly Halifax and Quebec City, are on tap for this year.

“We’re going to meet customers where they want to be, not where they have to go,” Clarke says. The lockers also offer an opportunity for InPost’s retail partners to drive traffic to their store. InPost’s research suggests more than half (54%) of all locker users will visit a nearby store.

Further data suggests shoppers like the anytime aspect of lockers. An estimated 52% of InPost users pick up parcels outside of standard business hours, including 35% picked up between 6 p.m. and 9 a.m., and 17% on weekends. “Gas stations love because there’s only so much gas they can sell,” says InPost Canada CEO, Tony Jasinski. “Chances are you’re going to get out of your car to pick up a parcel, and you might stop at the store for an ice cream, pop, whatever.”

One reason InPost may succeed in its quest to plop its lockers everywhere is due to the number of Canadians now shopping online, coupled with problems retailers have fulling those orders. Seventy-six per cent of Canadians bought online in 2014, according to Canada Post data, with about one-quarter buying off the Internet four to 10 times a year. But delivering directly to people’s homes isn’t cheap for retailers, and consumers don’t want to pay extra for shipping. A solution is to offer pickup, either in-store or at lockers.

Take Walmart Canada, for instance. Its Grab & Go service, launched more than a year ago, lets online shoppers send their items to a locker for pick-up. Customers select the Grab & Go option at checkout, and can choose to send their order to one of more than 50 storage lockers in Ontario or lockers at some 7-Elevens in Toronto. “Customers love that because they can choose pick it up on way home, versus having to wait at the house for a parcel to come, and if that parcel comes and not home ...” senior vice-president of e-commerce, Simon Rodrigue, told Canadian Grocer last fall.

Walmart has seen a rapid uptake in online shopping in the past 18 months, says Rodrigue, with the practice evolving from customers shopping for the likes of consumer electronics, to more everyday items such as bathroom tissue. “Customers are really telling us this is a big convenience,” says Rodrigue. “, ‘If you can drop that off at a location that I can pick it up at my convenience, all the better.’ We’re seeing everything going into the lockers,” from general merchandise to food to healthy and beauty.

The grocery industry, too, has spawned a growing network of pickup services. Loblaw launched its click and collect, in October 2014, at a Loblaws in Richmond Hill, Ont., and now lets customers pick up online orders at some 39 stores in the GTA, Ottawa, Edmonton and Vancouver. Store employees deliver the goods, including fresh food, to customers waiting in the parking lot. B.C.’s Overwaitea also offers click and collect, as does Walmart, whose fresh food pickup launched in Ottawa last summer and expanded to Toronto in February.

U.K. grocers, including Tesco and Sainsbury’s, have also introduced services, while research suggests that 20% of people in France have used click and collect provided by grocery banners including Carrefour, Casino and Leclerc. A 2014 study by Deloitte predicted there would be a half-million click-and-collection locations in Europe soon.

InPost management is keenly aware of the growing importance of grocery e-commerce. “We are going all-in on the grocery business,” says Clarke. The company plans to add temperature-controlled lockers, each featuring three storage zones (-18 degrees Celsius, 2 to 4 degrees and 16 degrees) to its product portfolio in the second half of this year. Clarke envisions a scenario where customers can order groceries online and have them sent to one of InPost’s dedicated lockers for pick-up whenever it’s convenient for the customer. A typical interaction with an InPost locker takes less than 10 seconds, with users scanning a QR code (or entering a dedicated code) to open a designated locker.

According to Clarke, temperature-controlled lockers are the perfect solution for customers needing to purchase top-up items, such as fresh produce and dairy (which account for an estimated 47% of all grocery purchases), during the week. “People are going to get in their car and get their impulse item, and they’re getting staples like rice or  our at a big-box store, but that middle area is where you’re going to see a lot of activity in the grocery locker business,” he predicts. Refrigerated lockers have already been tried by grocers in other countries, notably in Britain where upscale chain Waitrose has them in high-traffic spots, such as gas stations and near public transit.

InPost currently offers more than 4,000 automated lockers in 21 countries and is increasingly being joined by competitors from both the private and public sectors. Lithuania Post recently kicked off a three-month pilot project for parcel lockers. A startup called QikPod recently received US$9 million and has a stated goal of building the world’s largest parcel locker network, with more than 50,000 lockers in major cities in India. Norman Shaw, associate professor at Ryerson University’s Ted Rogers School of Retail Management, says locker services address the one thing consumers never seem to have enough of: time. “I don’t think it’s going to be transformative, but it’s going to help the grocery industry because it will make it more convenient for people who are time-starved,” says Shaw.

He predicts there will be “continued growth” of the click-and-collect model in retail, largely as a means of ensuring foot traffic to brick-and-mortar locations as e-commerce becomes more entrenched. “They’re making sure that the traffic comes in, because they know that if the traffic comes in, people are going to make more impulse purchases there,” he says.