Poor parcel complaint services are the new normal — and it’s harming small businesses

Many of us have experienced the frustration of long and confusing complaint processes due to a delayed or missed parcel. People might be unsure whether to contact the retailer or the parcel company, it can be difficult to speak to someone, and the process can take a long time. But for small businesses, unresolved parcel problems can affect everything to do with their day-to-day operations — from fulfilling orders and ensuring customers are satisfied, to receiving new stock.

Small businesses are the backbone of the UK economy. They make up 99% of UK private sector businesses, and generate an estimated turnover of £2.4 trillion. In recent years, the explosion of online retail has made small businesses heavily reliant on parcel services. But as the parcel market grows, so do the problems. We highlighted the struggle many small businesses faced in resolving their complaints several years ago and Ofcom responded, introducing new guidance on the complaints process for parcel companies. However, our recent research with small businesses shows further improvement is still needed.

There are still widespread problems in the parcels market affecting small businesses

Our latest Parcel League Table revealed that parcel problems remain widespread. Out of the 5 leading parcel companies in the market, none scored more than 3 out of 5 stars. This leaves businesses with few clear options if they want a reliable parcel company.

Our survey of small businesses last year showed that nearly half (47%) who sent or received a parcel in the last 3 months had a problem, of which 46% made a complaint. However, 8 in 10 (79%) of those who made a complaint had issues with the process for doing so, such as receiving a slow response, or having to chase multiple times to get a reply. We recently interviewed small businesses to discuss their experiences.

The latest complaint guidance is showing no sign of improving the situation for small businesses

Last year Ofcom, the parcels regulator, acknowledged that raising a complaint with parcel companies was too challenging, introducing new guidance to improve the complaints process for individual consumers. Small businesses clearly experience similar issues, making this guidance relevant to them as well.

However, over a year since the new guidance was introduced, our evidence shows it hasn’t led to significant improvements. Our interviews with small businesses also reflect this. They reveal that ongoing issues with the complaints process have led to a sense of hopelessness. Many reported spending hours trying to find the right person to help replace missing or damaged parcels. The big cost of this to day to day productivity discouraged many from filing complaints, believing their issues would go unresolved.

One business told us:

“I was on the phone for hours and hours trying to get somebody that would help me. I couldn’t think about anything else. I had to go and sit in a park because I needed to calm down from this two hour argument that I’ve had. Kind of ruins your day when you’re doing it all, when you’re a one man band.”

Small businesses face a range of consequences when dealing with unresolved parcel issues

Many small businesses feel particularly frustrated about ineffective complaints mechanisms, as the knock-on effects of parcel problems can be extensive. Reputational and financial consequences were the most widely raised. Our discussions with businesses highlighted concerns about customer complaints, damage to their reputation, and a loss of customer trust if parcel problems occurred. Our survey showed that 1 in 4 (24%) that had a problem received customer complaints or low customer ratings and 1 in 3 (34%) had to compensate or refund a customer.

The financial losses for a business affected by parcel problems can also be significant. Our survey revealed that nearly 1 in 3 (31%) small businesses that had a parcel problem lost on average £419. For small businesses with tight cash flows, such sums can have a huge impact. One business we spoke to shared their struggles of waiting months for just a partial reimbursement from a parcel company for a damaged item, which left them to cover the remaining cost:

“You have to send photographs. You’ve got to send the proof of delivery, you’ve got to do a costing of the item — every breakdown even down to the links that are used to print the item — but then they’ll only give you a unit cost, they won’t give you the sale price. Then they sent me back a fraction of what the item was worth. It took seven months from the start, to finish the claim.”

The lack of proper compensation is a big issue

For an issue that has the potential to create big problems for a small business’ balance sheet, the lack of a clear compensation process creates a major gap. When businesses do request compensation for something that’s gone wrong, the small amount they receive — sometimes just a book of stamps — means they feel it’s not worth complaining in the first place. As one business shared:

“It’s such a derisory amount that it’s just not worth it. It’s not the full monetary value. It’s just not worth trying to get money back if there is a mistake.”

In fact, our survey findings show that, out of the businesses that experienced parcel issues, over half (52%) didn’t make a complaint. This is an issue, potentially hiding the true scale of parcel problems, allowing parcel companies to avoid accountability and leading to systemic issues not being fully addressed by the regulator.

There are further steps that Ofcom could take to improve the parcels complaints experience specifically for small businesses

Small businesses are vital for our economy, but ineffective parcel complaints are impacting their operations. We’re calling on Ofcom and parcel companies to step up and make significant improvements by:

• Enhancing existing complaints processes for small businesses: This would involve implementing stricter rules for response times and resolution and developing clear escalation paths and support agents to handle specific issues.
• Getting rid of limited liability and enforcing fair compensation: Removing the limited liability conditions in paying out lost or damaged items, ensuring full reimbursement is based on the total sales value, not just the unit cost. This will prevent the financial burden falling on small businesses when problems occur and incentivise parcel companies to focus on providing a reliable service.
• Penalising underperforming operators: Ofcom should actively monitor the quality of customer support parcel companies provide to small businesses. Companies that consistently fail to meet service standards should face penalties or fines.

Small businesses will play a big role in delivering the new government’s priority of economic growth. However, parcel service issues are affecting how many of them function, and the contribution they can make to our economic recovery. The Coronavirus pandemic and the boom in online shopping have transformed the retail landscape, making parcel services even more important to the success of small businesses. Reliable parcel services aren’t just a bonus — they’re now a necessity for small businesses to succeed, and a strong economy depends on their success.