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25 Sep 2019

Cracking Last-Mile Delivery Challenges in the Middle East

The Middle East has always been a crossroad, geographically, culturally, and commercially. Today the region itself is at a crossroad, as its constituent nations emerge from a cooling epoch of vitality on the world stage.

Middle Eastern countries are entering a new era, in which they must stimulate regional and domestic trade to offset the slowdown in global commerce. Fortunately, opportunities are abundant, given the booming state of e-commerce in the GCC and broader Middle Eastern region.

Before retailers can capitalize on the healthy growth in online and omnichannel consumerism, though, they must face the challenges of local and regional logistics. Last-mile delivery success, for example, is not yet easy to achieve, but not impossible either.

What is the Last Mile Problem in the Middle East?

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](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:

Delivery Rejections

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.

Buyer’s Regret

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.

Product Returns

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.

Security Issues

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.

How to Meet, and Beat, ME Last-Mile Challenges

n addition to the region-specific obstacles that will challenge you in delivering to your customers, last-mile logistics is generally a challenging area in which to achieve cost efficiencies. It’s even harder to attain them while meeting the demands of an increasingly demanding consumer community.

As reported by Business Insider last year, last-mile delivery can account for more than 50% of retailers’ transportation costs. That’s a tidy sum by any standards, and shocking enough to prompt most retail businesses to look for cost-saving measures.

The problem is, last-mile logistics are seldom efficient, and until anticipated autonomous solutions become a reality, are unlikely to become much less costly. However, you can take steps to overcome some of the challenges individually, especially those peculiar to the Middle East.

Happily, governments and private-sector enterprises are working together to help you in this regard. Technology, too, is becoming instrumental in last-mile improvement. Although drones and driverless vehicles are not yet a practical solution, technological innovation is at the heart of new tools and services to assist you in finding your customers’ locations.

Governments Address the Challenge

As an example of how the nuclear address issue has aroused governmental action, you need only look at steps being taken in the Kingdom of Saudi Arabia.

The government-run postal service, Saudi Post, developed a national address system. That particular initiative aims to make every resident’s home and business establishment findable by last-mile delivery providers.

Governments in the UAE are taking similar initiatives. Dubai has implemented the Makani geo address system, and Abu Dhabi is using QR codes to identify precise locations as part of its Onwani system.

However, even if your customers aren’t registered on a structured postal system, a smart choice in delivery partners will connect you to a solution for fast, efficient, and accurate location-finding.

Thanks to the latest technologies, your customers need only download a simple app, and stick a pin in a map to guide drivers to their exact location. That means that you can deliver your products into consumers’ hands even if they’re not at home.

Technology-First Logistics Providers Step Up

At this point, working with a technology-driven delivery company is probably one of the most effective ways to overcome last-mile challenges in the Middle East. A slew of such providers has emerged in the last few years, mainly in response to the region’s burgeoning e-commerce market.

Government-led initiatives can be slow to mature and become accessible to private enterprises. However, proprietary solutions are available to any business prepared to tap into a provider’s technology and engage its services.

Tech-first delivery services are available today in several countries in the Middle East. Some of them, such as Shipa Delivery, span multiple regional markets, giving your business access to a reliable, region-wide delivery network.

Benefits of Tech-Driven Delivery Services

Why should you choose a Middle East-based provider with proprietary technology? Here are a few excellent reasons to do so:

  • Their technology allows them to offer a range of options, from two-to-three day lead times, all the way through to on-demand deliveries executed within hours of an order being placed.
  • They offer apps that any consumer can download onto a mobile device.
  • Customers need only to place a pin in a map to enable delivery drivers to receive turn-by-turn, automated directions leading them straight to the delivery point.
  • The technology keeps these providers lean and allows them to operate at low cost, translating into reasonable freight rates for local and regional deliveries.
  • Faster delivery times reduce the likelihood of customer-rejections and product-returns.
  • Proprietary technology can often be integrated into your own IT system, reducing workloads for your fulfillment team.
  • Some providers will offer dedicated resources for your business, including branded fleets, to raise your enterprise’s profile.

When choosing a partner for your last-mile delivery operations, remember to favor those that offer fast transfers of COD payments. Your partner should also be equipped to handle electronic payments at the point of delivery, as Card-on-Delivery is a payment method that’s growing in popularity.

The best providers also have a range of different assets available to make your deliveries, from large trucks down to motorcycles or even Bicycles, enabling them to move your products swiftly and effectively over long distances and into the tightest of urban locations.

For Fast Movers, Challenges are Opportunities

Several studies have shown that consumers are far more likely to remember experiences than prices. Others have found that in the Middle East, shoppers are prepared to pay extra for fast, efficient deliveries from retailers.

As the omnichannel retail model takes off in this region, it will be those retailers moving soonest to address the challenges of last-mile delivery that will leave a lasting impression. As a result, they will continue to retain loyal customers, even after the laggards catch up and get smarter about local logistics.

That’s why we can only recommend that you look at the last-mile challenges existing today, as opportunities to invest in. By selecting a high-performing delivery partner now, and taking advantage of the technologies and insights available, you can get ahead in a regional market that grows more with every tomorrow.