Adoption of On-demand Couriers for Same-Day Delivery

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By: Gopi Sukumar -- Senior Research Analyst, Logistics and Warehousing

21 February, 2018

Adoption of On-demand Couriers for Same-Day Delivery
WHITEPAPER

Abstract 

  1. Introduction
    The courier, express and parcel (CEP) delivery industry is currently facing competition from unexpected sources. Varied consumer demands from the fast growing Ecommerce sector have created new opportunities as well as challenges for express delivery companies. New consumer demands, such as instant delivery, same-day delivery and delivery to workplace has forced mainstream courier companies to adopt new operating models. At the same time, the scenario has given rise to several on-demand courier companies, such as Deliv, Postmates and UberRUSH in several markets. These companies operate at intra-city level. The transport model is predominantly on point-to-point basis, when compared to the hub and spoke model of incumbents, such as DHL, DPD, FedEx and UPS. 
  2. Main 
    Currently, buyers across all industries are engaging with their primary carriers, who are mainstream courier companies, to ship their same-day parcels. These couriers charge relatively high rates due to allotment of dedicated resources. On the other hand, these on-demand couriers, who offer delivery through a crowd-sourced model, offer similar services at a relatively lower price through optimized resource utilization. Major retailers, including Nordstorm, Walmart and GAP are currently engaging with these couriers to ship their same-day parcels in the US. 
  3. Recommendation 
    The development of on-demand couriers can help sourcing managers to obtain sameday delivery services of general shipments at a relatively lower price, without impacting business with their primary carrier. This can help them to keep check on the tail spend. There is some level of risk involved in terms of reliability, security and on-time delivery. However, these on-demand couriers are evolving at a faster pace than expected. Some players are already offering insurance and have defined key performance indicators in place. The possibility of these companies penetrating into the business of mainstream couriers is imminent. 

Introduction 

The growth of the E-commerce industry has created both challenges and great opportunities in the courier, express and parcel (CEP) industry. The B2C and C2C segments are growing faster than B2B, due to robust E-commerce sales globally. The B2B courier segment is expected to grow between 2.5 percent and 3 percent when compared to the overall CEP market (>5 percent) globally. Consumers from Ecommerce sectors expect faster, flexible and cheaper delivery from their vendors. The scenario has forced several mainstream courier companies, such as DHL, UPS and FedEx to adopt new operating models to deliver these shipments, impacting operating margins. Meanwhile, several technology based courier companies, such as Deliv, Postmates and UberRUSH were born. They better utilized resources and competed directly against major couriers in the same-day delivery market.

  • Several firms struggled to cater to the new same-day delivery services, such as instant delivery at a cheaper rate. For instance, DHL pulled out of the domestic markets of UK, France and other countries a few years ago.
  • In late 2015, Uber entered the courier logistics market through UberRUSH, which offers intra-city express delivery service in few major cities of US. It is noted that Uber already entered the logistics industry with UberCARGO, a road transportation service provider.  
  • In early 2016, global parcel delivery giant UPS invested in Deliv Inc., a US based on-demand courier. Deliv managed to secure $28 million from UPS alone, bringing the total funding to $40.5 million since 2012. 



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