Is the last mile the last challenge for retailers?
Many retailers know that a quick and speedy delivery is key to finding new business and holding onto it
Companies like Target and Amazon realize the importance of quick, same-day delivery when it comes to food and beverage products.
Target agreed to pay $550 million in cash to acquire Shipt, a leading online, same-day delivery service platform that’s known for its grocery delivery service. Amazon, with its acquisition of Whole Foods, according to recent statistics has 19 percent of online food and beverage sales in the US, twice its closest competitor, Walmart, which had 9 percent of the market. Meanwhile the Giant supermarket chain in the Northeast and Midwest has a home delivery service called Peapod, which I’ve seen making deliveries in my neighborhood.
No one can doubt that the retail grocery landscape has changed dramatically in the last 15 years, and added services such as deliveries are no longer a differentiator, but a prerequisite. Today’s world is one where individuals have the ability to access data about a store’s products before they’ve stepped inside.
The landscape has shifted as far as priorities are concerned. Platforms such as Yelp, third-party demand generators and social media have gotten more attention than ever before. It’s important for food retailers to keep up with the conversation, and, most important, be aware of changes in the market.
“More so than ever before, retailers are required to provide customers a convenience and connectivity that has never existed before,” says Rohan Duggal, co-founder of EpiFruit, a new, New York-city based on-demand delivery platform. “Platforms like Amazon and Google offer cheaper pricing and the ability to get products to customers within the day, which has become a major priority.”
By being able to provide a product cheaper and more conveniently, Amazon has been able to grow exponentially. How’s a mom-and-pop retailer to compete?
Retailers that can deliver, especially those that can meet local demand faster and more efficiently than Amazon, will thrive, says Duggal. Depending on the neighborhood one lives in, the concept of convenience can be very important to a buyer. A lot of people will buy from their local grocery store because it’s a few blocks away, rather than traveling miles to a larger or cheaper shop. This is typically the case in a metropolitan city as opposed to suburbia, where shoppers are accustomed to driving to stores.
“Delivering product with a click of a button leads to reaching more customers, creating a higher rate of customer loyalty and generating more business,” asserts Duggal. Delivery services are really an incredible mechanism for retailers to grow. The cost of delivery in New York City, however, averages $16.31 an hour, says Duggal.
A new concept in some ways
Retail/grocery stores in the city can opt to have their own people do deliveries, which is not necessarily efficient in a city environment. They can rely on third-party delivery services, but that gets expensive, and retailers realize they’re not only paying for the delivery, they’re also paying for a return trip.
Duggal has another concept, which has a familiar ring—think Uber. His concept, and he’s betting his company on it, makes use of Internet communications and independent delivery people. FE asked Duggal what’s wrong with current retail delivery systems, and how a new concept might just be better for retailers and consumers alike.
FE: What’s wrong with retailers doing deliveries?
Duggal: Most stores have employees who do more than their job description, especially in high-volume shops where workers are likely to also run out for deliveries leaving other tasks left to the manager or others to perform. It can be an overwhelming experience.
Likewise, the delivery person might not be the most reliable employee. Delivery workers stay at a retailer anywhere between three and six months before they leave or are fired. This becomes harder when a retailer might have 35 percent of sales come through delivery, making those workers more valuable than some of the sales associates because they can fulfill the demand.
Enough delivery workers need to be available and properly managed, which can be difficult in bad weather. Delivery workers that don’t show up to work because they are sick or having trouble getting to work in bad weather hurts a retailer because the delivery times will take longer, which can anger customers.
How about a third-party delivery service to which the retailer contracts?
Duggal: Third party solutions have been around for a while now. They’re great for fulfilling jobs within a specific radius; however, the ability for them to go everywhere is finite. The third-party courier as well has the same issues as the shop, where the delivery person working for them is also unreliable with high turnover, so it’s not guaranteed always that someone will be available to pick up the product when the retailer needs it to be picked up.
FE: How are third party online demand platforms such as a Seamless or Delivery.com affecting how businesses operate now?
Duggal: Retailers using a third-party platform might feel pressure to get deliveries to their customers in 40 minutes or fewer. Deliveries through a third-party platform can be addicting because stores receive additional revenue that can range in the percentage of 25-50 percent additional sales depending on the industry; however, those customers belong to the platform. If that platform raised its costs or kicks you off the platform altogether, those customers are unlikely to continue shopping with you.
Store owners entered the industry to sell what they are passionate about. When deliveries become a big priority in one’s business model, retailers need to become dispatchers and track those workers, a hard task. Store owners are unaware if a delivery worker runs personal errands on the company’s time. Delivery workers are also unsure if or how they will be tipped, so there isn’t an incentive to really hustle on deliveries.
With cost, liability, efficient employees, time commitment and pressure from third-party platforms acting as deterrents, companies are thinking twice about offering delivery services.
There is a solution, though: a third-party platform that arranges contract workers to pick up products at a cheaper rate than an in-house employee and are well equipped to get those deliveries done.
FE: How does this platform work?
Duggal: A third party on-demand last mile solution platform, like EpiFruit, offers retailers the ability to find a local courier in the area to do deliveries for businesses. The open-market platform allows businesses to create minimum bids on their deliveries, with delivery partners choosing to take on that task. It gives the business ample area workers to run deliveries and potentially drive down the price. The app gives retailers the ability to track the delivery worker through the process, along with the ability to message and call them if necessary.
Retailers only pay for the delivery rather than the delivery and return, which saves store owners money. It gives retailers peace of mind to click a button and let the deliveries happen without much thought.
FE: This sounds a little like Uber—independent operators, someone else takes care of the billing and other worries—doesn’t it?
Duggal: It has the Uber feel to it being that it’s involving independent contractors and matching delivery partners with businesses, but it feels more like seamless in the sense that the customer (the retailer) can come on and pick from an array of delivery partners and choose their driver based off of ratings, distance of pickup, pricing, etc.
FE: Amazon has lately taken the heat over independent package deliverers who mishandle packages or deliver to the wrong address. How do you prevent this from happening?
Duggal: We have a team on the back end tracking jobs as they are happening live. We also ensure a system where we hold the driver accountable for anything pertaining to the handling and care of all the product he or she is delivering, and have specific mechanisms in place to address it if need be to maintain a positive experience for both parties.
FE: Do you propose to allow drivers to enter a front entrance of the homeowner when he/she’s not home, provided the homeowner has provided an “electronic key/access”?
Duggal: At the moment we are looking at EpiFruit more as a system where deliveries are done when someone is available to sign to ensure that the product is delivered. Either it would mean someone is at home to sign, or it can be signed by the door-man if applicable.
FE: If a delivery person is granted access to an empty home, how do you guarantee the delivery person has not taken anything out of the home?
Duggal: We don’t anticipate EpiFruit partners entering customers homes to drop goods.
FE: Can you stay in business with this model?
Duggal: It requires a lot of transactions; however, our goal is to create a tool that can be useful to both sides, as technology could soon create a hindrance for the small business owner and the average working individual. I do believe we will tinker with our model if need be, but as of now our goal is to help others, and we believe this solution is a win-win for both parties.
FE: Do you think you can extend the business to other metropolitan areas?
Duggal: Absolutely. It will require a little time but our goal is to be nationwide.
FE: Is this model workable or even practical in the suburbs?
Duggal: It can be. It depends on how individuals value convenience. With a car in place, and gas also factoring into the cost, I’d imagine expenses will be a bit higher versus doing it on foot in a city. However, if both parties can agree, why not? It could be a great tool for businesses in the suburbs to implement to differentiate themselves—as a lot of retailers don’t necessarily practice delivering products, but are probably losing out to Amazon because they don’t. I see our solution being able to work, but the retailer will have to be creative.
FE: Anything else?
Duggal: Delivering items will become a big puzzle everyone will be looking to solve from a technology standpoint in the next 5-10 years. Our goal is very simple—utilize individuals who are already in motion to help facilitate those deliveries. By offering delivery and going farther than businesses have in the past it will lead to limitless possibilities for the retailer, and lead to them overcoming that glass ceiling all small businesses have to find a way to overcome.