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Peak is Coming: What Delivery Model Should You Choose?

by Adamo Dagradi

Peak season is coming and from the look of it it’s going to be more of a rogue wave than the “usual” peak. Or, to stick with the mountaineering metaphors, the Everest of peaks. Just imagine how busy Santa will be, with most of the world holed up at home monitoring seasonal coughs and flus, plus millions of sneezing youths unable to go to school while waiting for test results to come back.

The big carriers have announced a slate of unprecedented surcharges and volume thresholds. This means that the biggest Retailers will bear the most of the brunt. At UPS the surcharges will kick in at 25,000 parcels per week from a combination of air and ground residential deliveries. At FedEx, the threshold is 35,000 parcels shipped weekly for residential. We’re talking +$1 to +$5 per package and going until to mid-January.

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A wolfpack of Retailers has chosen to go the crowdsourced way to implement same-day on-demand deliveries. In the last few weeks Bed Bath & Beyond announced it was teaming up with Instacart and Target-owned Shipt to launch same-day delivery. Sephora will soon offer same-day via Instacart. DoorDash expanded upon its food-delivery offerings with the launch of its “DashMart” virtual convenience stores and will serve Pet Smart orders.

These solutions may be appealing thanks to easy implementation and high scalability of their resources there’s a wide set of issues to be considered:

  • - Cost. McKinsey, in 2018 made a study about “instant delivery” providers, stated that if a consumer spent $36 on a grocery order to be delivered as soon as possible 3 miles away, the gig-economy startup would earn about $1 and the supermarket pay 7% of the commission.
  • - Impending Regulations: In California the new law mandates the reclassification of many contract workers to employee status. Spain’s top court just rejected Glovo’s classification of couriers as self-employed. Etc.
  • - Inventory control. Especially for Shop to Customer deliveries.
  • - Quality of delivery. Riders are hard pressed for speed and little incentivized, nor trained, to display professional behaviour.
  • - Quality of the Order (for Grocery). Expired products. Missing Products. Products replaced without asking the Customer. Non refrigerated transport (counting od speed alone). Etc.

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                                                                   Copyright McKinsey & Co. 

Available data comes mainly from the food sector but, as we’ve seen, demand is rising also in non-perishables retailing and brand consistency is bound to become a problem as more image-conscious players enter the fray. This, of course, is not the fault of the riders (who work grueling hours under rain and snow, at less than minimum wage and often uninsured) but of the model itself.

Traditional carriers’ business models prevent same/next day delivery at reasonable cost to shoppers and vast gig-economy operations are too expensive and often not enough quality-oriented.

That’s where the flexibility of logistics SaaS companies come into play:

  1. They can help traditional carriers deploy and execute new options, with a renewed customer-centricity and much better data flow and management.
  2. They can be the solution for retailers who feel strong enough to build their own last-mile services.

What do delivery software platforms bring to the market? 

  • - Planning and thus the ability to balance volume and speed, standard options with premium ones.
  • - The possibility of choosing the desired option/cost directly from the Retailer’s checkout.
  • - The offering of time-appointed deliveries, whose need is more felt both among grocery (as many families, for example, order grocery once a week and add items day by day until they are satisfied with their cart) and non-grocery shoppers (how many need home ware or make-up now?).
  • - Professional drivers incentivized not only for speed but for quality of service.
  • - Machine learning that improves routes and single stops wave after wave.
  • - Advanced real-time tracking that eliminates anxiety and boosts successful first-try deliveries.

In the era of flexibility, it is the ability to choose custom-made options that drives conversions and loyalty. This, on the long run, will be the new normal.

 

Take a look at Milkman’s CEO showing the optimal balance between convenience and price:

#gig-economy, #Future of Last Mile, #last-mile, #black friday, #grocery

    
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