UAE e-shoppers needn’t wait around for delivery

DUBAI (Gulf News): What sort of e-shopper are you? Someone who prefers to wait for the delivery man to drop the package off? Or who wants to do away with all that waiting and instead picks up the package on his own?

A newly launched start-up in Dubai is hoping there will be enough e-shoppers wanting to do their own pick up. Through alliances with retailers, Fodel now has set up a network of 1,000 parcel pickup locations in the UAE. This includes outlets operated by the likes of Choithrams, Al Maya, BlueMart, 7Eleven, Zoom and Adnoc stations. Its retailer alliances extend to Landmark Group and Sephora.

Fodel’s tech platform allows consumers to pick up the parcel “at the time they want and where they want it”. But for shoppers, a big plus would be a chance to drive down the shipping costs on their bill… even if it means driving down to pick up their parcel.

This way, the business is holding out the promise of lower delivery charges for a shopping transaction, which in these cost-conscious times should go down well with buyers. In short, Fodel wants to reduce reliance on “last-mile” delivery, which happens when a third-party delivery service picks up the order from the vendor and then drops it at the shopper’s residence or office.

“The last-mile’s hefty share in total parcel delivery cost often reaches — or even exceeds — 50 per cent,” said Hamdi Osman, Chairman of Fodel and with a 33-year track record in the logistics industry. “The speed of e-commerce development combined with digital innovation and changing consumer patterns makes last-mile delivery an important investment opportunity.

“Through our platform, consumers can pick up their parcels from their local grocery, pharmacy, laundry, florist or from their gas stations on their way to the office or during the school run. We thus achieve a much higher same-day delivery ratio than traditional courier services. Also, it saves time as customers are not waiting all day for the courier to show up or answering phone calls from the courier company about their location.”

So far, leading e-retailers such as Amazon and noon have managed to keep the delivery and shipping costs in check, and even running free-delivery services during special promotions. But industry sources say delivery costs have been inching up, and, as Osman says, often end up making up a sizeable share of their online shopping bills.

But more than the cost itself, what shoppers can’t stand are delays on the delivery. More so, if the e-retailer had promised same-day delivery.

“It is precisely at the last-mile that many incumbents are struggling, as they often shoulder significant labour cost disadvantages,” said Osman. “Think of peak seasons like Eid — courier companies cannot scale up their delivery capacity by simply hiring more staff or leasing more motorbikes to help them cope with increased demand.

“This causes backlogs and delivery delays resulting in one of the highest return-to-origin rates worldwide, with some 18 per cent of parcels delivered daily classified as “failed deliveries”. It is high because of the lack of options consumers have in the last-mile delivery segment and also due to the fact 75 per cent of all eCommerce transactions in the region are settled upon delivery.”

So, if more e-retailers are able to offer pickup options of their own or third-party operated sites, then the onus is on the shopper to take delivery at a time of his choosing. (Retailers on their part have also been talking about “omni-channel” selling, but so far this hasn’t picked up momentum. This typically involves a buyer shopping online and then picking up the order directly at the retailer’s store.)

But whether this trend catches on will depend a lot on what the competition can throw up, mostly in the form of same-day delivery services. Currently, there are about 900 odd online e-commerce registered platforms in UAE. A majority of the purchases come with the promise of same-day delivery, of course, subject to product availability.

This trend will only get bigger as more shoppers head online to pick up their groceries. “All the major online players in the market, be it in consumer goods or grocery, have same-day delivery, which has brought in more customers to the platforms,” said Rojin Koshy, Operations Manager at Apex Services. “Noon and Amazon have introduced this with each product, based on availability and proximity. They have seen significant growth — customers are willing to pay extra for this premium service.”

So, as with everything, all that’s needed is for consumers to make up their mind — go with same-day delivery or opt to do the picking up. The parcel delivery business will be waiting for that call.

For the better part of his career, Hamdi Osman was focused on delivering packages across continents. In his latest avatar, as chairman of start-up Fodel, his focus is very much on the “last-mile”.

“I have consciously chosen to get involved in the last-mile delivery segment because of the ample room for innovation and disruption it offers and the vast potential it presents as an investment opportunity,” said Osman, who was a former senior vice-president at FedEx. “Fodel empowers e-platforms with the technology and merchant network required to drastically improve the last-mile delivery experience for consumers.”

Fodel picked up $2.6 million (Dh9.5 million) in a Series A funding, which brought in Saudi Arabia’s Al Rajhi Group. Osman too put in his own funds during the round.

In recent times, the food delivery business had seen some major fund flows, including full-on acquisitions. There was the purchase of Zomato’s food delivery business in UAE by Delivery Hero, and the food delivery side of Careem became part of the wider deal with Uber. After food, the wider parcel delivery business could be next on investors’ radar.