Internet sales boost courier services

Though the bulk of their business is still reliant on companies shipping packages to other companies, there are several factors driving the part of their business that involves delivery to consumers.

"An increasing number of people are using the Internet and access to credit cards, as well as the growth of the middle class means that a growing sector of the population are ordering online," says SA Express Parcel Association chief executive Garry Marshall

This does not mean providing a service to online retailers is easy money.

Marshall points out that while there is generally a set arrangement for delivering goods to companies, dropping off goods at someone's home address can be tricky.

"Address databases are a major issue, as is the availability of the receiver at the time and place of the delivery. If a courier has to attempt a delivery more than once, they lose money on it."

A courier service also has to have scale to be an effective operator. "Network is critical. You have to be able to deliver to every single address in the country. There is a huge cost attached to this," he says.

So online retail increases revenue, but making money from Internet deliveries is difficult for courier companies. "They are generally low-yielding products, and profitability is a concern," says Marshall.

Some couriers are up to the challenge. The Courier Guy's managing director Stephen Gleisner says though it takes a lot more effort to serve e-commerce businesses, it can still be done profitably.

It's not only couriers that are changing their business model. Takealot.com opted to bring its delivery service in-house when in late January it increased its holding to 60% in delivery company Mr D - previously Mr Delivery. The operation has 49 franchises with 800 drivers and makes 100,000 deliveries a month.

Takealot.com took a 40% holding in the group from Craig Lyons, David Chait and Alon Rom (who had bought it in 2010) about a year ago and has been working closely with it in turning it from a food delivery business to one that specialises in last-mile deliveries to the consumer market.

"We are very happy with the level of service provided to us by Mr D over the past year - so happy that we have decided to invest further and secure a meaningful stake in the business," says Takealot.com's chief executive Kim Reid

He says SA courier companies are well behind their counterparts in North America and Western Europe. It is not uncommon for couriers in those regions to deliver goods a day after the order was placed to . In the UK, courier companies delivered between 15m and 20m packages a day during the Christmas season.

Source: Financial Mail via I-Net Bridge