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The global courier and delivery services industry has a market cap of about $363.8 billion in 2022. Experts project the annual growth rate to nearly double from 2.6% between 2017 and 2022 to 4.9% from 2022 and beyond. What’s more, the industry currently ranks as the fourth largest sector globally in market share, after transport, post, and storage.
These are fascinating statistics for any entrepreneur eyeing the industry. But on the flip side, despite this trajectory growth, on-demand delivery is a pretty low-margin niche, something that explains why companies choose to retain more commission and pay unreasonable rates to drivers, typically $14.88 per hour. And in most cases, delivery companies also charge high costs in a bid to increase their profit margins.
So, what can companies do to attain high returns in the delivery business? Remember, factors such as discounts, offers, and the general ubiquity of promotions are still in play.
New Technology for Low-Cost Transactions
A recent Santander FinTech study projects that Web3 Technology will reduce the costs of the current financial system infrastructure by up to $20 billion by the end of 2022. Implementing Web3 tech in your delivery business this year translates to organized transactions, without the need of a third-party, such as mobile money wallets service providers. In other words, direct transactions between customers and businesses can help cut the costs associated with maintaining your legacy software.
Amazon is already accepting digital currency payments for order placement and delivery costs through a third-party company known as Purse. To encourage more buyers to embrace the system, Purse gives its users a minimum of 5% discount, with an option to negotiate for up to 15%.
Moreover, on-chain transactions are relatively cheap, costing a fraction of what the current third party financial service providers are charging to process transactions. With this in hand, consumers can enjoy lower delivery costs, while still getting the same value. Even better, this technology exposes your business to lower cybersecurity risks, imprinting a solid reputation. A trusted business means more orders, revenues, and better pay for delivery drivers.
Effective Scaling with RoRi – Autonomous Rover for Delivery
Like many industries, the main trend with the greatest potential of optimizing the delivery market for greater profit margins is the adoption of advanced technology. For instance, self-driven cars, such as the Autonomous Rover for Delivery (RoRi) can help businesses scale and deliver large numbers of orders with minimum overhead costs.
Moreover, automated delivery cars come with advanced software and algorithms that give real-time insights into localized delivery routes. This may include the prevailing traffic status to allow businesses to prepare and deliver multiple orders at relatively affordable rates and predictable timeframes.
“Autonomous delivery software like RoRi empower merchants and customers to automate deliveries for less fees and long-term sustainability due to low environmental impact. Typically, autonomous delivery can cut costs by up to 80% if service providers purchase their own units,” says Roman Tsarovsky, CEO at Ally.
Companies that switch to innovative proprietary delivery solutions, such as self-driven cars can increase their profit margins and offer better compensation for drivers tasked with delivery on non-localized routes.
In-Person and Digital Food Delivery in the Metaverse
With popular fast-food chains, such as McDonald’s joining the metaverse, virtual delivery is something worth taking a look at in 2022 and beyond in a bid to optimize profit margins. Many consumers are moving to the metaverse to have a digital experience of a kind, thanks to augmented reality and 3D immersive videos. If you can deliver physically, it makes sense to also deliver digitally to the consumer segment that prefers this experience.
“The gap between physical and digital experiences is narrowing as the Metaverse extends to eCommerce. It’s just a matter of time before mainstream users start interacting with their go-to brand in the Metaverse and pay for virtual experiences using digital currencies, fiat, or utility NFTs, says Tsarovsky.
Virtual deliveries in the metaverse are swift and personal, eliminating the need for a delivery driver in the first place. Moreover, you don’t have to deal with traffic or any barrier that may delay delivery and hike the costs. This is a win-win solution for both the consumer and the delivery business.
Perpetual NFTs for Promotion and Rewards
In-app promotions and rewards, such as discounts and coupons are a double-edged sword when it comes to the delivery business. On one hand, you can have many orders streaming in on an average day. On the flip side, the costs of running these campaigns can sum up pretty quick and prove unsustainable in the long haul. Eventually, you might pass the same ordeal to customers and delivery drivers in terms of high costs and lower compensation, respectively.
But, the good news is that you can reward your customers with perpetual NFTs as opposed to traditional coupons. With the increasing consumer interest in Web3 and digital assets, perpetual NFTs rewards will likely earn you improved customer loyalty to drive sales. Even better, you can mint your own business NFTs at relatively affordable costs while also offering utilities and use cases in the metaverse.
Household brands are turning to NFTs as a strategy for fostering customer loyalty and giving out rewards. Besides increasing engagement with consumers, companies like Nike, Pizza Hut, and Taco Bell are spending millions on conceptualizing digital assets in a bid to create new revenue streams.
Optimize Your Delivery Costs Today for Employee and Customer Retention
Optimizing delivery costs and profit margins using these strategies benefits everyone, from the business, to the drivers, to the consumers. This puts you in a better position to maximize the opportunities of on-demand delivery business and scale to realize your overarching goals. Most importantly, it builds the reputation of your business.