Courier and delivery business is lucrative, but see this before you lose your investments

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For sometime now, I keep receiving distress calls from people who have ventured into the courier and delivery business. It's obvious that a lot more of us follow opportunities without first assessing the risks inherent in the opportunities. I am by this post sharing a few of my learnings in this field, so that someone might safeguard their investments.

Do they look before they leap?

Indeed, e-commerce and m-commerce is the future of trade which holds so much potential for our country and the subregion; at least Covid-19 has thought us all a lesson in this regard. Globally, this industry is worth trillions of US Dollars. As a result of this crucial market phenomenon, a solid logistics infrastructure is key to the growth of this online trade industry.

To take advantage of this seeming opportunity in the market, a lot of investors has established delivery businesses hoping to cash in, only to soon realize that it is not for the faint hearted. My response to those who say things like “I have ten bike I was using for this delivery business, but I can’t handle it anymore and I want to offload them to you”, has been; whatever challenges you are facing, I am facing a double or triple of that. Some key players I came to meet in the domestic delivery industry have all gone down, and to keep afloat hasn’t been easy.

What issues should one consider first?

Beyond the ability to buy motorcycles, tricycles and vans, there are other crucial aspects which determines the success or failure of a delivery business. The question to ask is why are the big courier companies like DHL/FedEx/etc with all their resources not taking up the domestic delivery market for these e-commerce businesses, but rather, there are thousands of small delivery businesses filling up the space?

Bottom line is the numbers. Out of the many big e-commerce businesses I know and have worked for, only one operates at a profit. All the rest run at a loss. This means that, in their bid to cut down their losses, delivery fee is always targeted. So those who have the volumes will not pay economic rates for your services. The viable option is therefore to do on-demand or corporate services and charge economic rates, although these do not guarantee volumes.

Key among the factors you must consider include but not limited to…

1. Riders
2. Pricing
3. Regulation
4. Volumes
5. Customer Behaviour
6. Accidents, breakdowns and repairs

Riders

The number one complaint I usual get is on riders. They come with their own agenda. No amount of customer service training seems to get them to conform to your service delivery promise to the customer. These are usually people who think they are the ones on the road and should make more money. They build a parallel personal client base and so, use your bike and fuel to serve both your customers and their personal customers. Unfortunately, some of them are thieves and they run with customers cash and sometimes even your bike. I have a lot of such wanted riders who have run away with cash.

Certainly, a gap exists in the market for the training of professional dispatch riders. If you can hack this part of the puzzle, you have found an answer to a successful delivery business. Many merchants who believed they are better off managing their own internal delivery system, soon find out it’s a no go area due to rider management issues.

Of course, there some very good dispatch riders in the system. Their job is highly risky. Some have had their legs broken, while others have even passed away, just trying to satisfy customers. The real MVPs of this industry are the riders. They face extreme pressure from both management and customers. Sometimes, they get abused verbally by the same customers they seek to serve.

Pricing

Pricing is the next major issue in this space. Studies have shown that customers are highly sensitive to delivery charges. They are always benchmarking the price of an item with the delivery charge. This is the reason why you see e-commerce platforms advertise free delivery sometimes, to increase traffic and grow sales volumes. Why will I buy a ₵10 meal and pay ₵20 for delivery? They ask. But convenience and comfort comes at a cost, which the customer must understand. If all variables are considered in your price build up, the shocks from the inherent risks would be absorbed adequately. This however, the market is not willing to pay. So some even charge ridiculously low rates which are not sustainable. The current market rates require that operators run a highly efficient regime. If you have what it takes, then go ahead and try your hands in this market.

Regulation

On regulation, I don’t know of anything being done to protect the interest of legitimate players, beyond operators paying license fees annually. If you want to taste firsthand the corruption of the police, start a delivery business; sight of a motorcycle is their cash cow. The industry regulator (The Postal and Courier Regulatory Commission) does nothing to protect licensed operators from this harassment from the police on the road. So you just pay them off and carry on with your business even if you have everything intact. Just the time wastage will kill your business; customers don’t care about the police operations when their parcel is time bound.

In today’s technology world, it still beats me why the regulator can’t give licensed courier companies, unique QR codes for each bike, which with a scan with a phone by the police, complaints could be logged and offending rider and courier company fined; which fine is shared by both the police and the regulator. This way, repeat offenders get banned from riding or company license revoked for repeat breaches of the law. If this was done, I won’t have to worry about delaying in delivering medical samples and drugs needed to save lives. The rider can be allowed to go and his sins punished later. Well, for now, it’s a free for all regulatory space. Quite chaotic if you ask me. So be advised.

Volumes

Regarding volumes, it’s a fragmented space with a lot of individual players (legal and illegal) handling small volumes per day. The model introduced by Speedaf Express is what I see to be the future of the domestic delivery system. They have parcel distribution centers in major cities, where all small and individual riders can bring their parcels and they are aggregated and dispatched based on zonal groupings. Each rider thus gets the opportunity of high volumes and save time from otherwise having to move the length and breadth of the city by one rider. The market needs collaboration for volumes harmonization to happen.

Customer Behaviour

A number of worrying trends I have observed has at the core two things bothering on customer behaviour. To the Ghanaian customer, every order is an emmergency. So once an order is placed, there is pressure on riders to deliver quickly. Understandably, vendors only care about their sale, and so rider safety is not their focus. If every delivery is urgent, then customers must be ready to pay express rates to cover the full cost of a single route movement for just one customer.

The other customer behaviour of concern is insincere business ethics. Some customers collude with riders for off record deliveries, so they lower rate to rider on the side. Be ready to deal with such situations.

Accidents, breakdowns, and repairs

Finally, accidents happen and they disrupt the delivery flow. Have a backup system. These accidents together with usual wear and tear requires a strict repairs and maintenance regime. This has the tendency of eroding your gains; watch it.

Concluding remarks

I guess I have shared a lot for anyone to be guided if they want to play in this space. So before you call me on your headaches in this space, refer to this notice first. The available market is huge, but so are the hurdles; watch before you leap, so that hopefully, you don’t lick your wounds like some of us. But for the generous support of our stakeholders, things would have been worse for us.

Meanwhile, if you bring goods from China, or need countrywide trucking services, warehousing and domestic delivery services, Speedaf Express has the fastest service and lowest rates in the market. Reach out and let’s support you.

Thank you.

Courier and delivery business is lucrative, but see this before you lose your investments

Samuel is the chief executive officer at Entrepreneurial Solutions Gateway Ltd.

Courier and delivery business is lucrative, but see this before you lose your investments

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