City Link’s new MD has put in place a three-year turnaround strategy at the struggling parcels business in the wake of “disappointing” losses.
The plan will see City Link break-even within the next four months, make a profit by Q4, and become a £500m business in the next three years, through a combination of improved customer service, reduced operational costs and a focus on winning profitable business, rather than chasing volumes.
Speaking to MT.co.uk, new MD Dave Smith, who joined the business in December 2011 following a nine-year stint at the Royal Mail Group, says: “City Link is a rough diamond, but it has some great people and underlying strengths. I believe it has every chance of success.”
Looking at the reasons for City Link’s £31.3m pre-tax loss in 2011, Smith says the problems stemmed from two major areas: revenue per consignment was lower than expected because of the fallout from poor service in Christmas 2010; and worse than expected operating costs and efficiency levels, due to a lack of flexibility in its cost base.
Smith is now focusing on getting the basics right and is pumping £5m into customer service, as well as investing heavily in staff training.
He will also drive down operational costs by changing drivers’ contracts to ‘per drop’ rather than the current time-based ‘per day’ or ‘per week’ basis, as well as make savings on trunking and improvements in IT and administration functions.
The type of customer City Link will target will be pivotal, says Smith, who wants the business to be perceived as the “delivery expert” in the market, rather than the biggest player.
“There are two types of customers emerging: those who want the cheapest price and those who are prepared to pay for [quality],” says Smith.
“I’d rather City Link was a £500m business with the right customers than a £700m-£800m business losing £1m a week.”