Mile Hype

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There may be much hype about online shopping but growth in this area is around 10% each year and getting online sales to the door is an expensive challenge, but most deliveries are still business-to-business. “Even in the US, around 85% of deliveries are business-to-business,” says Garry Marshall, CEO of the South African Express Parcel Association when presenting at the March Transport Forum held at UJ, attended by “Supply Chain Today”.

Express parcel delivery as we know it today dates back over a century. UPS had its beginnings in 1907, when it began daily pickups in 1919 and established its own airline in 1988. DHL was established in 1969, and Fedex in 1973.

On its first night of operations, Fedex delivered 186 packages. “In the 1990s, Fedex was named the fastest growing business in corporate America by the Wall Street Journal and was in fact the largest airline in the world,” says Garry.

Express delivery in the 1970s catered for emergency type shipments, just-in-time dominated in the 1980s, which led to a massive set up of physical infrastructure and networks.

The 1990s saw the rise of e-commerce. Amazon was formed in the late 1990s and conventional last mile practices faced pressure. By the mid-2000s the demand for home delivery was the challenge.

Business benefitted. “As people addressed the issue of last mile deliveries, stimulated by e-commerce sales, service levels improved and that moved over to business-to-business,” Garry explains.

The new trend is x-to-c where consumers can have a variety of goods and services delivered. “This is where you have a plumber coming to work in your home – and they bring your parcels.” What Garry calls the “merging of different mechanisms to create the best efficiency.”

Ten years to catch up

You might be thinking of a service like uber but the market in South Africa for online consumer sales is small, and according to Garry, South Africa is around ten years behind Europe and Asia when it comes to e-commerce and deliveries.

His comments are echoed in a PayPers Cross Border e-commerce report, which states that South Africa is ‘considerably less developed than major world markets.’

Volumes of goods ordered are low. “E-commerce sales are less than 1% of retail South African sales,” Garry points out.  The global figure is 8 – 9%. Worldwide the value of online sales tops $1 trillion, and is expected to reach $4 trillion by 2020.

The potential for growth is creating “a few headaches and a few opportunities, and some unbelievably exciting developments. Traditionally South Africa has had a low level of internet connectivity, but mobile is now the order of the day.

“I think the big thing for Africa is not e-commerce but mobile commerce,” Garry states. Mobile phones are good for ordering, paying and potentially very useful in delivery in a continent where physical addresses are problematic. A smart tracking device or geo-locator could identify where to deliver your goods using your mobile phone as an address.”

Low volumes and long distances

Delivery cost remains an issue. The last mile is often said to be the most expensive leg. Garry puts the cost at 30% of total costs.

Competition is high, customers are price sensitive and the physical difficulties are numerous: infrastructure outside of major urban areas is not good, and deliveries to security complexes are time-consuming.

“Delivery costs rise when you have to deliver to an actual person as pinning down an absolute time is problematic. Address and contact details are also frequently incorrect leading to a high number of returns. Crime too is a problem, although not unique to SA. In the US, Amazon has porch delivery which has led to a number of ‘porch pirates’ who steal items left on a porch.”

70 drops a day

The benchmark delivery number for profitability is around 70 drops per day. The country has low volumes and long distances making this difficult to achieve.

“In South Africa the biggest challenge is the lack of drop density,” Garry said. Technology should make it easier to overcome the challenges. For example, track and trace has been around for many years. But it is not good enough for customers who want to know exactly where their parcel is, not just that it has left the warehouse and is on its way.

”We could take a leaf out of uber’s book where you know that your driver is six minutes out. People also want to communicate directly with the driver and not go through a call centre.”

Drones

Smart lockers are available locally and cloud-based keypads which allow you to unlock your garage remotely for a delivery are in use in the US market. Drones, which should lower the cost of delivery considerably, have yet to make their appearance.

“You can go and buy a drone but people have to accept this new technology,” Garry points out. Drones have an unfortunate association with military combat, and invasion of privacy. When they become accepted by society, the business case has to make sense, and then regulations need to be complied with.

“In South Africa, drones must be constantly monitored by a person so drone delivery is only happening in the developed world now,” Garry concludes. “We have a long way to go.”

Visit the Transport Forum for more details on their presentations www.transportsig.com.

Garry Marshall can be contacted on

Tel: (011) 395-1354

garry@saepa.org.za

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