The last mile as a potential game changer
Like marathons, the last mile in an e-commerce journey – the final leg entailing the movement of goods from the last transportation hub to the final delivery destination, typically a customer’s residence – is a potential game-changer. An effective, consumer-centric last mile experience could engage and retain consumers. More often than not, small and medium enterprises (SMEs) get the product development and customer interface right but stop short of fulfilment and shipping.
“In times of instant gratification, last-mile delivery is certainly crucial. From our experience, speedy fulfilment can be a revenue-, acquisition- and satisfaction-driver and in the luxury space, customers are willing to pay extra for same-day services,” says Andreas Skorski, founder and CEO of The List, a global e-commerce marketplace selling designer fashion and accessories as well as lifestyle products.
Nour Suliman, CEO, DHL Express MENA adds: “The e-commerce vertical has forced logistics players to re-align mindsets and processes to better accommodate for a more demanding customer and retailer segment. There has been a complete shift in how we as logistics players tackle e-commerce, with almost the entire process being steered by the needs of the end consumer. Today we are competing on ‘e-fulfilment’ and customer satisfaction; online consumer behaviour and buying habits have changed dramatically as a result of technology and we are now dealing with a more demanding, price-conscious segment who want real-time interaction, they want things faster, with more visibility, more choice and a great deal more convenience.
“On the other hand, you have the e-commerce players. They are aware of how critical e-fulfilment is to sustaining customer loyalty and they seek logistics partners who can help them stand out by offering simple, direct, cost effective and innovative solutions to reach their B2C market.”
The Capgemini Research Institute, in its consumer survey, polled over 2,870 consumers across five countries in Europe and North America during Q4 2018, and 500 supply chain executives, as well as entrepreneurs and industry leaders. The study revealed that 82 per cent of satisfied customers share their positive delivery experiences with kith and kin, while 74 per cent of the satisfied respondents intend to increase spending by 12 per cent with their preferred retailers.
So which factors come into play for e-commerce companies, while choosing between outsourcing deliveries vis-à-vis maintaining an in-house fleet?
“The most important reason is cost,” notes Suliman. “To stay competitive, e-commerce players need a cost-effective shipping strategy, and therefore have to assess which option will keep the costs low enough to attract shoppers. The best option for e-commerce companies really depends on the size, scope, and future of their business.”
Over the last five years, a significant portion of DHLs’ revenues have come from businesses selling direct to consumers via digital platforms. B2C has grown from around 10 per cent in 2013 to more than 20 per cent today, say Suliman, while e-commerce activity has been growing by around 40 per cent annually, making it a star player for DHL’s business.
The last mile may be mired with hassles such as route planning, aligning deliveries to consumer schedules, and parking hurdles, and while these factors and additional ones such as cost-effectiveness and size of the business come into play, choosing to outsource delivery is also dependent on the amount of control an e-commerce company wishes to maintain over the process.
Ulugbek Yuldashev, founder and CEO, Awok.com, explains further: “Awok manages more than 90 per cent of its logistics and last mile in the UAE. Outsourcing also has its advantages, of course, where it is easy and fast to start and scale the operations. On the other hand, the advantages of an in-house fleet ensure not only more control, but if executed correctly in the long term, can be more cost efficient. It also provides better customer experience and quality of service.”
Fulfilment centres
To develop a thriving e-commerce ecosystem, encourage more online startups to enter the market, and improve the last mile experience, synergised fulfilment centres – third-party spaces that process and fulfil customer orders from e-commerce retailers – are vital. A fulfilment strategy – the methodology by which a customer order is fulfilled – defines the success of a B2C e-commerce business.
An e-commerce business can sell a valued product via a richly designed website with exemplary customer service but if the purchases take too long to process or if shipments are delayed, that value does not reach the customer and subsequently does not translate into profits.
In 2017, logistics service provider, Arvato SCM Solutions, in its research of 2,000 US-based shoppers, revealed that 83 per cent of the participants considered free delivery as the most significant factor when it came to fulfilment of online orders, followed by speed of delivery (53 per cent) and free returns (52 per cent).
“Since the region, with its e-commerce ecosystem, is just at its starting point, similar factors apply to the fulfilment centres to sustain scale and the way of operating with e-commerce. There is still a lot of potential to grow,” opines Skorski.
Locally, companies are realising the importance – and need – of fulfilment centres to develop the e-commerce ecosystem. In 2019, logistics firm Aramex launched a 60,000 square metre fulfilment centre in Dubai to strengthen its e-commerce business with B2B retailers. The new facility uses an automated conveyer belt system, and ‘Pick to Light’ feature – a system for picking items off shelves using lights to help workers. Also, in 2019, the MENA region’s first robotic fulfilment centre – IQ Fulfillment – was launched in Dubai to deliver back-end solutions to support the needs of SMEs, incubators, accelerators and e-commerce players, utilising robotics and technology.
Meanwhile, e-commerce players are also throwing their weight behind the concept, controlling their fulfilment and last mile elements. Amazon-owned Souq.com opened a new 23,000-sqm-fulfillment centre in 2018, its third in the UAE, to benefit sellers – including SMEs who sell on the Souq platform – ensuring that they serve their customers faster and more effectively.
Souq.com also acquired Wing.ae, a marketplace for merchants and couriers in the UAE that offers mobile and webbased delivery solutions for businesses and consumers.