The Future of Business – Part 1: Adapting to a Revolution in Consumer Behaviours
The pandemic has triggered enormous changes in consumer behaviour, redefining how we shop, our brand loyalty and our customer experience. Watch our session recording with Mike Hancox, CEO of delivery company Yodel where we discussed how to turnaround a company to embrace new opportunities and the challenges to overcome.
Meet Our Speaker!
Mike Hancox, Chief Executive Officer at Yodel
Experienced Chairman and Chief Executive Officer working in the retail, logistics and broadcast media industries. Mike is skilled in retail including digital strategy, marketing management and business planning. He has previously held leadership positions at large e-commerce retailers including Ideal Shopping Direct and Shop Direct. Mike has also acted as NED of delivery software company Sorted as well as non-executive chairman at retail services company Sigma. Mike was also CEO of Otto Group in the UK and is currently Senior NED of global marketplace platform Fruugo, giving him an ideal background for commentary on the retail industry.
Yodel bounces from loss to profit – with a £1bn top-line target
Mike Hancox joined struggling delivery company Yodel in September 2019, just six months before the pandemic hit UK shores. Now, just 18 months later, the business is set to report record numbers following a surge in demand. Protiviti’s Paul Middleton and Peter Richardson ask him how it’s happened
I’ve been a chief executive now for around 20 years and before that I was a chief financial officer. Back in the early 2000s, I worked at GUS Home Shopping, and was part of the team that sold it to the Barclay family in 2003; and with it, the business that effectively became Yodel. The company has gone through various iterations, but since it developed into the Yodel brand in 2010, it has struggled to make a profit in a growing market.
For me, joining Yodel in 2019, meant I could work with a group of shareholders I’ve known for a long time and who I liked working with. It was a bit like a football manager going back to his first team. But it was also a good intellectual challenge to try and work out why this is big business, which is now turning over more than £500m, was struggling to make money.
I’ve done a few turnarounds and Yodel had a number of characteristics that were fairly unique. The company had been consistently unprofitable, rather than just dipping into a loss for one or two years, for example. There had also been no expense spared trying to recruit the best people to help. And from a shareholder perspective, there had been a lot of support and investment, in infrastructure and technology.
I was six months into the job when the pandemic started. It’s now a year since we closed the head office and began adapting to all the challenges that brought. But on the frontline, we were nominated key workers, so we had to keep 11,000 staff working every day and trying to make the business profitable at the same time.
There’s no doubt in my mind Yodel has been a beneficiary of the pandemic because we’ve gained business as a result. But volumes don’t always equal profit.
If I cast my mind back a year, to the early days of March 2020, there was quite a lot of fear about exactly what the virus did and how you could catch it. We weren’t really sure what was going to happen. We put salary sacrifice systems in place and started to see costs come through with the requirement for protective clothing and masks.
We put new processes in place to make sure customers felt safe with the delivery experience. Our priority at that point was purely the safety of staff and customers. If I’m honest, we weren’t too worried about profitability initially; we just wanted to keep the operation going safely. Of course, one of the challenges of the pandemic is that absence can kick in very quickly. We had as many as 1,000 people off at one time.
But as a business, we have ultimately grown. I don’t know what the real number is for the industry, but I’ve heard that e-commerce has experienced between three and five years of growth in a year. It certainly feels like we’ve done two years’ work in one year. Our parcel volumes have increased by about a third. The turnover has been lifted significantly and we will make a substantial profit. The business is going from strength to strength.
I think in some ways the pandemic, and the other challenges associated with going from loss to profit, bind people together. We’ve certainly had a common cause. We adopted Prime Minister Boris Johnson’s ‘Get Brexit Done’ tagline, into our own ‘get profits done’.
Like a lot of turnarounds, we’ve also had to address the cost base. In my first six months, we lost a lot of people, and were about 1,000 people down before the pandemic hit. When the volumes came in, we started to recruit, but in different areas. The challenge has been finding frontline drivers and we’ve had to be flexible. We’ve worked with taxi companies who saw a downturn in work, and we’ve also had people from other professions, join temporarily. I think we took on about 3,000 people at the peak and more than half of those are still with us.
But we shouldn’t underestimate how difficult it’s been for people, particularly on the frontline. Everyone knows somebody that’s had a bad experience through Covid-19. We’ve made a conscious decision to put time and money into a mental health initiative. We’re in the process of recruiting about 100 Mental Health First Aiders, so we’ve got people in the business who are trained to recognise the symptoms. We absolutely need to put people at the front of our thinking for the next 12 months.
Capacity has been a challenge for the past 12 months. We’ve had to cleanse our network and make sure the parcels going through are suitable for the automated systems we’ve got. When I got to Yodel, I discovered we were carrying all sorts of shapes and sizes of parcel, and not necessarily charging the appropriate prices. It was adding cost to the business, but importantly, it was slowing down operations.
So, in the early days, we had conversations with some customers about either paying the right price or finding somebody else. With the benefit of hindsight, that was a real turning point. It allowed us to carry more appropriately sized parcels, which means we can move more of them through the network each day.
For new drivers, the training period was also too long to get them up to speed. We’ve used technology to guide people and help them be more effective at delivering parcels. When I joined, there were jokes about drivers throwing parcels over fences, but I think all the carriers hear that. We’ve made a real effort to make sure our drivers understand the importance of customer experience. We’ve put customer service at the heart of our turnaround and our Trustpilot rating has consistently moved up.
The peak period for retailers is absolutely sacrosanct. During those six weeks around Black Friday in the run up to Christmas, there’s a lot of profit to be made, and volumes can double. There’s always a temptation to take on more business outside of the peak period, but then fail in the run up to Christmas. I’ve been really keen we don’t do that.
I think another pillar we’ve put in place is to be really challenging on costs. After 10 years of losses, people might think we have the leanest, cleanest cost base, but there’s always something that can be done. Our business is worth something to the people that supply us, so we’ve had to negotiate hard. Very often, we have stayed with the same suppliers, but reduced our cost base.
The final pillar is about people. We’ve encouraged the top team to get down in the detail and get their hands dirty. And for the people below to really own what’s going on in their business units. We’ve had an incredible response. If I look at the operations team, we’ve got over 200 years’ experience in the top five or six people; they have seen everything before. When things happen, and things do go wrong, problems get fixed really quickly.
One thing I can see is the use of pick-up and drop-off sites coming back. At Yodel we have a partnership with Collect+ at 6,500 stores across the UK. It was certainly a growing business before the pandemic, but it’s not really grown in the past 12 months. I think the convenience of these locations will continue. It also plays a little bit towards the green agenda, with fewer vans travelling up and down the street.
The environmental focus is really important. We talk about it a lot. My initial priority was to first recover a loss of £45m but now we’re moving into profitability there are obvious things to do. We’ve been trying to reduce energy use wherever we can. In addition to the drop-off sites I mentioned, technology has also allowed drivers to plan their tours better, and reduce the overall mileage that Yodel vehicles travel. I also think we have one of the most modern fleets of all of the carriers.
We’re doing what we can without major capital investment at the moment, while we get the business into profit. The next stage will be to start to look at alternative fuels. Even in the last two weeks, we have been looking at gas powered vehicles, and are starting to make some decisions about alternative fuel types.
Ultimately, I think we’ve got a period of consolidation ahead of us. We’ve got into profit incredibly quickly and we want to keep growing. I’m a target-driven person and I can see Yodel getting to £1bn of sales within a sensible period. I think growth will keep coming. If we can maintain our profitability at the same rate we are now and keep customer service at the heart of everything, we will carry on being successful. It would be a genuine reward for the shareholders who’ve stuck with the business through thick and thin.
Mike Hancox was speaking on Protiviti’s weekly Collaboration Forum, which is now in its fourth series. Click here to find out more about the event.
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