Disrupting Deliveries & Shaking Up the Logistics Industry

Deliveries and logistics are evolving

It’s been just four years since deliveries and logistics company Budbee launched with just two merchants in Sweden. In that time, they’ve not only expanded into a number of other countries and become the largest home delivery company in the Nordics, they have also paired technology with a customer-focused business plan to show that no matter how entrenched legacy companies are, you can still teach those old dogs some new tricks.

Ten years ago, when e-commerce started to take off, everything was focused on removing choices at checkout in order to increase conversion. Today, though, everyone wants choices and that’s where Budbee has been able to penetrate the market: when you are at checkout do you want to choose a shipping service that delivers to a shop and then go fetch the package yourself? Or do you want a service that allows you to choose delivery to your home at a time that is convenient to you? The second option transfers power to the consumer – and that is at the heart of the Budbee solution.

From the beginning Budbee has focused on creating a distribution and transport company that brings real value end-to-end by consolidating parcel deliveries while creating a very convenient experience for the consumer.  This was key because in Sweden in particular, most e-commerce businesses traditionally offered ‘almost’ home deliveries, meaning they shipped your package to a local postal point such as a grocery store or a tobacco shop, where you then picked it up. Budbee wanted bridge the gap between e-commerce and customer by removing the middleman. They did this by extending deliveries right to your front door at a time that is convenient to you.

“People shop online to get better prices, a wider range of assortment, and convenience,” explains Simon Strindberg, CCO Budbee. “The cost savings and better assortment were already in place, but the convenience factor wasn’t up to scratch. You still had to pick the package up or, if it was possible to have it delivered to your home, you were given a delivery time between 7am and noon, or 1pm and 7pm – generally keeping you stuck at home, hoping the delivery person came sooner, rather than later. And if you had to return something? That was yet another trip to the shop.”

What we’ve done is solve the convenience part of the puzzle by making home delivery smooth, simple, and convenient, fueling the transition from offline to online.

Simon Strindberg CCO Budbee

Budbee has done this by industrializing and automating things in the real world, not just from a technical perspective, but also by building things like their own terminals and automatic sorting machines.

How it works

Operationally, Budbee’s business model isn’t all that different from traditional industry players’: parcels arrive at Budbee terminals from ships or airplanes and are then dispersed to smaller hubs, after which they are then distributed to customers by Budbee delivery vehicles.

What is different is that customers can go with the delivery time suggested by the app, which is free, or they can narrow it down for a small fee. App communication works like this:

  1. Customer is first alerted that the package will arrive on any day between 5 and 10pm
  2. The day/date of the delivery is confirmed
  3. At lunchtime on the day of delivery you get the hour it will arrive. Then, when the driver starts to move away from the terminal, the delivery gets narrowed down to the minute.

It’s solutions like this that show how Budbee is challenging the industry. They have used their knowledge of modern technology to build in transparency down to the customer, along with building in app features based on data in order to enhance the customer experience.

“We build all of our technology in-house, other than components such as Google maps or IoT, which allows us to push the control and customization possibilities down to the consumer as much as possible, as well as create a link between the consumer and the driver,” says Strindberg. “For example, we built the software for our sorting machines, which are connected to our algorithm, which is calculating which driver will deliver which package at what time and in what order. The customer might use the Budbee app to upgrade their delivery to a one-hour time slot, such as between 8 and 9pm. Our algorithm has already planned that delivery for 5pm, so it needs to change the whole delivery chain.

“Essentially, when the consumer changes the delivery time, he or she is giving instructions directly to the algorithm so that the algorithm can recalculate, which will give the instruction to the sorting machine, as well as make sure the package is with the right driver at the right time, ensuring the whole process unfolds smoothly.”

Putting that much power into the hands of the consumer means Budbee is also able to listen to their customers’ needs and respond accordingly. And despite operating in a very price-sensitive market, the company is always finding new ways of adding to their service without also adding a lot of new costs.

One example is when they looked at the data from consumers ordering baby or kid products. Budbee couldn’t understand why their ratings from this market segment were so much lower than the average across all deliveries. Then they had an a-ha moment.

“We knew our drivers were exactly on point when it came to time, but we were still getting one or two out of five stars,” explains Strindberg. “Then we saw comments saying ‘You woke up my kids by ringing the doorbell’ or similar. We realized that we weren’t doing anything wrong – but that we did have a chance to do something right.

“We had already developed a tool in the app that gave our drivers instructions, such as what the house looks like or where they should park. This allowed them to work efficiently. After reading the comments from parents we knew adding a lot of free text wouldn’t be efficient, so we instead decided to make it as binary as possible, creating two options for the consumer: do you want us to ring the doorbell and speak in a normal tone of voice, or do you want us to knock gently and whisper when we deliver? The consumer can choose, and the driver can easily see which one the consumer wants.

In order to make a fix like this you need to have both the technical knowledge and the infrastructure that allows for flexibility. For Budbee it was two days of work, with the benefits completely outweighing the small amount of time and cost involved.. And right after launching that feature, Budbee could see a huge spike in consumer satisfaction.

It’s ideas like these – so simple on the surface but ultimately highly valued by the customer – that are key to Budbee disrupting the delivery business.

Budbee and IoT

While Budbee’s business model is based on bridging the delivery gap between merchants and consumers they’re also aware that convenience sometimes means NOT having delivery to the home, maybe because someone is traveling or has other commitments. This has again presented an opportunity for Budbee to innovate.

“If you don’t want a package delivered to your home you can have it delivered to an IoT-enabled Budbee Box,” says Strindberg. “Budbee boxes are conveniently placed in shopping malls and other places consumers regularly visit. We are placing several hundred in the Stockholm region and they are all connected with Tele2 IoT SIM cards, which will allow us to work with them remotely.  Basically, IoT connects the boxes to a PC/laptop that then communicates with the cloud and the app so the customer can see that the package has arrived, and when they fetch the package a code allows them to open the box and we know it has been delivered. IoT allows communication between the Budbee Box and the end-user.”

Sustainability

Sustainability has been a core part of Budbee’s business model from the beginning and it remains a big part of their profile. The company’s ambition is to have at least 50% of their parcels delivered fossil-free in 2020, and fully fossil-free by 2022.

That said, Budbee realized right from the start that by going into transportation they were going into an industry that historically has a negative impact on the environment.

“We decided that being part of the problem meant being part of the solution,” says Strindberg. “From day one we have been compensating for each and every delivery we make, plus 10% extra. We are waiting, though, for technology to catch up with our needs, such as critical mass when it comes to electric vehicle (EV) charging stations. It was only a year ago that a van was developed that could do a whole delivery route without having to charge during that route, so things are moving forward but there are still challenges. Larger EV delivery trucks/heavy vehicles are one of them.  Our industry is reliant on heavy vehicles for getting goods moved from ships or planes to warehouses and while there are some companies pushing for electrification, we’re not there yet.”

The good news is that technology is growing quickly, allowing Budbee to take more steps towards not emitting any carbon dioxide at all. They have increased the number of delivery bikes in Stockholm and Gothenburg, as well as in the Netherlands, and they are also transitioning into more and more electric vehicles.

“We believe it is just a matter of time before we are able to reach our sustainability goals,” says Strindberg. “The price of EVs is going down, the technology is constantly improving, and we will start introducing HV0 100, which is diesel made from the forest, not oil. It’s fossil free but can still be used in older vans and is an excellent interim solution for us.”

Budbee has also baked sustainability into their terminals in Stockholm. One terminal they had built has the entire roof covered in solar panels, and not only is the terminal self-sufficient when it comes to energy, excess energy generated by these panels is used to power more than 60 delivery vehicles.

The future

Budbee’s plans going forward are to continue to grow as a company, which means moving into new countries while also having as big an impact as possible on sustainability challenges within the transport industry.  And of course, their focus on innovation will remain strong.

“Our adaptability and flexibility are among of our advantages, with the tech platform we’ve created allowing us to innovate no matter what comes along. Right now, we’re B2B2C and deliver in the evenings for the convenience of our customers but as we evolve alongside changes in the market we will expand when we deliver and to whom. We’re in it for the long haul, and we will to continue to challenge the marketplace,” says Strindberg.

If you would like to learn more about how IoT can help your business, please get in touch.