Insight Brief: Last Mile Delivery Industry in South Africa

What do Checkers60, Amazon, UberEats, and SHEIN have in common? They are all part of the broader last-mile delivery industry in South Africa. The last-mile delivery industry in South Africa focuses on the final step of the delivery process, where goods are transported from a transportation hub to the final delivery destination, typically the customer's home or business. This sector is crucial for e-commerce, retail, and logistics, ensuring timely and efficient delivery of products.

The value chain includes suppliers (warehousing and distribution centres), logistics providers (courier services, delivery trucks, bike couriers), technology platforms (delivery management software), and end customers (consumers and businesses)

Market Size

The South African last-mile delivery market is experiencing rapid growth, driven by the expansion of e-commerce, increased competition, advancement in technology and increased consumer demand for fast and reliable delivery services. We estimate the market size will be $408 million by the end of 2024. We expect the market to grow at a CAGR of 8% per year.

Competitor Overview

The industry consists of different segments such as food services and retail. Key companies include established logistics providers such as DHL and local players like The Courier Guy and Fastway Couriers. Below is a brief analysis of other key competitors within the industry.

*NB: Revenues estimated based on figures & percentages disclosed in companies financial reports

**Assuming asap! accounts for 5% (industry average) of sales

In terms of the grocery segment, we see that Checkers has the largest share of the market compared to its direct competitors Pick n Pay & Woolies Dash.

Consumer Behaviour

Here are some key trends you should be aware of:

• Grocery delivery boom: According to Statista, the size of this segment is expected to grow by 22.2% worldwide in 2024. Global estimates also suggest that over 2.5 billion people will use last-mile grocery delivery services.

• Speed is vital: According to a PWC survey, over 70% of customers say that speed and convenience are some of the most important factors regarding last-mile delivery. Furthermore, 90% of customers want to receive their parcels in 2-3 days while 30% expect same-day delivery according to McKinsey.

• Price Conscious: According to KLA’s study, 14.5% of SA consumers say that pricing greatly influences their choice of food delivery service providers.

Advantages of Starting a Last-Mile Delivery Business

Starting a last-mile delivery business has several advantages that can make it a worthwhile venture. Here are some key advantages:

Growing Demand: E-commerce has significantly increased the demand for efficient last-mile delivery services. As more consumers shop online, the need for reliable delivery solutions continues to grow, offering a vast market opportunity. A notable high-growth sector is grocery delivery as more Grocery Retail giants expand their services due to demand.

Customer Convenience: Last-mile delivery services provide unparalleled convenience for customers by delivering products directly to their doorstep. This convenience can lead to high customer satisfaction and loyalty, driving repeat business and positive word-of-mouth.

Technological Advancements: Technology advancements, such as route optimization software, GPS tracking, and automated dispatch systems, have made managing last-mile logistics more efficient. These tools can help businesses improve delivery times, reduce costs, and enhance overall service quality.

Flexible Business Models: There are various business models to explore within the last-mile delivery space, including partnering with local retailers, focusing on niche markets, or offering specialized delivery services. This flexibility allows businesses to tailor their services to specific customer needs and market segments. For instance, the healthcare industry is not as mature as the food services or retail sectors when it comes to last-mile delivery. Aspiring entrepreneurs can create services in this space so that hospitals and clinics can cater to patients efficiently.

Disadvantages of Starting a Last-Mile Delivery Business

Starting a last-mile delivery business can offer significant opportunities but also comes with several challenges. Here are a few disadvantages to consider:

High Operational Costs: The costs associated with last-mile delivery can be substantial, including vehicle purchase and maintenance, fuel, labour, and technology investments. Managing these expenses while maintaining profitability can be challenging, especially in the early stages of the business.

Logistical Complexity: Coordinating deliveries efficiently to ensure timely and accurate service is complex. Managing routes, handling a high volume of orders, and dealing with traffic and other unforeseen delays require robust logistics management systems and skilled personnel.

Competition: The last-mile delivery market is highly competitive, with numerous established players like DHL, Uber Eats and local courier services. For instance, in the food delivery food segment, research suggests that Uber Eats and Mr D have 90% market share in SA. DHL has been in the industry for decades and enjoys economies of scale. Differentiating your business and capturing market share against such competition can be difficult.

Regulatory and Compliance Issues: Navigating the regulatory landscape can be complex and time-consuming. This includes ensuring compliance with regulations regarding vehicle operation, labour laws, and safety standards, which can vary widely and change frequently.

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