In 2020, the package volume resulting from online purchases exploded. After the COVID-19 pandemic, we saw massive growth in the e-commerce industry. Today, online ordering is a necessity, even for smaller local businesses.
Customers want the convenience of ordering online, and they want those orders to arrive quickly. When Amazon offered two-day delivery, it rocked the e-commerce market. Suddenly, convenience had a whole new meaning, and so did customer satisfaction.
The number of shoppers expecting same-day delivery nearly tripled in a year. While only 24% of shoppers placed same-day delivery orders in 2020, 68% say fast shipping was a deciding factor in their 2021 orders. To put this in perspective, in 2019, same-day delivery amounted to a $5.87 billion market in the U.S. By 2024, the market is estimated to be worth $15.6 billion.
To keep pace with online competition, local businesses are promising door-to-door delivery of their products within hours. Currently, 51% of U.S. retailers offer same-day delivery, and 65% plan to make it available within two years.
The Challenges of Scaling
On-demand delivery is neither simple nor cheap; the last mile of an order accounts for over 53% of the total shipping fee. The price of the last-mile delivery is astronomically higher than that of next-day delivery from a company such as FedEx. When you start guaranteeing accuracy within an hour, the cost skyrockets.
Another obstacle businesses face as they scale same-day delivery service is the tight delivery window. Customers are choosing the fastest option, and companies feel the need to match their competitors minute for minute. Initially, businesses dipping their toe into the industry struggle to meet one- to two-hour deadlines.
Yet another issue is the flawless execution that’s required to meet the challenge. Imagine planning the route to pick up and drop off thousands of deliveries in under an hour. Unless businesses have the means to ensure almost perfect accuracy, they quickly find themselves inundated with complaints from unhappy drivers and disgruntled customers. Every mistake leads to higher expense and less accuracy.
A final challenge in the on-demand delivery process is the human element. Even though the process is largely automated, this inescapable obstacle creeps in from both employees and customers. For example, accidentally swapping labels during a speedy pickup leads to two customers receiving the wrong products. Last-minute cancelations or changes to orders wreak havoc on routes and schedules.
The solution begins with infrastructure. Establishing hubs to dispatch orders efficiently is key to the logistics of last-mile delivery. The most successful businesses establish multiple hubs that are designed to produce and distribute their products.
Some restaurants have opened cloud kitchens to prepare food for delivery only, and many retailers have set up “dark warehouses” that are so automated they practically run themselves.
There's no storefront to these facilities. Drivers come, grab their products, and deliver. Dark warehouses and cloud kitchens are far more affordable to open than storefronts and restaurants, and multiple shipping hubs dramatically shorten delivery times. As you scale, you can open more locations utilizing drivers in the new areas.
In addition to distribution centers, businesses need to consider infrastructure for transportation. Certain businesses have specific needs to make their deliveries happen. Some require huge cargo trucks or refrigerated vans. Others achieve far more efficient and cost-effective services with an increased number of drivers and smaller vehicles.
Integrating the Tools
Integrating on-demand delivery into a business’s e-commerce website is vital. Today’s customers are looking for convenience; they want options for ordering, payment, scheduling and tracking all in one place. Businesses can only meet these needs with a fully automated process and the tools that enable real-time communication and driver visibility.
The tools are plugged directly into the online store through an application programming interface (API). When customers shop on the site, place an order and leave their address, the information is delivered straight to the dispatch location and drivers.
This automated process is key to keeping costs down. Most e-commerce businesses offer a delivery time within one or two hours. The cost of a single pickup and drop-off delivery is incredibly high. However, if you allow yourself a one- or two-hour window and have the tools to optimize your routes, you can batch several orders and deliver multiple packages along one route.
Real-time communication is crucial as businesses attempt to scale an affordable and reliable on-demand delivery service. The client, driver, and recipient must have tools that facilitate open channels. Even though the process is automated, people are still involved. Mistakes will happen, and when they do, it's best to have prompt communication between those three parties.
A photo of the delivered parcel on the porch with a time stamp helps the sender and recipient clear up errors instantly. Proper communication between driver, client and recipient prevents mistakes from becoming complaints. A lot of time is saved if customers can contact drivers directly.
In addition to real-time communication, driver visibility is essential. Business owners need to know who’s delivering every package, and where each driver is along the route. These are the tools that allow customers to see the progress of their delivery and the time stamp of the photo when it arrives.
How to Start Scaling
Outsourcing on-demand delivery services to a team of experts is often more effective than building the service from the ground up. If you don't have enough volume at the beginning, they have other deliveries for other companies and can offer you the same affordable price. Scaling the service becomes much simpler when the vehicles and drivers are not on your payroll.
When first implementing on-demand service, don’t immediately begin offering one-hour deliveries. Start with same-day or three-to-five-hour windows. Work together with your delivery partners for at least one month while tracking your progress. Get experience, then decrease your time window when you see you’re ready.
Because every business has unique logistical requirements for its last-mile deliveries, it’s important to choose the right team to help scale the service. Restaurants, for example, need to offer "white-glove" delivery. The more communication there is between the business and delivery service provider, the more efficient the deliveries will be.
There's a high risk of failure in this industry if you don't select the right partner. Even the best ones will encounter problems without enough communication on all sides. The process is automated, but human interaction is critical.
Anar Mammadov is founder and chief executive officer of Senpex.
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