Profitable small baskets, efficient last mile and crucial tech integrations – these are the 7 most common e-commerce delivery challenges in retail, with a range of solutions for each 

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Is your e-commerce delivery profitable?

There’s a lot at stake: Researchers say the global e-commerce logistics market, which stood at $286 billion in 2021, is set to quadruple to $1.2 trillion by 2030. At which point Forbes says shoppers will be buying about $6 trillion worth of goods via e-commerce channels alone.

Consumer adoption is off the scale, but, ask anyone in e-commerce and retail, and they’ll tell you that the sheer logistics of meeting changing market demands is not easy.

Optimising your e-commerce delivery model is extremely complex because you have so many more external factors than a brick-and-mortar store.

Fear not: We’ve helped a few big brands navigate some of these hurdles, and are here to highlight some of the most crucial e-commerce delivery challenges – and some options to solve them.

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First: Why Delivery Can Make or Break Your Business

The number one rule in e-commerce is delivery. If you can deliver it better, faster or more conveniently than competitors, you’re in the game.

It’s directly tied to customer experience. And some 85% of customers say they will not shop with a retailer again after having a poor delivery experience.

In South Africa, we had an extreme example of this within the major grocery retail space during Covid: While more niche e-commerce already offered same-day and next-day deliveries by 2019, most of the country’s largest retailers still focused on brick-and-mortar business, with most deliveries being within a few days or even a week later.

When lockdown hit, though, one of the big retailers, Checkers, launched new technology that allowed them to deliver small baskets to your home in 60 minutes. And, almost overnight, e-commerce which accounted for only 8% of purchases in 2019, doubled in 2020, and again in 2021.

Today, 70% of South Africans say that “direct delivery to my home” is the main driver for shopping online, as the market and adoption just keep on growing even after Covid.

It was such a huge leap that it forced the entire industry to play catch-up – and, four years later, much of it is still lagging.

That’s the power of nailing delivery. The key is knowing and overcoming e-commerce delivery challenges, so you can do it profitably.

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7 Key E-Commerce Delivery Challenges (And Overcoming Them Profitably)

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1. Profitability in Small-Basket Orders

Achieving profitability on small-basket deliveries is a unique challenge for grocery retailers compared to niche, high-value goods (where you don’t mind waiting a couple of days or weeks).

With a small-basket order, people are generally buying fresh goods and necessities – i.e. things they need right now, not next week, which doesn’t leave a lot of room for delivery costs.

What’s more, you have extremely competitive pricing in the fresh market, adding even more financial pressure.

Possible Profitability Solutions

• Implement dynamic pricing: Tailor delivery fees, basing them on factors like order size, location, and delivery window. With enough customer data, you might even begin exploring dynamic basket pricing, with prices based on the individual’s perceptions, habits and behaviour.
• Make data-driven decisions: Utilise customer data analytics to understand buying patterns and optimise product mix for higher margins.
• Offer subscription models: Provide subscription options with free or discounted deliveries for frequent customers.
• Optimise basket pricing: Utilise data and customer insights to employ strategic pricing strategies, potentially making up for smaller margins or even losses on individual items in exchange for continued business.

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See the key areas to innovate in this overview of the future of retail, learn why you need a digital consultant to make the most of it and see how to use big data to understand customer needs.

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2. Customer Expectations: Faster Last-Mile

Customers want lightning-fast deliveries, often same-day or within the hour or even minutes. This necessitates exceptional inventory and stock management, coupled with efficient delivery systems across a broad region.

What’s more, with hybrid models where the online order is fulfilled from a brick-and-mortar store, you have to solve the issue of managing stock and availability – plus the dynamics of having a “picker” who assembles your basket in-store etc.

Possible Fulfillment Solutions

• Strategic warehouse & micro-fulfilment centres: Invest in warehouses closer to customer concentration areas (use data to figure it out) to reduce delivery times, or multiple micro-fulfilment centres to reduce last-mile delivery time.
• Partner with third-party delivery services: Collaborate with providers specializing in quick deliveries, leveraging their network and expertise.
• Advanced stock management: Leverage real-time inventory tracking and predictive analytics to ensure stock availability.
• Flexible delivery options: Offer a range of delivery times with pricing incentives for non-peak hours.

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See the real-world impact of digital transformation, discover how to use data to boost customer loyalty, how to integrate online and offline channels in retail and the key differentiation strategies in a competitive market.

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3. Inventory Management

When shopping online, customers expect instant product availability. Out-of-stock notifications after checkout can be a deal-breaker. Retailers need reliable systems to ensure consistent stock availability and efficient order fulfilment.

Possible Inventory Solutions

• Implement robust inventory management systems: Utilise real-time inventory tracking and forecasting tools to maintain accurate stock levels.
• Use predictive analytics: Analyse past sales data and customer trends to predict demand and prevent stockouts.
• Embrace CPFR with suppliers: Collaborative Planning, Forecasting, and Replenishment is a joint initiative with suppliers to ensure timely deliveries and maintain optimal inventory levels.

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See how to get all the benefits of inventory technology integration, learn from others with these POS integration case studies and see how to integrate your Point of Sale.

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4. High Delivery Costs & Sustainability

Driver salaries often constitute a significant portion of delivery costs. Optimising driver efficiency and reducing overall delivery costs while prioritising sustainability and perhaps exploring alternative energy models are crucial aspects of a healthy e-commerce operation.

Possible Cost-Saving Solutions

• Optimise routes and delivery personnel scheduling: Leverage software to plan efficient delivery routes and Implement intelligent scheduling tools to ensure efficient allocation of drivers and resources.
• Partner with third-party providers: Using a last-mile specialist for your deliveries is a great way to de-risk yourself and allow someone else to help innovate on your problems.
• Explore alternative delivery options: Consider options like bike deliveries, electric vehicles, or utilising lockers for self-collection in specific locations to minimise environmental impact and enhance fulfilment.

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Get some great strategic insights from our case study on Amazon’s omnichannel strategy and the key differentiation strategies in a competitive market.

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5. Route Optimisation & Road Safety

Ensuring efficient delivery routes is paramount. This requires careful planning and consideration of factors like traffic patterns, weather conditions, and road safety regulations specific to each region.

Possible Route Solutions

• Advanced routing software: Employ state-of-the-art route optimisation tools that account for traffic, weather, and delivery windows.
• Utilise real-time traffic data: Integrate real-time traffic data into route planning software to ensure optimal delivery times and avoid congestion.
• Invest in driver training: Provide regular training programs to equip drivers with safe driving practices, defensive manoeuvring techniques, and knowledge of local traffic regulations.
• Use third-party providers: Partnering with external last-mile specialists de-risks your company (in terms of logistics, not customer experience) – and if you partner with, say, innovative startups, you’ll get the benefit of them innovating on your behalf.

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Learn to think like a tech company, test and roll out new e-commerce ideas super-fast by using the ultimate MVP method for e-commerce.

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6. Technology Investment & Integration

Keeping pace with the evolving landscape of e-commerce technology requires continuous investment and integration with existing systems. This can be a significant financial hurdle for retailers, but, naturally, there are methods of funding your tech.

Possible Capital Solutions

• Look for phased solutions: You don’t have to build all the new tech at once, modular and scalable tech options let you build it in stages, so the cost is spread and more manageable.
• Explore cloud-based solutions: Leverage cloud-based technology to reduce upfront costs associated with hardware and software maintenance.
• Seek partnerships with technology providers: Explore partnerships with technology companies offering flexible payment models or subscription options.

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Discover 7 unique ways to finance new tech projects with our guide to venture funding in retail. as well as how to choose a retail venture funding model. and our guide to integrating online and offline channels. Also see e-commerce innovation processes in action with these MVP examples for retail.

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7. Regional Variation

One aspect very few people talk about around e-commerce delivery is the challenge of reaching rural VS urban areas. Fulfilling within the city is one thing, but taking that same level of service (which you want all your customers to experience) to the countryside is something else entirely.

In South Africa, for example, we have a massive cash-only growth market in rural areas that are entirely underserved by e-commerce. Unlocking that market is where much of the future growth in e-commerce lies.

Possible Rural-Delivery Solutions

• Partner with local delivery providers: Collaborate with delivery providers who understand the unique challenges and infrastructure of each region.
• Customised delivery models: Adapt delivery strategies to fit the specific needs and infrastructure of urban vs. rural areas.
• Leverage data and analytics: Utilise data insights to understand regional variations in customer behaviour and delivery complexities, allowing for targeted solutions.
• Solve the rural payments issue: In rural regions where advanced payment method adoption is slow, consider partnering with companies providing cash-for-token technologies.

See how to use big data to understand customer needs.

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See all the companies we’ve helped solve significant business and tech challenges in our portfolio.

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Need to get your delivery solutions profitable?

Speak with our technology consultants to get better insights and real-world solutions.

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