While several countries in the Middle East have superb infrastructures, developed during the prosperous oil-producing era, local and regional logistics present a surprisingly persistent problem. In reality, it is not just one problem, but several issues with frustrating interrelationships.
Challenges though, are all part of building a successful business, so you’re not going to let a little thing like the last mile get the better of you, right?
After all, your business is not the only one contending with these obstacles. Furthermore, there are plenty of new logistics and technology providers ready to back your efforts to understand, and beat, the last-mile challenge.
Shipa Delivery is one of those helpful entities, and we specialize in both logistics and technology development, but we’re not writing here to evangelize our solution. Instead, we aim to provide some guidance in knowing and overcoming the last-mile problem.
To that end, let’s begin with a quick rundown of the challenges your business must contend with to be successful as a consumer retailer in the Middle East:
1) Vague and Imprecise Postal Address Systems
When you look at the ultra-modern landscape of a city like Dubai, it’s hard to believe the difficulties couriers and carriers are up against when trying to deliver goods to consumers.
In many cases, drivers navigate avenues lined with glass and concrete, with half their attention on a mobile phone conversation. The discussion might go something like this:
“Was that first right after McDonalds, then second left by the garage?”
“No second right after McDonalds, then first right just before the garage.”
“Okay, got it, stay on the line. I’m almost there.”
“When you turn left by the garage, I’m about 400 meters along, on the right… My neighbor has a green Honda Accorded parked on the street. You can’t miss it.”
“Hello? I’m at the end of the street and didn’t see any green cars.”
“Oh! My neighbor must be out. Turn around. I think it’s about 300 meters. I’m on your left. Wait, I’ll come out to the street.”
“Okay, I’m already outside.”
“Well, I’m outside, and I can’t see you.”
“Hmm! I think I must be in the wrong street, but I turned left before the garage… The ADNOC.”
“No. Not the ADNOC… The ENOC.”
“Aahh!…I’ll call you again in five minutes.”
This type of exchange punctuates a delivery driver’s route numerous times every day, since addresses are descriptive at best. Not only are there no postcodes, but many roads and streets have no name (cue U2 on your MP3), so navigating from one landmark to the next is the norm.
As cities in the Middle East continue to develop and grow though, established landmarks are obscured by new constructions, and road layouts change at a hyperactive pace.
For consumers waiting for deliveries, the need to act like a human GPS can be remarkably frustrating, so the address problem doesn’t do much for the customer experience. It also makes fulfillment operations inefficient and costly.
According to Dubai-based venture capitalist firm Mavericks, last-mile delivery failure rates run at anything between 15% in the United Arab Emirates, to 40% in Saudi Arabia. The inability of the logistics company to find the customer’s location is a typical cause of failure. Of course, delivery providers will generally try several times to make delivery, incurring a high cost to do so.
2) Cash Payment Culture
The next-biggest challenge after the Middle East postal address issue is the region’s love for cash as a means of payment. While the rest of the developed world is primarily indoctrinated into a digital payment ethos, cash still reigns supreme in GCC and other Middle Eastern nations.
At first glance, this may not seem to have much to do with last-mile delivery. In reality, it does add to the challenges in a handful of ways, with consequences for your business, your delivery provider, and your customers:
Cash on delivery (COD) makes it easy for frustrated customers to reject their purchases before they receive them, as they’ve invested nothing at that point. Frustration is common enough when the address problem makes it hard for logistics personnel to deliver accurately and on time.
Another possible reason for rejection is the so-called buyer’s regret. That’s when a customer suddenly has second thoughts about a purchase after completing it, and is quite a common phenomenon in both traditional and e-commerce retail.
COD makes it easier for customers to succumb to buyer’s regret, as they don’t have to deal with a refund request. Moreover, the longer the delivery lead time, the bigger the opportunity to ease the regret by canceling the order.
Just as customers can turn a delivery driver around before they receive their goods, they can also reject their purchases at the point of delivery. While the return of a delivery (on the first attempt to deliver) incurs less immediate expenses than a failure to deliver after multiple attempts, there are costs involved in processing the return. The loss of the sale is also a financial hit, and your business must still pay for the attempted delivery.
Business Cash Flow
When customers pay only on receipt of their purchases, your business retains the risk of shipping up to the point of delivery. At the same time, you will receive no revenue until the goods are in the customers’ hands. That in itself makes COD less desirable than electronic payment at the checkout.
Compounding this issue is the fact that when you use a delivery provider, you will wait even longer for your sales revenue. Your provider will likely consolidate cash-on-delivery payments from consumers and credit you in bulk on a weekly (at best) or monthly basis.
Unless you have a robust line of business credit, these delays in revenue can severely impact your business cash flow.
COD also presents a security risk for your delivery provider. Each delivery driver will be carrying cash, which increases the possibility of theft. While the risk can be reduced with the installation of strongboxes in vehicles, drivers frequently have to spend time on foot to make their deliveries.
Sometimes a customer delivery-point can be some distance away from the nearest convenient parking. That means a driver must return on foot from the delivery point, perhaps traversing several hundred meters of urban terrain, carrying the customer’s cash payment.