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Change of Customer Behavior is Fueling Last Mile Delivery Business

Franchise India Bureau
Franchise India Bureau Jan 10 2019 - 3 min read
Change of Customer Behavior is Fueling Last Mile Delivery Business
Evolving consumer behavior is also fueling greater immediacy in purchasing: 59% of customers purchase products online when they need them, rather than wait until the weekend to buy in-store.

According to Capgemini global study, 40% of customers currently order groceries online at least once a week: This number is expected to reach 55% by 2021. Forty percent of customers class considers delivery services as a “must have” when purchasing food and grocery products, however, 1 in 5 (20%) is prepared to switch retailers if this is not provided. Evolving consumer behavior is also fueling greater immediacy in purchasing: 59% of customers purchase products online when they need them, rather than wait until the weekend to buy in-store.

Tim Bridges, Global Sector Leader, Consumer Products, Retail and Distribution, at Capgemini said, “Today customers are neither satisfied with the quality of delivery services nor willing to bear the total cost of last-mile delivery. Therefore, the dilemma facing retailers is to provide last-mile delivery services that customer’s value, without damaging their own profitability. If done right, and their last-mile experience can win over customer satisfaction, retailers stand to gain loyalty, increased purchase value, and frequency, while mitigating profitability risk through automation and optimization of fulfillment locations.”

This is how customer behavior change is opening employment opportunities as well as generating business opportunities for the last mile delivery category:

o Fast and effective last-mile delivery increases customer spend and loyalty: Encouragingly, 74% of satisfied customers intend to increase spending by as much as 12% with retailers they frequently purchase from. The majority (82%) of customers have shared positive experiences with friends and family, and just over half (53%) would even be willing to purchase a paid membership for a good delivery service. However, despite 55% of customers expressing those offering 2-hour deliveries would increase loyalty, only 19% of firms currently provide this compared to 59% of firms that offer a delivery time frame of over 3 days.

o Many entrepreneurs and startups are investing their time and energy to develop innovative ways to make this last mile delivery their main business and thus are generating employment opportunities for people in tier-II and tier-III cities. Logistic companies and modern logistic tools are also being developed to ease out the delivery work for the e-commerce players.

The Capgemini global study report indicates the following recommendations for last-mile delivery success:

o Optimize fulfillment locations: Increasing store-based deliveries by 50% could potentially lead profit margins to soar by as much as 9%. Dark stores - retail outposts with store-like layouts intended only to fulfill online orders - can also process high delivery volumes and are 23% cheaper than conventional stores for same day deliveries. Additionally, if 30% of deliveries and returns are routed through parcel locker collection arrangements, organizations could expect an8% increase in profit margins.

o Automate delivery options: The report finds that back-room automation could increase profits by up to 14% by reducing the cost of click-and-collect orders and deliveries from the store. Furthermore, automation offers a range of benefits including reduction of fulfillment errors, and managing returns (which forms 26% of the delivery cost).

(With inputs from Capgemini global study report)

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