The most time-consuming and costly process in a product’s journey is the Last mile delivery. It is the final process in which the customer receives the product at their doorstep. Since the process requires the shipping company to deliver the product safely and promptly to the customer, it has many inefficiencies which must be combated against.
In dropshipping model, you don’t handle inventory management or logistics. But you have reliable suppliers who can handle logistics on their own. So, how did this model impact last-mile delivery? Let us discuss.
How Profitable Is Dropshipping?
Dropshipping is among the profitable businesses today which doesn’t demand much investment. Since you don’t handle inventory and logistics by yourself, you can simply enjoy the profit margins from each sale. You can find successful dropshippers making around $5000 per month on average.
In many cases, dropshippers can get a profit margin of 15% – 20% if they choose the right product and supplier. Even if there are low profit margins, with the number of sales you make each day can pile up to a huge amount of profit every month.
If you implement all the success parameters in dropshipping, you can simply make thousands of dollars every month without doing much work. Initially it can be a side hustle which gives a passive income. But once your brand is established, you can make dropshipping your mainstream resource.
What Are the Logistics of Dropshipping?
Dropshipping doesn’t directly deal with any part of logistics. It depends on the supplier or the manufacturer with respect to delivering the product to the customers. That includes inventory management, packaging, shipping, and last-mile delivery.
In the dropshipping model, you set up an e-commerce online store and list products from reliable suppliers. When a customer orders a product from the store, the order is directly sent to the supplier who either has an inventory of the product or further directs it to the manufacturer.
The supplier prepares the product, packages it, and ships it directly to the customer. The shipping process depends upon the location of the manufacturer and the delivery time highly depends on it, too.
For example, if your product has to be manufactured and shipped from China to the US, it will definitely take much longer to reach the customer. The lack of local inventory will affect the delivery time and results in a slower last-mile delivery.
How Much Does Last-mile Delivery Cost?
Last mile delivery holds about 53% share of the overall shipping costs and it is considered to be the most expensive and time-consuming part of the logistics process. On average, the cost for last-mile delivery is about $10.1 per product delivered.
The process becomes costly due to the following factors and events:
- In last-mile delivery, you are not shipping a single package to a single delivery location. Rather, it consists of several product packages which must be delivered to different locations around the country.
- The variable size of the package is also a major factor. You don’t get to deliver the same size packages. You can have both smaller ones and large packages that require a separate mode of transportation.
- Since the delivery involves producing the product at the customer’s doorstep, it takes more time. Due to a large number of stops and traveling time, you have to appoint several delivery agents and transportations which adds up to the cost.
- The delivery destinations can also complicate the delivery process further. Especially in rural areas, you might have to travel long distances to deliver the packages.
All these factors add up to the shipping cost and affect the performance of last-mile delivery. It can be optimized to get better results.
Why the Last-mile Delivery Is Important
Last mile delivery is a significant part which must give satisfaction to the customer. The loyalty of customers partly depends on this process. When a customer encounters a bad experience with the delivery, it can seriously affect the brand and popularity of the store.
You will get the following benefits and generate more business than ever by increasing the efficiency of last-mile delivery :
- Increase brand loyalty and your customer base. This will divert more traffic to your store and gets converted into sales.
- Reduce the order cancellation rate if you provide the customer with timely deliveries and increase customer satisfaction.
- Be able to reduce delivery failures and significantly save a lot of money. This can improve your business with the suppliers and manufacturers.
- Reduce the idle time spent during delivery as well as the number of stops.
- A significant reduction in the extra miles can save a lot of operating costs which helps you to post products at a competitive price.
- The overall operating costs can be brought down and you will be able to get more profit.
Even if dropshippers are not directly responsible for last-mile delivery, it is a must to discuss the mode of operation and delivery performance before agreeing to partner up.
You can also suggest ways to improve last-mile delivery so that both ends are benefitted. You can significantly reduce shipping costs and deliver the product at a better price without any compromise in quality.
How to Improve Last-mile Delivery?
The optimization of last-mile delivery is not a dropshipper’s concern. But in order to generate a profitable business with a dropshipping model, it can be helpful to know these techniques. Here are some methods to improve last-mile delivery:
- Choosing a Reliable Supplier
- You cannot deliver a product on time if you don’t have a reliable supplier. The supplier or the manufacturer should always be able to provide the customer with the desired product. So, to find a reliable supplier, you can always depend on tools like Supplier Optimizer by DSers to quickly import relevant reliable suppliers for your dropshipping product.
- Choice of Delivery Time
- When the customer can choose a particular time for receiving the delivery, the supplier can instruct the logistics personnel to optimize their route, delivery timings, and mode of delivery accordingly. So, if a customer wants to place an order, you can provide a choice of delivery time to the customer and ask them to choose a slot. This will be very helpful for optimizing the last-mile delivery.
- Order and Delivery Tracking
- Tracking orders and delivery helps you to inform the customer promptly. So, when a customer wants to cancel an order or reschedule the delivery timing at any point, you can save some operating costs. If the cancellation is done before shipment, you will be able to save a lot of manpower and money.
- Delivery Optimization Software Applications
- This can help the shipping company that handles the logistics and last-mile delivery. Some applications optimize the delivery route and do automated route planning. You can simply use them to plan the vehicle capacity, customer availability, driver schedules, and much more. Therefore, with the use of such applications, you can easily optimize your last-mile delivery and get complete customer satisfaction.
Dropshipping doesn’t directly involve the process of shipping and logistics. But if you can reduce the cost of shipping, you can gain more profit. Since last-mile delivery is the most costly process, you have to optimize it for better outcomes. The success of dropshipping lies in tweaking the performance of such key elements. Therefore, here we have discussed the role of a dropshipping model in logistics and shipping.