Last Mile

The Present Situation

Your mother in Embu sends you arrowroots, bananas, and avocados as a parcel using Neno Sacco. The parcel arrives in Nairobi, and the courier sends you an SMS. To receive the parcel, you or your representative must present themselves at the courier office with your ID.

You work at Ridgeways, Kiambu Road, and live in Kirigiti, near Kiambu town. You report to work at 8 am and leave around 6 pm. To collect the parcel, you have to rush to the Central Business District (CBD) during the lunch break or go after work.

The lunch hour is hardly enough time, and the evening trip to the CBD, the struggle to find transportation with a sack in tow, the traffic on the way back, and the overall hassle do not sound enticing after an exhausting day.

You could send someone, but who? You live alone, and the boda guys near the office are reluctant or charging exorbitant rates, more than the value of the items.

So you have to push yourself over lunch or in the evening to pick up the parcel; otherwise, the avocado will start ripening and rotting. Neno courier will call your mum and say you have refused to pick up her package. She will be disappointed.

But what if on the same day the parcel arrived, Neno gave you an option to deliver the parcel to your workplace or home at a minimal extra cost?

Or you could have WhatsApped your ID to someone, they pick up the parcel, and deliver it to you?

Better still, what if instead of providing an ID, Neno provides you with a code, which your agent can show to their staff to retrieve the parcel and deliver it to you?

What if there was a last-mile delivery option from the inter-county courier (long distance) to the recipient?

 

Context

• ü  Increase in parcels delivered. 
•      According to the Communication Authority Outgoing Domestic Courier Items in April – June 2023 were 1,256,522. In July – September 2023 were 1,427,436, a growth of 13.6 %. Growth has been on an upward trend.
• ü  Adoption of technology by courier firms, enhancing efficiency and tracking capabilities.
• ü  Increased competition within the courier industry, driving innovation and service quality.
• ü  Integration of courier services as a standard offering by transport Saccos, expanding accessibility.
• ü  Growth in inter-county trade, leading to higher demand for reliable courier services.
• ü  Efforts at regulation to improve services by the Communication Authority, aiming for enhanced standards and customer satisfaction.
•  

The Opportunity

The opportunity lies in providing a courier service that serves as the last mile link between the long-distance courier company and the final recipient.

This service eliminates the need for the recipient to visit the offices of the courier company to collect their parcel; instead, it offers pickup and delivery directly to their doorstep.

 

How It Would Work

Option One: Independent

a)   The recipient receives an alert notifying her that her parcel has arrived at the offices of the courier company.

b) She contacts your last-mile courier service.

c) You agree on the terms of delivery.

d) She provides you with identification to prove ownership of the parcel.

e) You pick up the parcel from the courier company and deliver it to her.

(Consideration: Is there a way for the recipient to prove ownership or provide ID without necessarily having to send you her ID in a manner that can be stored? Or how does the consumer feel safe sending you a copy of their identification?)

 

Option Two: Collaboration with the Courier Company

a)   The last-mile courier service has partnered with the long-distance courier company.

b) Once the parcel arrives, the long-distance courier company sends the recipient an SMS alert, offering the option for doorstep delivery by contacting the last-mile delivery courier. They could also provide a code which could act as a sort of identifier.

c) If the recipient opts for doorstep delivery, the last-mile courier service provides her with terms, and if agreeable, picks up the parcel and delivers it to her.

d) To provide authorization from the recipient, the last-mile courier provides the code that was earlier sent to the recipient.

These are preliminary versions with ample room for streamlining. The aim is to achieve seamless same or next-day delivery from the offices of the long-distance courier to the doorstep of the recipient.

Characteristics of the Product

Ease of Use: The service should be straightforward and user-friendly for both the long-distance courier, last-mile courier, and final recipient.

High Trust: Establishing trust among all parties involved is crucial for the smooth operation of the service.

Minimal Friction: There should be minimal or no friction experienced during the entire delivery process, from the long-distance courier to the last-mile courier and ultimately to the final recipient.

Timeliness: Deliveries should be made in a timely manner, meeting or exceeding the expected delivery timeframe.

 Fair Charges: The service should offer fair and transparent pricing for all parties involved, ensuring that charges are reasonable and justified.

Professionalism: The service should maintain a high level of professionalism in all interactions and transactions, instilling confidence and reliability in the delivery process.

Product Possibilities

1. Standalone Last Mile Delivery Business: This option involves establishing a dedicated last-mile delivery service that operates independently, providing door-to-door delivery services for parcels from long-distance courier companies to final recipients.

2. Partnership with Long-Distance Courier Companies: Another possibility is to form partnerships with long-distance courier companies, serving as their designated last-mile delivery provider. In this model, the last-mile delivery business collaborates with various long-distance courier companies to facilitate seamless and efficient delivery to recipients' doorsteps.

 

Revenue Models

Margins on Last Mile Delivery Fees: The primary revenue model involves charging margins on the fees collected from recipients for the last-mile delivery of parcels. This could be structured as a flat fee or based on factors such as distance, urgency, or parcel size.

Validation

• Consumer conversations
• Growth in ecommerce doorstep delivery
•  Use of technology in ecommerce

Back-of-the-Envelope Calculation:

Assuming:

- Average net margin per customer: Kshs. 100

- Average number of customers per day: 35

 

Calculation:

- Average daily revenue: Kshs. 100 * 35 = Kshs. 3500

- Monthly revenue: Kshs. 3500 * 30 = Kshs. 105,000

 

Major expenses: Fuel, Marketing, Maintenance

 

Details:

This calculation is based on the assumption of serving 35 customers daily, with an average net margin of Kshs. 100 per customer. The monthly revenue projection is derived by multiplying the average daily revenue by 30 days.

However, actual revenue may vary depending on factors such as customer demand, operational efficiency, and market dynamics.

 

Process

 

a) Identify pilot routes, such as Embu – Nairobi, Nakuru – Nairobi.

b) Identify the Sacco to collaborate with for the pilot project.

c) Engage with customers who frequently collect parcels to gather insights and preferences.

d) Discuss the proposal with Sacco officials to establish collaboration terms.

e) Develop a comprehensive plan and business model outlining operational processes, pricing, and customer service standards.

f) Obtain the necessary licenses and permits required for courier operations.

g) Acquire essential delivery assets, including vehicles or bicycles, for efficient parcel delivery.

h) Initiate marketing efforts to create awareness and attract potential customers to the service. This may involve both online and offline marketing channels to reach a wider audience.

i) Get customers

j) Review and improve

 

Challenges

 

a.    Seamless integration of the long-distance courier, last-mile business, and recipient into a cohesive delivery process.

b.    Establishing a reliable and secure method of trust and identification without relying on sending and storing personal identification documents.

c.    Building and maintaining relationships with long-distance courier companies, which are often affiliated with Matatu Saccos or other transportation associations.

d.    Potential competition and threats posed by long-distance courier companies considering entry into the last-mile delivery segment.

e.    Determining optimal pricing strategies to ensure affordability for recipients while maintaining profitability for the last-mile delivery service.

f.     Operating independently of long-distance courier companies while still coordinating and collaborating effectively to facilitate smooth parcel delivery.

 

 

Haters

Objection: The Saccos will not agree to a partnership.

Counter: One option is to operate independently by directly reaching out to consumers. Additionally, it's in the competitive interest of Saccos to consider a partnership that expands their service offerings.

 

Objection: Consumers will not agree to share their IDs, which are required for the Sacco to release the parcel to an agent.

 Counter: While there may be initial hesitation, users already share IDs with many apps, indicating a level of comfort with this process. Technological solutions can also allow for the display of ID without necessarily giving it to the last-mile courier.

 Moreover, a partnership with a courier company could introduce alternative methods of authentication, such as codes, to alleviate concerns.

Objection: Long-distance courier companies would rather handle the last mile themselves.

 Counter: While this is a possibility, some courier companies may face limitations due to licensing or may not consider last-mile delivery their core strength or interest. If it were their preferred option, why haven't they pursued it already?

 

Objection: The logistical challenges of coordinating between long-distance courier companies and last-mile delivery services will be too complex.

 Counter: While there may be logistical challenges, effective communication, clear processes, and technological solutions can help streamline operations and mitigate complexities. Additionally, the benefits of a seamless delivery experience for customers may outweigh the challenges.

 

Objection: Consumers may be concerned about the security of their parcels during the last-mile delivery process.

 Counter: Implementing robust security measures, such as real-time parcel tracking, can help reassure consumers about the safety and security of their parcels. Moreover, and simpler, building trust through transparent communication and reliable service can alleviate any concerns.

 

Objection: The last-mile delivery business model may not be financially sustainable.

 Counter: By carefully managing costs, optimizing delivery routes, and continuously refining the business model, it's possible to achieve profitability in this last-mile delivery model.

Competition

ü  Boda bodas: Motorcycle taxis often provide quick and affordable delivery services, posing competition to last-mile delivery businesses. Their agility and accessibility appeal to customers seeking immediate delivery options, particularly in urban areas.

ü  Courier companies offering door-to-door services: Established courier companies may already have infrastructure and resources in place to provide last-mile delivery services. They can leverage their existing networks and brand recognition to compete in the same market segment as last-mile delivery businesses.

ü  Informal delivery networks: Informal delivery networks, such as friends and families, may also compete with last-mile delivery businesses. These informal networks often rely on personal connections and local knowledge to fulfill delivery needs, presenting a challenge to formalized delivery operations.

Purchase frequency

Once every two months.

Critical success factors

·         Strategic partnerships with courier companies: Collaborating with established courier firms can provide access to customers, technological integration, make the process smoother. 

·         Efficiency: Streamlining processes, optimizing routes, and minimizing delivery times are crucial for meeting customer expectations and maintaining competitive advantage in the market.

·         Seamlessness: Ensuring smooth coordination between long-distance couriers, last-mile delivery services, and recipients is essential for a seamless delivery experience, reducing friction points and enhancing customer satisfaction.

·         Ease of use: Designing user-friendly interfaces, simple identification methods, and hassle-free delivery processes will contribute to a positive customer experience, encouraging repeat business and referrals.

·         Trust: Building trust with customers, courier partners, and stakeholders through reliable service, transparent communication, and consistent performance is fundamental for long-term success and brand reputation in the industry.

What do you think ? Please leave a comment below.