Time for e-commerce companies to explore alternative delivery solutions

14th Dec 2015
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Manish received an SMS from the e-commerce company he had placed an order with saying his package would be delivered soon. He then started getting incessant phone calls whilst he was busy at work from the delivery courier company, asking him directions to drop off the package. An irritated Manish snapped at the delivery guy saying he was busy and asked for the delivery to be made the next day.

Ishan had a bike and his friend told him that he could earn a good salary and commissions by joining the delivery team of a courier company. However, the money was not easily earned. Locating the residential addresses was not easy, negotiating with the adamant security guard was equally a challenge and after all those obstacles he would find the door locked or sometimes the CoD amount was not ready and he was told to come the next day. Even after lugging a 30-kg bag on his back and working hard he could not achieve the productivity targets set by his supervisor.

Suruchi had ordered a pair of shoes online from her favourite website. But the size was not right and she wanted to return them. She called the customer care service of the web portal and learnt that she had bought the shoes from a listed seller and not the online shopping company. This meant that Suruchi would have to pack and return the shoes on her own using a courier company. After this, she would have to scan the courier receipt and send it to the company to get a refund on the shoes and courier charges. She was exhausted just listening to the long process.

Such instances are symptomatic of the limitations of the current last-mile delivery model. No one is at fault here. Clearly, what is required is a new approach to solving the problem of last-mile delivery. Let’s start by taking another look at what we are trying to do. On the one hand, we have e-retail companies who want to send a larger number of parcels to the largest population at the cheapest price. On the other hand, we have customers who want the parcel delivered to them when they have time and at the place of their choice. In the current model, the delivery staff are working as the important link in meeting these two demands. But a scarcity of this resource clearly endangers the needs of both the stakeholders.

Hence, there is a need to develop a low-cost, alternative delivery method.

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Several models have been tried, but one that has been met with reasonable success is the 'store pick-up model'. Under this model, customers are incentivised to collect their parcels from a conveniently located store of their choice. This model clearly reduces the transportation costs significantly. The customers can choose the time to collect the parcels and since these places remain open for a longer duration, they can come in even after a long day at office.

The next major stakeholder in this model is the ‘location’ i.e., pick-up store. The major incentive available to these grocery, medical stores etc., is that they increase the number of footfalls in their stores. Experience has shown that these increased footfalls convert into sales as customers may start preferring these stores over other similar stores in their neighbourhood. The earnings from the operations are just a cherry on the cake.

The e-retail industry stands to gain the most by investing in this model. By increasing the proportion of store pick-ups, the companies can significantly reduce the dependence on the constrained home-delivery resources, while at the same time increase their profitability. This impact can be as much as two per cent to the bottom line.

Customer experience would also become better. First, the customers would themselves decide the time at which they will be collecting the parcels, eliminating the hassles surrounding co-ordinating a delivery. Potentially, these pick-up points can also start offering other services like fitting rooms (to try out the size before ordering), further enhancing the online shopping experience.

For India, especially, this model offers a unique advantage. Many locations in India are still unserviceable by delivery companies. Even though customers living in these locations have access to Internet, they are not able to order online. For the delivery companies, the low density of population in these areas reduces the financial viability of maintaining the home delivery network. However, with just a pick-up store in the locality, the entire locality can be served. For delivery companies making ‘milk runs’ across several such localities, it will not be very costly either. Hence, this model has the potential to take e-commerce to the interiors of India in a cost-effective manner.

Several players have recognised the need for such a model. Amazon has launched the store pick-up service in 45 cities. Flipkart recently announced the launch of its own pick-up stores in 20 cities. Recently, DotZot-DTDC announced the impending launch of this service in 15 cities. Other formats of the pick-up model are also being created. Startup Qikpod received $9 million in funding from Flipkart, Delhivery etc., to install automated lockers across metros.

For majority of Indians, pick-up stores truly have potential to bring the e-commerce world closer to them. And we have started with the first steps in the right direction. However, this is a new concept for Indian consumers. A lot of players will have to work together to create awareness on the ways in which this method can make life easier for customers.

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