Senior Business Developer
April 29, 2020
These are the numbers of a harsh reality – most of the last mile delivery and logistics industry wasn’t prepared to deal with the disruption caused by the coronavirus pandemic. Major carriers, retailers and distributors initially struggled to adapt to the imbalance in demand, shortages in the supply chain and the exponential growth in-home deliveries.
Here at Urbantz, working with various delivery operators, from different sizes, markets, and countries, we defined similar critical points that can help strengthen delivery businesses in the short term:
The rapid increase in e-commerce and subsequent overwhelming of last-mile delivery services taught that responsiveness is essential to keep a business running. With some European markets like France or the UK experiencing an increase of nearly 100% in their grocery e-commerce sectors, research shows that around 30% of first-time e-commerce shoppers will make it a habit to buy online even after confinement is over. Retailers need to and will use technology in new and different ways to scale up their e-commerce channels and their capacity for home delivery. Established last-mile operators have the opportunity to catch part of that business.
If the European tendency slightly approaches what is already done in China with same-hour delivery, adapting to e-commerce means orders cut-off times are going to fade away, moving towards all-around availability and order fulfillment.
As a last-mile business, to respond to these changes and growing pressures on the delivery system you will need to focus on:
● Restructure your operations to provide intraday delivery and to support additional delivery orders: grocery retailers claim that flexibility is a key factor in deciding their delivery partners.
● Adopt digital solutions that allow dynamic route optimisation during the day: to stay flexible and allow same or next-day delivery, your delivery management system needs to allow quick readjustments while still providing optimised routes.
● Establish efficient communication with drivers and end-customers: offering stable communication forms with the drivers, and high visibility about their parcel to the customer reduces the workload of drivers and boosts client satisfaction. Dynamic ETA communication is key to lower “bad deliveries”, decrease customer service workload and to provide a decent service to the end-customer.
Last-mile operators are constantly faced with a balance dilemma between the cost and quality of their delivery. This dilemma will be even more present during the upcoming months as a result of the growth in e-commerce and the potential coming economic crisis. How can your business stay competitive and differentiate from others?
There are two tendencies we’ve been watching in the Asian and now in European markets:
● Consider focusing in a market niche: if you see your local market is saturated with competition providing general delivery services, tailoring your offer to the specific needs of a given market might bring advantages. By targeting niche sectors you are able to charge more for special services you provide, resulting in a higher profitability. For example transport of pharma products, temperature goods, high-value goods, or services where the driver is also a technician and needs to install a small machine. You can also be perceived as the reference operator in that niche – but don’t forget to stay flexible to adapt to changing market conditions. The underlying issue is that you are betting all in one or two markets, raising your exposure risk.
● Bet on differentiating yourself with extra services within a competitive market: create and offer extra services, incorporating in your service other parts of the delivery process beside the actual delivery. For example, Delhaize’s drivers, a Belgian grocery retailer, deliver the groceries in your kitchen. These services, even if representing a need to readjust your structure can become a major differentiator and client retention source.
Our third advice is again linked to responsiveness and flexibility. When analysing the status of many delivery businesses during the crisis, we can see two problems: most businesses had no contingency plan and the business model was rigid. The prediction is that with the upcoming crisis, carriers might resort to lowering the price of their services, affecting profits, service quality and staff retention. How can you stay competitive and viable?
● Stay open to try new markets: we saw that roughly 35% of delivery operators were faced with a loss of volumes and clients as a consequence of B2B businesses closing. Your business strategy might be to focus on sectors or diversify as much as possible, but either way you need to be flexible enough to go after new markets when needed. We saw this strategy at work when one of our clients, specialised in B2B, quickly and completely changed their strategy to B2C deliveries, being able to recover 50% of revenues.
● Offer multiple service options to your customer: either being your regular service or new services, structure it. When engaging with a new client present them with a ‘menu’ of multiple options including cost and service level. This approach results in higher chances of getting the deal and it helps you standardise your offer, lowering costs.
● Base your pricing proposals on the additional operational cost of new customers: before offering any service to a potential client, analyse their operational needs and the impact on your costs. Don’t propose a price that is below your operational cost. For example, a client that requires short time windows will be more expensive to run than longer time windows. It seems basic, but we still see many delivery operators that don’t have a clear understanding of their operational costs.
Now it’s the time to look at your business and operational model and plan for the future. There is much uncertainty surrounding the economy in the next 2 years, but as we saw, predictions in the e-commerce and delivery industry are positive.
Do you want to talk about your business continuity plans around coronavirus and after the pandemic? Get in touch today. Based on our experience with the recent events, we can help you plan and optimise your delivery operations with a rapid setup.