Packages, Parcels and Profit

Ancillary income and the package explosion.

2014 was a year of futuristic concepts for the parcel industry which sparked a public debate about the practicality of drone delivery. The cyber shopping season noted record-breaking package volumes due to shoppers using mobile devices during retail excursions, free shipping, parcel tracking, and enhanced services like the United States Postal Service’s Intelligent Mail Package Barcode tracking technology. 2015 will see a noticeable growth in shipping industry revenues, led by innovation and consumer expectations, according to Neopost USA, a provider of business communication management and shipping solutions.

Some trends that will continue the escalation of shipping growth in 2015 are: the continuing growth of e-commerce, the consumer expectation of package tracking, new delivery technologies and faster delivery services, and price changes. The top shipping carriers are transitioning from a weight-based pricing model to dimension-based pricing, which will be a substantial revenue-generating change for the industry.

Online shoppers are projected to spend $279 billion this year, almost a 20 percent increase since 2010. The continuously increasing volume is affecting all stakeholders, especially apartment communities. Staff is tasked with handling, individually logging, sorting, storing and distributing packages not just during holiday season, but every single day. The National Multifamily Housing Council (NMHC) and Kingsley Associates teamed up to produce the 2014 Package Delivery Survey to find out how apartment communities are handling these growing demands.

Rick Haughey, vice president of industry technology initiatives at NMHC, told MHN the survey was inspired by several members who said this topic is a growing concern for them. “At one of our annual meetings Keith Oden of Camden had visited a property around the holidays and was blown away by the volume of packages that was coming through his community. There was a real positive response from the audience that this is an issue they were dealing with.”

The survey revealed that a typical apartment community receives as many as 100 packages a week. This takes nearly five hours per week for most on-site staff to handle the deliveries.

“This gets to the bigger topic of e-commerce and where we’re going,” Haughey said. “When we started doing the research I was amazed to find that only six percent of all retail sales are online sales. When you think about that, it is a tremendous amount of growth still. I assumed that number would be 50 percent. If that doubles, what does that mean for our communities? An assumption would be that the younger the resident, the more likely they are to do online shopping so for this next generation coming up, those numbers should be even higher.”

Internet-based retailers, like Amazon, make it easy for consumers to purchase anything online, from toilet paper to a king-sized mattress. At Crescent Communities, the focus is on figuring out a way to make that as easy as possible for residents.

“We’re trying to move as digital as possible,” Darren Pierce, director of asset management at Crescent Communities told MHN. “For us, it’s how do we design a building that can accommodate the packages. You don’t want to design it for Christmas when you’re getting 10 times the normal, but you’re accommodating the everyday situation when people are ordering a package.”

Technology is providing a strong helping hand in managing the package explosion. Many communities are looking to digital solutions, like package lockers and text message and email alerts, to maintain package handling. According to the survey, nearly a quarter of apartment communities have invested in software specifically to track packages and notify residents. Additionally, one in 10 apartment communities have turned to package lockers in an effort to manage package volumes more efficiently. A big question is whether digital upgrades could play as a source for ancillary income. Ancillary services and amenities can be a win-win as they have potential to drive substantial bottom-line value for property owners and increase convenience and efficiency for residents. The importance of package storage in an apartment community is rising, making it the second most important amenity after fitness centers, as shown by the NMHC-Kingsley survey.

“We do have one customer that charges a registration fee on all their properties. They charge $20 at move-in,” Georgianna Oliver, founder and CEO of Package Concierge told MHN. “It can definitely offset the ongoing cost of lockers or if it’s a large community, it can pay for the lockers. Long term, it definitely can be a way to offset the costs. You’re not going to make a fortune off of ancillary revenue but it does help.”

However, Crescent Communities doesn’t feel the extra charge is necessary. “We feel that if someone’s going to come in and pay a high price for a really nice apartment, we don’t want to nickel and dime them across the board,” Pierce said. “We really think about it more on the front end as how can we design something that’s functional. Overall, the total rent on the unit will justify that.”
Crescent is already looking toward the future and discussing ways to stay ahead of the demand by taking advantage of technology.

“We’re thinking about new communities and saying, “How would we want to do that from a refrigeration standpoint?” Pierce speculated. “So we’re incorporating some of those design elements where someone can actually order from the local grocery store, whatever their weekly groceries are. If they’re coming home from a trip, they have a refrigerated locker they can open up, pull the groceries and bring them to their unit at 10:00 at night, we’re really just trying to make sure that those parts of their lives are easier, be it dry cleaning pick up through a locker system, groceries, or partnerships with local restaurants and food deliveries. When people are living in an urban setting, they’re really there for the convenience factor, and if they don’t have to think about being home in time for a package or to go to the dry cleaner at a certain time, it just helps with their whole experience.”

Technological upgrades greatly tie into potential ancillary income models. However, the lingering question is where will the income come from? Haughey said residents can be sensitive to added charges. Some communities charge fees, and residents are OK with it. It also could be the case where if package carriers find themselves spending a lot of time handling and delivering packages they might accept a model that charges them a per package fee to drop all the packages at once and save that time.

Pierce said developers should be planning for high package volume by taking a thoughtful design approach and embracing technology. They need to adapt to the latest systems, package lockers, coolers, dry cleaning lockers, and after-hours areas where a concierge has access without having to go to the main office. “Think about it early on, just like you’d consider a leasing office, pool, fitness room, and community area ahead of time. This is just as important.”

Although it may seem consumers will be the direct beneficiaries of the 2015 shipping industry growth options, the property management industry does have the room to become a player and earn extra revenue by diving into the technological world.