Overcoming the 8 Challenges of On-Demand Delivery Services

Delivery notification

Key Insights

  • On-demand delivery services are slowly becoming a part of everyday life, with half the urban population expecting same-day deliveries
  • While such a model has innumerable benefits for businesses, it does come with its own set of challenges 
  • The inability to identify and properly address such challenges is one of the reasons why on-demand operations fail
  • Any business looking to establish or grow its on-demand offerings must ensure that they are in tune with its current and future projections. They must weigh the pros and cons of such a model before putting a plan in motion

It’s 2022 and it has never been easier for customers to get what you want with just a few clicks. From a cup of coffee to a slice of pizza to a ride to a concert, there’s an app for everything. 

Needless to say, on-demand delivery services are booming. 

Websites and application-based digital platforms are major drivers of its rapid growth. A report by Statista highlights how the revenue from platform-to-consumer delivery is expected to reach US$96,864 million by 2024. 

Technological innovations are not the only drivers. 

Evolving customer expectations, the need for instant gratification, convenience, cost-efficiency, and the emerging gig economy markets are all playing an integral role in its boom.

With on-demand delivery services witnessing a rapid uptick among business owners, it is also vital to understand how such a business model can play a pivotal role in improving customer experience.

Hop on the Ride or Be Left Behind 

One of the finest examples of a company nailing the on-demand service model is Instacart. 

The American company revolutionized the grocery shopping industry by bringing groceries right to the customer’s doorstep. Instacart’s partnerships with big names such as Whole Foods, Costco, and others went a long way in piloting the company towards success.

Instacart’s tremendous success can be attributed to its focus on omnichannel to close the customer experience gap. This is also a leading reason why more and more businesses are making an on-demand delivery service model their first choice for a business model.

There are a number of opportunities for enhancing the customer experience with an on-demand delivery business model.

  • Customer Base: Compared to traditional brick-and-mortar outlets, on-demand delivery services help brands to reach out to a larger customer base, spanning both local and international locations.
  • Access to Customer Insights: On-demand delivery services leverage advanced technologies such as Artificial Intelligence (AI) and Machine Learning (ML) to better understand the buying patterns of your customers. Consequently, this improves the chances of upselling and cross-selling products.
  • Customer Loyalty: More than 57% of respondents in the 2021 Loyalty Barometer Report by Merkle said they stayed loyal to a brand despite the events of 2020. Tech-savvy brands that are taking advantage of logistic tools to enhance customer experience and provide personalization are benefitting from a customer base who act as brand advocates.
  • Reduced Manual Dependencies: Speed and the ability to ensure quick turnaround time are important facets of an on-demand delivery service model. This requires the automation of manual delivery processes. These include delivery scheduling, task allocation, route planning, roster management, and dispatching.

What are the Biggest Challenges in On-demand Delivery Services?

Grocery delivery

It is always a good idea to keep up with changing market dynamics. However, some businesses may find it a daunting exercise to identify the challenges of an on-demand delivery service model.

While it is difficult to start something new and capitalize on opportunities, understanding the obstacles can help you find ways to resolve them. 

1. Inventory Management

A report by Statista highlights that 56% of global retailers experienced moderate disruption in their supply chain in 2020, while 12% faced heavy collapse.

With the global supply chain making a brand new start, it is vital for manufacturers to re-architect an existing business model towards an on-demand delivery service app to stay afloat. 

Addressing such challenges in customer experience means designing effective, resilient strategies by investing the use of analytics in the supply chain management system. 

2. Real-Time Visibility

Customers want to see prices for various fulfillment options at checkout as well as view order progress in real-time. 

Logistic providers require visibility into contracted fleets to ensure that Service Level Agreements (SLA) between shippers and consignees are being met. Similarly, retailers need visibility into not just inventory, but also how customers are interacting with the brand.

As challenging as it may seem, this instant, granular level of visibility across stakeholders requires reliable integrations between systems as well as effective information sync, so that the data is easily digestible at any point.

Many names in e-commerce fulfillment have achieved this level of visibility in order to close the customer experience gaps. Think of Amazon, FedEx, and Walmart. 

3. Fitting In

Consumer behaviors have changed since the pandemic disrupted industries across every sector. 

Today, people rely heavily on new online shopping experiences. 

In fact, 60-70% of consumers are shopping in an omnichannel way with social media becoming a new form of window shopping, according to a McKinsey research.

We also see a focus on value-based purchasing, convenience, and availability. Where to shop, the quality of products and the purpose of purchasing have all become the drivers of consumer decision-making. 

To compete in such market dynamics, brands can find a better fit for themselves through an on-demand delivery service model.

4. Automation, All the Way

A leading issue with the on-demand delivery model is that there is a very short period between when customers place their orders and when those orders are sent out. 

With over 27% of shoppers abandoning their carts when delivery options are not fast enough, there is little room for errors with on-demand delivery. 

Such services work when all processes have been automated to be completely seamless and on time. Solving CX challenges in on-demand delivery, along with adopting a mobile-first CX strategy, will be successful with the automation of logistics.

5. Competitive Market

Despite the clear wins, the on-demand delivery service model is not suitable for every industry and geography. 

You should carefully select your niche based on factors such as your expertise, tech background, users’ needs, budget, and legislative and regulatory framework. 

Additionally, the model that you deem fit for your business might require tweaks, now and then. 

Starbucks is a fine example of this approach. 

The Seattle-based company changed its reward program to enable people to earn points through payment methods. Previously, this was only possible through the Starbucks card. And it paid off. The company’s active member base increased to a record 21.8 million in Q1’21.

6. Maintaining Customer Satisfaction

A Mckinsey report shows that over 60% of US consumers have experienced out-of-stock items in the last three months of 2021. When this happened, only 13% waited for items to be restocked.

To stay in demand, brands should reconsider their offerings. 

A strong brand image and corporate reputation will go a long way in creating a credible online environment where your customers will be more inclined to keep coming back. 

7. Third-Party Delivery Services

On-demand delivery service means the ability to meet customer demand, irrespective of the time or day. 

Addressing CX challenges in this model requires you to react quickly to customer needs. This is where third-party delivery solutions come in.

Adding third-party delivery solutions to your existing fleet management tools will help you optimize your on-demand deliveries, enhance brand awareness, and help you deliver a stellar customer experience while keeping customer satisfaction on a high note. 

8. Enhanced Customer Communication

With customer expectations at an all-time high, businesses must put customers at the heart of what they do. 

The success of an on-demand delivery service also depends on how well you relay messages to the customer. Delivery apps can give your customers different levels of visibility into their order’s status and location. 

Additionally, look for solutions that can push notifications to customers when their orders leave the warehouse or to the store when it arrives.

It’s All About Convenience

The success of any on-demand delivery service can define the value of a brand. 

Personalization, convenience, and good performance, mixed with a dash of strong branding, will help you not only close the customer experience gap but also enable you to win repeat customers. 

This is the second installment in our series on Unique Challenges where we look into the hurdles faced by businesses in different industries and their game-changing impact on business growth. 

Head over to our blog, Overcoming the 6 Challenges of Subscription-Based Businesses, and explore six of the most common challenges plaguing subscription-based businesses and how to overcome them to be successful.

Do give it a read, if you haven’t, till now!

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