Lockers: The Future of last mile delivery

Consider this scenario a couple of years ago even in the developed market. You order a product online to be delivered at your residence. What would happen at the time of delivery of your parcel if you are not at home?

1. Delivery guy will probably call you & ask for instructions?
2.  Drop the parcel with the neighbors or take the parcel back & reattempt the delivery probably at a later time or in all possibility on an alternate day.

This is a common scenario especially among the urban dwellers, who fear either the package may not be delivered or may be stolen if left unattended. This is a perfect nightmare for any online store as well. Imagine the cost associated with the failed delivery attempts in monetary terms as well as impact on the overall productivity. Add to this other factors such as cost associated with handling customer calls through customer service, dispatching a replacement item in case of lost item or even potential loss of sale due to customer switching to alternate retailer.

To address these challenges e-tailers have been working either on its own (Amazon) or closely with the logistics solutions providers such as Singapore post, Finland’s Itella, InPost Canada, Australia Post for building a network of smart lockers for delivery of parcels. It’s a win-win situation for customers as well as sellers. This solution is helping the etailers & logistics solutions providers not just to avoid the cases of failed delivery attempts, but also with improved productivity due to multiple deliveries at the same point resulting in reduced cost per delivery. Add to factors such as lesser chances of a lost parcels, deliveries during the non-peak hours resulting in avoiding the traffic congestion. Othe benefit being explored simultaneously is, for the reverse logistics. Lockers also work as pick up point for returned items.

How the lockers work?

Smart lockers are generally installed in public places such as Malls, convenience stores such as seven-eleven which are in the vicinity of the residential areas & often visited by the natives for the daily needs. It has compartments of varying sizes to accommodate wider variety of items & can typically handle items weighing upto 10 pounds.

Once the parcel has been delivered with the locker, automated tracking systems trigger the communication over email or cellular phone as preferred by the customer. Mail or SMS sends the details required of opening the lockers. Generally a passcode or QR code. Some of the locker models are also using the Bluetooth connectivity feature for added security.

Items are typically held in lockers for about 3 days for the customer to pick up the items. The backend system is designed for even reminding the customer for pickup of the items or alternate instructions in case item cannot be picked up within the set time or if customer wants the items to be returned to the seller.

While we all hear about the pilot projects of deliveries using drones to address problems relating to cost, traffic congestion, speed & agility, lockers have slipped in quietly into those convenience stores & doing the job assigned to them with ease & offering the convenience to the customers

Challenges

While the lockers are being successfully implemented in developed nations where people shop online mostly using internet banking & credit cards, it will be interesting to see how this works in developing Asian markets such as South East Asia & Indian subcontinent where preferred mode of payment is still cash on delivery. 

Why Global e-Commerce giants are yet to conquer South East Asia

South East Asia (Popularly referred as SEA) is considered to be the most diverse & rapidly changing market in the world. With the population in excess of 650 million, the market is too huge to be ignored for any global player especially in the current booming space of online retail. In spite of this, we haven’t seen much of an activity from giants with likes Amazon, Alibaba & Rakuten in the region.

Let’s have a look at some interesting statistics.

Courtesy: https://www.techinasia.com/southeast-asia-internet-infographic/

Currently online shopping accounts for a minuscule number in the region. But with rapid penetration of internet & smart phones in the region the market is all set to explode. According to a report from Frost & Sullivan the region may see fivefold growth by 2018.

What is so very different about South East Asia?

1.       Six Countries six cultures:

Region comprises of 6 countries Singapore, Malaysia, Thailand, Indonesia, Philippines, Vietnam. Each of these countries has a different population mix, different language, religion & culture. Which is an important indicator of product preferences of people.

2.       Cross border transactions:

Crossing international boundaries means customs clearances, which add the complexity of payments of duties for imports, legal regulations on imports & restricted items in a particular country.

3.       Online security & cyber theft:

      The region in past has experienced some severe cyber theft cases. In the absence of a cross border jurisdiction mechanism & gaps in regulations potential consumers deter from online shopping.

4.      Penetration of Credit cards: 

Credit card penetration in SEA region is only about 10%. Add to that skepticism of those not very open to share the card details online for the fear of fraud. As a result cash on delivery (COD) & AT transfers is the preferred mode of payments. Handling of cash payments presents a bigger challenge than anything else. In most of the countries postal networks are either sluggish or unreliable. This means retailers need to have sophisticated delivery partners or build an in-house delivery capabilities.

5.       New sales channels:

With rapid penetration of social media & messaging services like “Line”, home grown e-retailers have already entered into strategic tie ups with the companies for exclusive promotions & campaigns in the region.

With above factors being critical to be successful in the region, even if likes of Amazon, Alibaba enter the market, it will take considerable amount of time for these companies to replicate the local knowledge acquired by home grown online retailers

In spite of all the factors SEA may still prove to be a market big enough for several large e-retailers to co-exist. However will it be profitable for these businesses, time only will answer that question.