CASE STUDY OF ESTONIA
Founder / shareholder of the e-retailer
(Furniture and home appliances) ON24.ee in
Estonia and ON24.fi in Finland.
Member of the Supervisory Board of E-
commerce Association of Estonia
E-commerce in Estonia
Small country with 1,3 million inhabitants
Member of EU
Very good internet availability and high usage
Wide selection of services (state and private)
available and used in internet
Relatively low level of e-retailing (3% of total
Reasons for historically low e-
Weak supply side
Small market and not interesting for big players
Low quality level of e-commerce logistics
State-owned Post has been dominating
Inconvenient receiving the orders
High level of uncertainties
Relatively high price
Situation on e-commerce
logistics market in 2008
100% of the e-commerce deliveries were made by traditional
Delivery to post offices.
Estonian post had the only
Delivery to home by
5% share of competitors of
Estonian Post had 95%
position had negative
impact on the quality and
price of the service.
Problems of e-commerce delivery using
Post offices are located inconveniently
Poor parking possibilities
Not on the everyday routes
Inconvenient opening hours
Standing in the queue
Filling the papers
Time waste up to 40 min in peak-hours
Unpleasant customer service experience
Making a return is a headache
Problems in e-commerce delivery using
Relatively high price
For every delivery a person has to make a trip
Giving up some freedom and wasting time
Need to wait in home for courier
uncertainty about the exact time of the courier
Problems with traditional e-commerce
delivery from E-retailers point of view
Prices are increasing
Nearly monopolistic position in price-negotiations
Slow or not existing innovation and quality
Need to adapt the fast developing e-commerce processes to
slowly developing delivery services.
Many delayed or damaged parcels
Need for additional customer-service work
Low quality and high prices of delivery services
were among the most important barriers for
growth of e-commerce.
Recent changes of e-commerce in
In last 2-3 years the growth of e-commerce
Estonia, has become very rapid
25-35% annual turnover growth
The number of e-commerce companies grows ca.
Main reason for the rapid growth of e-commerce
in recent years is the drastic improvement of
quality- and rapid decrease of price of e-
commerce delivery services. There is a new
format of delivery services implemented.
New format of e-commerce delivery
40-50% of e-commerce deliveries are made by using a
new delivery service – Automated Parcel Terminals (APT-
How the automated parcel terminal
1. Ordering online 2. Delivery to APT
3. Text message
How the automated parcel
terminal service works?
4. Inserting the PIN + 5. Collecting the parcel
6. The customer is happy
What is a network of automated
Pricing of e-commerce delivery
Prices of delivery
Operation costs are
services have to
compete with APT-
s, and the prices
have been reduced
Quality of e-commerce logistics
No queues for receiving parcels
Pick-up from APT takes only 15 sec.
Very close to everyday routes of consumers. In
Notifications move through e-mail and text message. No
need to fill any papers.
No need to wait at home for the courier
Quality of e-commerce logistics
The delivery point can be chosen from all possible
locations, not only home- or work address
Receiving the parcel goes by using PIN-code, which is
received by text message. So the PIN-code can be
forwarded and somebody else can pick-up the parcel.
Speed of delivery is high
The text message goes immediately after inserting the parcel
into locker. So it’s possible to pick up the parcel immediately.
The price for the service is lower
Feedback from users: „I will never use courier or post
Impact of the new delivery service
to traditional delivery services
Post-offices started to move to more customer-friendly
Staff of post-offices has become more customer-
Couriers have become more accurate and faster
Text message notifications are implemented also for
courier- and post-office deliveries
Impact of the new delivery service
to traditional delivery services
Courier- and post-office deliveries have become
Traditional service providers have started to care more
about the e-commerce needs.
Despite the quality improvements of traditional
services, the loss of customers continued.
A competing network of APT-s has been implemented by
Estonian Post in 2011 in order to try to stop losing the market.
Situation on e-commerce
logistics market today
Two networks of automated parcel terminals, covering the whole
country, are competing on the market.
The winners are e-retailers and their customers.
Itella SmartPOST Estonian Post since
since 2009 2011
Future of e-commerce logistics
The concept of automated parcel
terminals has been proved.
Desirable for final consumers.
Profitable for service providers
The changes in broader scale are
In many countries logistics companies
are building and starting to implement
Amazon started to test their own Amazon locker in USA
network of APT-s called „Amazon
It’s evident that automated parcel terminals are the future
of E-commerce logistics.
Opportunity on the market
We know that the new delivery service can have very
positive impact on the e-retailing in every country
where it will be implemented.
What to do to make the service available as soon as
Demand the service from existing service providers
To be the implementer of the service (like Amazon)
You can find more info about the business model and
technology on the web page of the technology- and
business model developer Cleveron Ltd.
Thank you, questions?
AEGLASELT.Happened in Estonia during the last 3-4 yearsWith very high probability is going to happen in all countries with well developed e-commerce.
AeglaseltNow I talk shortly about my backgroundThe annual turnover is approximately 6 million euros E-commerce associaation is an organisation of e-retailers in Estonia. The organisations mission is to develop e-retailing in generalMake sure that more and more consumers start using e-retailing instead of traditional retailingRepresent the interests of e-retailers in talks with government, consumer organisations etc.
Aeglaselt.Internet usage statistics is in close to the top numbers in the world.Declaring of taxes, Medical services, pharmacy receipies, widely usage of digital Id card and digital signatures etc.
AEGLASELTWhy is the e-commerce level in Estonia so low?- Most of the e-commerce everywhere in the world local and is based on language. It means people like to order the goods in local language, have the customer service in their native language. It means that to be successful in Estonia, tou have to sell in Estonian language. So its more reasonable for retailers to invest into the shops which are based on larger languages. The low quality of logistics services is the most important reason for the relatively weak demand side.We all know how inportand is the logistics in e-retailing. The workers of logistics company are oten the only physical contact between e-retailer and final consumer.E-retailer = logistics companyPostal company = large, state-owned, slow, long time in monopolistic position etcLow speed = processes slowUnconvenient = bad locations, Standing in the queue
AEGLASELTNearly monopolistic situation Also monopolistic by in courier service segmentAnnual note of price increase.
AEGLASELTOld buildings and offices from the times where people did not use cars so much, the parking was not importantLocations were chosen long time ago the postal network is 30-50 years old . Today the people move very differently compared to the situation 20-40 year ago.Peolpe work until 17-18. Post closes it-s offices at the same timeAdditional trip because of bad locations and early leaving the work if possibleStanding in the quques sometimes many times. There are many cashier desks and not all desks offer the same services. If you stand in the wrong queue, you have to do it again from the beginningFilling the papers, Personal identification. Not possible to send somebody else to pick up the parcel.Unpleasant customer service has been the result of monopolistic situation where the people have been not treated as important customers. Return = same unpleasant process as the receiving but with additional activities
AEGLASELTPrevious slides = the problems from consumers perpective which lead to the low demand side of e-commerceNow the point of view of e-retailers.
AEGLASELTI described the history and the reasons for relatively low level of e-retailing in Estonia. But today the situation is changed: Üleminek järgmisele slaidile lõpus_ What is the new format?
AEGLASÈLTThe new format of e-commerce delivery service is Automated parcel terminals – People receive the parcel in self servicing way. Comparable with ATM where you do not use bank offeces any more for receiving of cash, but you take the cash in self servicing way from banking automates.On the picture you see one of Automated parcel terminals terminals in EstoniaÜleminek Now I am going to describe how the system of automated parcel terminals works.
AEGLASELTCustomer orders the goods onlinePuts the goods into the shopping cart in web-shopAnd chooses the automated parcel terminal as the delivery methodE-retailer gives the parcels to the logistic’s operator who operates the network of parcel teminalsLogistic-s company inserts the parcels into the Automated parcel terminal and the text message with PIN code willbe sent to the consumer
The customer has the phone in the pocket and goes to the parcel teminalAfter inserting the pin and payment (if payment is needed), the door of one locker opensThe customer collects the parrcel and is happyThe process of receiving a parcel is very simple. I think it can not be simpler any more. The feedback from customers says that by ordering the goods and choosong the parcel terminals as delivery method, they were a bit afraid : it looked like something complicated and the customerc were not sure whether they can do it or not. But after receiving the parcel they realised that its much simler than using banking machnes. ÜLEMINEKLet’s have a more detailed look at the system of automated parcel terminals.
AEGLASELTParcel terminals, locker boxes with central cosole, managed by controllers computers and other hardwereLocated in shopping centers, grocery stores etc.All automated parcel terminals are connected into a network over internet and managing of the network goes from one place. Software solutions are the key. Software solutions make possible the efficient management and operations. Techincal montioring, sorting and other functions.The system does not consist of software and hardware only. The operations, transport, sorting, sales customer service etc. Should be in place and supperted by hardware and software.So this is the new revolutionary delivedy method for e-commerce. Let’s now have a look at the results and impact of the system. What are the results of implementation of the new service.
AEGLASELTDelivery Prices have fallen remarkably. There are 2 reasons: 1. the new service with lower operation costs: No need for human labour, efficient storage of parcelsLess transportation costs per parcel (many parcels are delivered to one location, instead of making a courier-trip for every parcel)Secon reason is competition. Without competition the traditiona services had no motivation to reduce prices, but after losing a remarkable market share the prices of traditional services also started to fall.ÜleminekShortly said: Today the prices are much lower in every service segment. Now let’s have look at the quality of the delivery service.
AEGLASELTThe customer has to key in the pin code and take the parcel. The queues just can not appear.The consumer does not have to make any additonal trip for collectiung the parcel. It is made at the same time with shopping.
AEGLASELTThe convenient location is close to the everyday route, not nessesarily close to home or workplace. The routes can change sometimes. No oersonal identification using passports etc. The pin code is identification.In case of using post-offices, as the first step the notification on the paper was delivered to the customers home. So this creates an unnessesary delayThe prices are lower due to the cost level and nateure of the service.Basically this feedback is the most important signal for the future growth of this service. Sometimes people hesitate to try the new services for the first time, but after the first-time usage the customers keep using the autometed parcel teminals.
AEGLASELTThe network of traditional post-offices is very old and in not very customer-friendly locations.The motivation for training the customer service and to provide better service is thereThe couriers have lost a part of their market , so they also started to make efforts for offering services with higher quality
AEGLASELTAlso the prices of traditional services have fallenNot only the final customers are now in focus of postal companies. Also the business customers: e-retailers feel the better service. Some new it developments are made new marketing possibilities are offered etc.The competitive advantages of teh new service format are really strong. Theis is a unique situation where a service has the both competitive advantages at the same time : quality advantage and price advantage. It’s a very rear situation, Normally these both advatages exclude each-other and only one of the advantages is possible to reach ether quality advantage or price advantage. And this is the reason why Traditional services - manned pick-up points or courier services are not able to get the market share back despite the improved quality and reduced prices.So Esdtonian Post Last year was forced to start building it’s own new network of automated parcel terminals.
AEGLASELTThere is no country in the world where 2 similar networks cover the country. That’s another sign of the future potential of the service. So far the Estonian Post’s network has not been remarkably positive- The Itella Smartpost’s network is still growing rapidly and taking the market share.One of the possible reasons of not very successful start of Estonian Post’s network could be the locations strategy of the Estonian Post’s parcel terminals. Their patrcel terminals are located outdoors and I am convinved, that is not very good choise. Especially if the climate is so cold like we have in Estonia: in Wintertime some of the ordered products can be damaged because of feezing (cosmetics, electronics). The goods can get wet if it’s raining during the inserting or collecting the parcels. This is very unconvenient also for the customers, to be outside during the collecting the orders whet the weather conditions are bad.But let’s see, maybe Estonian Post can still make it’s parcel terminald network successful.In general. All Estonian e-retailers are happy for the situation on the delivery market – the delivery companies are competing, prices are falling and quality is improving, which leads to the sales growth of e-retailers.So the future of e-commerce seems very postive for e-retailers in estonia.
AEGLASELTThe delivery service for e-commerce using Automated Parcel terminals is the future of E-commerce logistics. Why?Final customers just want to use it. Users claim after fiors tusage „I will never use courier service or post office aqgain“Logistics companies can offer the service profitably despite the drastically lowered prices. Finland, Estonia, Russia, Czech and slovak Denmark, Germany, Poland etc.Largest e-retailer in the worldÜleminekThe future of e-commerce is evident but what can we do with that kowledge?