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Navigating around the high costs of last-mile delivery in e-commerce

3 Oct 2024

Last-mile delivery is one of the costliest areas of the supply chain.

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The combination of multiple delivery routes, packing and packaging, and dispatch waiting times saddles e-commerce businesses with prices that, on average, range from R90 to R900 per package.

For smaller e-commerce businesses, these costs can be particularly devastating. But with South Africa's online retail sector in a boom period and the local industry expected to be worth R100bn by 2026, solutions need to be found—and fast.

Anita Erasmus, head of business at Bob Group, adds that in addition to the general costs associated with last-mile delivery, fuel costs and security expenses are also negatively impacting the industry.

“Fuel is notably expensive in South Africa, directly impacting delivery costs. Additionally, courier companies incur extra expenses to ensure the safety of both their drivers and parcels, which further increases the total cost,” she says.

The nature of deliveries

Another factor escalating last-mile delivery costs is the nature of deliveries themselves.

Typically, these involve single parcels being delivered to individual recipients, and since deliveries are not consolidated, drivers spend considerable time reaching each specific destination.

Erasmus says effective last-mile delivery management must be implemented from “day one”. Even shipping a single parcel each month can directly influence an e-commerce business’s overall level of service.

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“As shipment volumes increase, manual management becomes increasingly challenging. This is where leveraging technology to streamline the process can be highly beneficial.

Platforms and services offer tailored plans for businesses of varying sizes.

"It must be remembered that as order volumes rise, so too do shipment numbers. This, in turn, increases the likelihood of errors. Implementing technology early on can significantly reduce this risk and ensure a smoother delivery process,” adds Erasmus.

Cost-effective strategies

Erasmus points to several innovative and cost-effective strategies for last-mile delivery that can assist South African e-commerce businesses. These include:

Aggregator platforms allow access to multiple courier services in one place. These platforms enable businesses to compare pricing, manage orders and track deliveries from a centralised dashboard. This streamlines logistics, reduces costs, and offers flexibility in selecting the most efficient courier for each delivery.

Partnering with established networks of pickup and drop-off points, which allow customers to collect parcels at convenient locations. This reduces the time and fuel costs associated with door-to-door deliveries.

Using crowdsourced delivery services, where independent couriers complete deliveries using their vehicles. This can be more cost-effective, especially during peak times or in less densely populated areas. Platforms like Wumdrop, Breeze and Picup offer such services in South Africa.

Building partnerships with local courier companies can be cheaper than national or international services. Local couriers also understand the unique challenges of specific areas, offer quicker delivery times and might be more flexible with pricing for smaller businesses.

However, Erasmus quickly adds that these options are not a "one-size-fits-all” solution; instead, the most effective approach often involves combining strategies.

“It’s crucial to evaluate each option’s technical capabilities, specifically how seamlessly they can integrate with your e-commerce store to ensure a smooth and efficient workflow.”

In any e-commerce business, the operations manager usually oversees these processes. This individual must be able to multitask effectively.

He or she must also have exceptional analytical skills to interpret data related to last-mile delivery.

“Additionally, they should be adept at managing relationships with partners, especially courier service providers. Striking the right balance between maintaining a firm approach and fostering a positive working relationship is essential for ensuring smooth operations,” Erasmus says.