As Ocado finds itself embroiled in a battle with north London parents over its new urban delivery centre, Retail Week looks into the growing trend for city centre logistics. 

Ocado boss Tim Steiner has found himself in hot water and, for a change, it’s not over his sizeable pay packet.

As the retailer looks to expand its one-hour delivery service Zoom around London, it has come into conflict with the parents of children at Yerbury Primary School in Islington.

These parents – who are coincidentally among Ocado’s target market – have taken umbrage with the online retailer’s plans to open a delivery and refuelling depot next door to the school, which culminated in four of Ocado’s execs spending a night in the school’s hall being grilled by a community concerned over diesel pollution, noise and a lack of transparency.

While this irate parent governors’ meeting may seem insignificant, it highlights what is likely to become a growing issue for retail.

Nocado

‘Nocado’ – the parents’ campaign 

The increasing penetration of ecommerce and growing popularity of next- and even same-day delivery means that logistics firms and retailers are looking at ways to accelerate the pace of deliveries, which has led to a simple solution: opening inner-city distribution hubs.

As the chief executive of logistics firm ArrowXL Charlie Shiels puts it: “We’ve opened Pandora’s box. People want items delivered to their house and we have to find a way to do that to a high standard and as cost-effectively as possible.”

And bringing stock closer to those that want to buy it seems like the easiest way to do so.

Parent trap

But can retailers and logistics specialists mollify the concerns of residents living next to urban delivery centres?

One of the big issues for the parents of Yerbury Primary lies around Ocado’s plans to install a number of diesel and petrol pumps at the centre to service the fleet of delivery vehicles that will be operating from the site.

Ocado chief executive Tim Steiner says the retailer has been in consultation with “various local stakeholders” and has “committed to doing various things on the site, including replacing diesel vans with electric ones, building a new entrance to the site to keep diesel vehicles away from neighbours” and “building a living wall on the site to improve air quality”.

Ultimately though, Steiner struck a defiant tone. He says the land has “always been an industrial site”. The previous owner had attempted to get the site re-zoned for residential purposes and only when this failed sold it to Ocado.

“There was nothing hidden in our planning application and anyone who suggests otherwise is being deliberately mischievous”

Tim Steiner, Ocado

Tim Steiner

Tim Steiner 

“The site has planning permission for the use we want, we just want to improve the health and safety on the site and reduce the carbon footprint by doing some of these things,” says Steiner. “There was nothing hidden in our planning application and anyone who suggests otherwise is being deliberately mischievous.”

Despite this residents have started a ‘Nocado’ campaign, with posters plastered across the streets of north London, and have started an online petition that has attracted more than 4,000 signatures and has been backed by local Islington Labour and Green councillors.

Shiels calls such opposition “nimbyism”.

“Everyone wants home delivery, and everyone applauds and encourages better and faster home delivery, but the infrastructure required for it is unwanted. It’s a bit of a perfect storm, but we have to find a solution. You can’t have one without the other. You can’t have deliveries without the infrastructure,” he says.

However, one logistics expert sympathised with parents, wondering “what Ocado was thinking” when it chose the site next to a school. 

Race for space

Ocado is not alone in building this infrastructure close to the consumer. 

Amazon has been moving its distribution closer to big urban centres and was rumoured to be buying old Homebase stores to use as delivery depots back in 2018. Meanwhile, many of the big logistics firms that courier retail’s parcels are moving into cities.

Urban delivery depots are critical to the model of DPD, which is part of the second-largest delivery group in Europe.

”Our operation is based on four huge overnight sorting hubs located outside of city centres, which then feed retailers’ parcels into our network of urban delivery depots within towns and cities each morning for the final mile delivery,” says DPD director of technical services Mark Wilkes.

In 2018, DPD opened the UK’s first all-electric vehicle micro depot in Westminster, within a stone’s throw of Buckingham Palace. 

Parcels are fed into the micro depot every morning by two electric 7.5-tonne trucks, and the final-mile deliveries are then made by electric vehicles and e-cargo bikes. 

Wilkes says: “The Westminster depot was a real game-changer for us. It is smart and it delivers tangible benefits in terms of reduced mileage and CO2.

“We already have two other all-electric sites in central London, where we’re aiming for seven in total. We will then roll out the model across the rest of the country.”

Electric DPD Westminster with depot vehicles 5

DPD opened the UK’s first all-electric vehicle micro depot

DPD’s optimal urban sites are those where it repurposes existing small spaces, such as garages, railway arches or even parts of multi-storey car parks, says Wilkes.

However, finding such sites is a big challenge.“Traditional warehouse space is being priced out of city centres by residential developments. But planners have to recognise that those new city-centre residents need to be serviced and that includes being able to do online deliveries in a sustainable way,” he says.

Even finding suitable sites on the outskirts of big cities like London is difficult, as Hermes operations director for delivery experience Carl Lyon explains.

The firm operates a 52,000 sq ft hub in West Thurrock, Essex, but he still says: “There’s a huge demand for properties the size that we’d want. In London, for example, our property, which is outside the East End, services 40 or 50 vehicles. So, you need a very large site and those types of units go really fast.”

In the dark

Building inner-city distribution depots is not the only solution retailers are working on to deliver parcels quicker and in growing numbers.

Sorted sales and commercial director Andy Hill says a number of his retail clients are moving away from a hub-and-spoke model – whereby stock is moved from a large central warehouse to a smaller, edge-of-town hub, and on again to smaller ‘spoke’ sites, usually located within built-up areas – to using dark stores, which are effectively fully stocked stores not open to the public.  

Other retailers are opting to pick orders from existing bricks-and-mortar store inventories, says Hill, with some devoting entire sections or floors of stores to service ecommerce.

“You could order a pair of shoes from, say JD Sports, and rather than it shipping that from the central warehouse in the North West, it’ll come from a JD Sports shop a couple of miles from you. That has a big environmental as well as inventory impact.”

Hermes has been working on various other solutions to enable speedier inner-city deliveries. This includes building algorithms to determine the smoothest possible delivery route for drivers to take. 

Hermes has also been exploring using locker-box networks in stores and supermarkets to allow customers to click and collect from store, which cuts down on the number of home deliveries it makes. It has even explored bike deliveries in cities to speed up delivery times.

Appeasing concerns

However, such initiatives are in their infancy, admits Lyon. 

In the meantime, Siobhán Géhin, managing director for retail at Accenture Strategy, wonders what the “cost to society” will be in terms of pollution and road congestion as more logistics firms and retailers move fulfilment centres into cities.

“The mayor of Paris recently promised to impose severe penalties on Amazon due to the volume of traffic it was generating. It’s also a huge issue in Manhattan – the pollution, carbon emissions and congestion,” she says. 

“If I were mayor of London, I’d put it out to tender and have one provider, with an electric fleet, and everyone else can pool their stuff on the M25 and bring it all in. It’s not really sustainable when you look at the growing awareness of the environment.”

“The mayor of Paris recently promised to impose severe penalties on Amazon due to the volume of traffic it was generating. It’s also a huge issue in Manhattan”

Siobhán Géhin, Accenture Strategy

In the short-term, adopting electric fleets to cut down on noise and pollution seems an obvious solution, and one that Ocado has taken.

However, a source close to the retailer points out that there are limited electric vehicles large enough to fulfil the number of orders needed to preserve its margin and powerful enough to refrigerate food.

The source says that Ocado is “scouring Europe” for suppliers that can build enough of these vehicles for the firm. He adds that UK energy companies are slow when it comes to installing the infrastructure needed to keep an electrified fleet going.

Ocado van

Ocado is looking to increase its fleet of electric vehicles 

This has not hindered DPD – although it must be noted that delivering non-refrigerated products is far less energy-intensive.

“Increasingly, retailers want to be able to say to their customers that they are delivering their goods in a more sustainable and environmentally friendly way, ” says Wilkes.

“We are helping them do that by investing in the largest all-electric parcel delivery fleet in the UK, with 600 electric vehicles.”

DPD is also using e-cargo bikes that can access bike lanes for the last mile. 

For ArrowXL’s Shiels, however, fixing issues around pollution and noise with neighbours is about using common sense.

“We switch off reverse beepers in the evenings to reduce noise. Same with radios. No slamming doors, no revving engines. It’s not rocket science.”

Whether issues can be solved by technology or common sense, as the worlds of logistics and suburban living collide with increasing frequency, the choice ultimately rests with the consumer.

Are people willing to give up certain comforts for better home delivery? If the parents of Yerbury are anything to go by, possibly not.