Updated on: May 06, 2022
The hyperlocal services market size was valued at $1,324.2 billion in 2019 and is estimated to reach $3,634.3 billion by 2027, registering a CAGR of 17.9% from 2021 to 2027. – Allied Market Research, Hyperlocal market services by type, 2021-2027
The past few years have seen consumers shopping with whole new levels of convenience. With a few clicks, we get food, grocery, household essentials, or medicines delivered to our doorsteps in a few minutes. The delivery business model that works behind these lightning-speed deliveries is the hyperlocal delivery model.
What is a hyperlocal delivery?
Hyperlocal delivery connects local retailers and merchants with customers that fall under a limited geographical area, which allows for quicker deliveries. The upsurge in technology has caused the hyperlocal deliveries to cover many possible streams like:
- Food delivery
- Grocery Delivery
- Vegetable and Fruit Delivery
- Home services like cleaning, repair, salon services, pest control, maintenance
- Pharmacy, etc.
The major USP of hyperlocal delivery is the geographical boundary and the delivery timeline.
An e-commerce model functions nationally and internationally. It cannot fulfill the immediate needs and burning demands of customers. It operates on a larger scale for fulfilling customer needs that are not too urgent.
For instance, if a customer wants a sanitizer on an urgent basis, they cannot get it from a regular e-commerce vendor. But a local vendor can accept this order, and deliver the product to the customer within a maximum time frame of 90 minutes.
How does the hyperlocal delivery model work?
Hyperlocal delivery businesses fulfill orders of customers belonging to a specific geographical area. E-commerce companies build partnerships with local retail stores to deliver orders quickly to customers. The visibility of retail stores involved in hyperlocal deliveries is within that specified locality covering a specified radius of the delivery area.
For a product to reach customers doorsteps using hyperlocal deliveries, there is a process involved. This process is general for any type of business following hyperlocal deliveries. It involves:
Local shops are the storehouses for essential products like groceries, medicines, medical equipment, hygiene products, etc. With lockdowns prohibiting customers from visiting shops for weekly grocery purchases, hyperlocal delivery has turned out to be a game-changer.
Hyperlocal delivery ensures that essential goods are available to customers at their doorstep without any hassles. It has become the most convenient option to access high-priority products quickly, thereby enabling businesses to stay afloat in the market during COVID-19 times.
- Retail outlets (grocery stores, hotels, pharmacies, etc) establishing their partnership with e-commerce partners and delivery agents
- After customers place their orders, it is forwarded to the retail outlet by the e-commerce partner
- Once the retail store receives the order, it processes and packs the order and keeps it ready for delivery
- As the package gets ready for delivery, it is handed over to the delivery agents
- Delivery agents receive the parcel and deliver it to the specified customer locations
Overview of hyperlocal delivery services
Hyperlocal businesses that were once startups have seen massive growth after the pandemic. Their businesses are going to new peaks as they offer convenient delivery experiences by partnering with neighborhood retail stores.
Factors behind the success of hyperlocal delivery businesses
From its nascent stages in 2014, hyperlocal deliveries have come a long way. Today hyperlocal businesses are jumping into 10-minute deliveries. A lot of things changed in the past decade for delivery logistics businesses. The factors behind the massive success of the hyperlocal business model in India are:
- Improvement in logistics infrastructure
- Increasing mobile internet users
- Penetration of smartphones
- Growing urbanization
- Improved lifestyle
- Changing consumer preferences
- Increase in business digitalization
- High funding for e-commerce businesses
Whether it is food, grocery, e-commerce, household essentials, or medicines, hyperlocal businesses are experiencing higher demand from customers today. Some of the hyperlocal delivery businesses are:
- Tata 1mg
- Big Basket
- Urban Company
- Paytm Mall and so on
Why do retail businesses opt for hyperlocal delivery models?
There are some reasons for retail businesses to use hyperlocal delivery services such as:
- An opportunity to optimize sales
- Improved business growth with minimal efforts
- Enables businesses to build a sustainable delivery ecosystem
- Easy to get orders on a unified app-based marketplace
Difference between hyperlocal delivery & last-mile delivery
|Points of difference||Hyperlocal deliveries||Last-mile delivery|
|Definition||Hyperlocal deliveries involve the delivery of goods directly from sellers to consumers. It may even involve delivery partners or courier agents picking products from sellers and delivering them to consumers.||Last-mile delivery is the final leg of the fulfillment process that deals with transporting packages from a central distribution hub to a customer location. It is the final leg before the order reaches the customer. All hyperlocal deliveries are last-mile deliveries, but not vice versa.|
|Area of Delivery||Hyperlocal deliveries are made within a radius of 5-15 km and it is much smaller compared to last-mile delivery. Even intra-city deliveries take place when the distance of deliveries is greater than 20 km.||Last-mile delivery agents can travel up to 30 km to deliver goods to customers. The area of last-mile delivery depends on the location of the central transportation hub.|
|Time taken for delivery||As the geographical perimeter is smaller for hyperlocal deliveries compared to last-mile delivery, the time taken to deliver a product is 2-3 hours or 6-8 hours maximum.||Depending on the distance, the resources at hand and priority, delivery time can vary from 12-16 hours to the next business day.|
|Volume and weight-based restrictions||Hyperlocal deliveries have a cap of 10-12 kg as products are delivered through two-wheelers and three-wheelers and these weight restrictions may vary for different businesses. When product weight exceeds the predefined number, extra delivery charges are added.||The delivery charges in the last mile are based on volume and metric weights and there are no extra charges levied from sellers.|
|Type of products||Being carried out in a small area and with shorter delivery times, essential and perishable items are best suited for delivery through hyperlocal delivery models.||All types of non-essential and durable products are delivered through the last-mile barring perishable products like fresh food items, meat, etc.|
What are the critical aspects of hyperlocal delivery service?
The higher adoption of hyperlocal deliveries is seen in industries like food, grocery, medicines and meat. Many organizations are now looking to launch their own hyperlocal models for saving profit margins. With large enterprises and retailers increasingly adopting hyperlocal delivery services, the biggest concern for them is to balance service quality and costs. Apart from this concern, there are very crucial aspects that businesses in hyperlocal deliveries should address.
Effective demand management
The fulfillment and inventory management in hyperlocal deliveries differ when compared to a traditional brick-and-mortar setup. Businesses in the hyperlocal delivery model have to rightly balance their foot traffic and delivery demands effectively. Whether they own a delivery workforce service in-house or partner with a delivery business, they should effectively manage their fleet to changes in demand.
Adherence to Expected Time of Arrival (ETA)
With access to customers in the vicinity, businesses should strictly follow the ETA and deliver the orders on time as it determines the quality of the customer experience.
Error-free delivery scheduling
To make deliveries on time, it is crucial for businesses to schedule the right set of delivery agents at the right time to deliver the products. As delivery volumes increase and the customer base expands, it is crucial to schedule and make deliveries in an error-free way, which requires proper technological support.
Challenges of hyperlocal deliveries
Despite its growing appeal among customers and sellers, hyperlocal deliveries have been facing considerable hurdles, all of which have increased complexities and inefficiencies in the delivery processes too. These include:
Inefficient delivery workforce management
Businesses in hyperlocal deliveries are tested when they encounter a larger number of orders. With fewer dedicated delivery workers, it becomes difficult for them to handle orders.
Ineffective route management
Incorrect addresses and inefficient delivery routes are the biggest obstacles to hyperlocal deliveries. Without a proper tracking mechanism and optimal routes, it becomes difficult to make faster deliveries.
Lack of flexibility in delivery operations
The frequency of orders changes and there are special occasions when order volumes spike. There are even unexpected times when order volumes can go up. A major difficulty for businesses in hyperlocal deliveries is their lack of flexibility to handle volatile demand.
Saturation in delivery expansion
For retail outlets operating in a hyperlocal business model, it is difficult to expand their delivery services at a far distance. Businesses can engage only with customers in a limited geographical area and they have only fewer options for delivery expansion like opening new outlets.
Managing varied delivery preferences
With spiking order volumes, it becomes challenging for businesses to manage the varied delivery preferences of customers. It drives up operational costs and makes fleet operations burdensome for the delivery workforce.
How dispatch management software helps businesses efficiently manage hyperlocal deliveries
With shorter delivery times and tighter delivery windows, it is often difficult to manage hyperlocal deliveries and satisfy customer expectations. As businesses in hyperlocal delivery models struggle to balance customer preferences and rising operational costs, it is the right time to adopt the technology.
A retail business in the hyperlocal delivery model loses its customers when it does not deliver the products on time as promised. Dispatch management software comes in handy for businesses that want to optimize their delivery process and gain a large share of revenues by incurring lesser operational costs. Read on to find out how.
Data insights to forecast demand and expansion
The most crucial factor towards the success of hyperlocal delivery is how a business manages its demand. To effectively manage demand over time, data insights are indispensable. Sellers and retailers involved in hyperlocal business need data from various localities in an urban area to estimate the future demand for their goods.
With the help of dispatch management software, retailers and delivery partners can get insights on customer orders. They can analyze past data to know on which days and what times they received a greater number of orders so that they could be able to fill their stocks appropriately. Using its insights on high-priority orders and tight delivery windows, it can manage their future fleet operations effectively.
A retail outlet involved in hyperlocal deliveries with the help of dispatch management software finds out that it receives more than 45% of orders outside the delivery radius of 20 km from the shop. As hyperlocal deliveries can only be handled in small delivery areas, it becomes difficult to manage this. But the data generated from a dispatch software allows them to set up another retail outlet in that area. By using the dispatch solution, businesses in hyperlocal deliveries can forecast demand and plan their expansion.
Adds more visibility and automates the delivery process
When a retail outlet or delivery partner in a hyperlocal business starts receiving more orders, they suffer from two aspects- improving visibility and managing the delivery process. Failing in either one of them or both of them would lead to fall in revenues.
A dispatch management software with its end-to-end tracking abilities provides a comprehensive view of their supply chain. Tracking on-ground executives, helps sellers or delivery partners eliminate delays, rectify inefficiencies and manage their ETAs. Its automation capabilities help them effectively assign drivers and vehicles based on delivery constraints and Service Line Agreements (SLA). By adding more visibility and increasing automation, dispatching software helps businesses in hyperlocal models avoid failed deliveries.
Rightsize fleets and maximize their utilization
The cost savings and profit margins for a hyperlocal delivery model depend on how a business utilizes its fleet. It is necessary to focus on vehicle utilization to provide low-cost logistics while remaining profitable.
By using dispatch software, hyperlocal delivery businesses can decide on their optimal fleet size. Its Artificial Intelligence (AI) capabilities calculate constraints, goals, and past delivery performance and provide fleet utilization recommendations. Based on its analytical insights, they can rightsize their fleet, and maximize its utilization without burdening the drivers or compromising the SLAs.
Makes communication effective and transparent
Communication in logistics becomes effective when a customer feels that they are an integral part of the delivery chain. This happens when they get timely updates on their deliveries. Communication and the overall customer experience become even more effective when customers are given the option of rescheduling their delivery preferences.
With dispatch management software, hyperlocal delivery businesses can update their customers prior to any operational or unexpected delivery delays. Whenever customers make rescheduling requests, it enables them to effectively manage rescheduled orders without affecting the SLA targets of scheduled orders.
Dynamic optimization of delivery routes
Hyperlocal deliveries require efficiency at every step as the time windows for deliveries are tighter when compared to the last-mile deliveries. With the rise in order volumes, it becomes difficult for businesses to manage operational costs for hyperlocal deliveries. Especially since rising fuel costs, coupled with increasing empty miles, can impact profitability.
A dispatch management software generates optimal routes after factoring traffic updates, vehicle capacity, delivery time windows, delivery location, driver breaks, number of parcels and other real-world constraints. By mapping optimal routes for each driver, reduces the delivery time and minimizes the fuel costs. It helps delivery managers dynamically reroute deliveries when there are last-minute delivery changes without burdening their resources and increasing empty miles.
Future of hyperlocal deliveries
Retail businesses adopting hyperlocal delivery models will become more accurate in audience targeting. They will gain increased traction by catering to lucrative demographics and with insights from the psychographic segmentation of their customers.
Many e-commerce and retail giants are moving towards the hyperlocal delivery model because they see an opportunity in capitalizing on the customer loyalty that smaller stores enjoy. Hyperlocal delivery offers them an opportunity to deepen their customer engagement and expand their customer base. The future of hyperlocal delivery is looking promising for sellers and customers due to the following evolving trends.
E-commerce giants will redefine last-mile delivery
E-commerce giants will be re-exploring new opportunities in the last-mile delivery. They will build a combination of locally owned warehouses that are integrated with local stores for a robust supply chain framework.
The future of hyperlocal services will witness the entry of large e-commerce players building an ecosystem with an app-based hyperlocal delivery service. They will build a collaborative and giant hyperlocal delivery environment to penetrate into smaller localities. They may even acquire retail stores in different cities and build hyperlocal delivery chains.
Hyperlocal deliveries will be explored in non-essential goods
Some retail outlets will start to extend the hyperlocal deliveries to categories like apparel, cosmetics, liquor, etc. Instead of being exposed to large crowds in places like malls, fashion stores or supermarkets, businesses could think of executing a hyperlocal delivery strategy.
Hyperlocal deliveries will help non-essential retail businesses expand their online presence and broaden their customer base. It will offer a unique opportunity for businesses to utilize new technologies and increase their customer reach.
Hyperlocal deliveries will move towards rural areas
The next evolution of hyperlocal e-commerce models will be in under-tapped rural areas. Rural e-commerce will be a billion-earning industry for hyperlocal deliveries in the years to come.
Retail outlets will expand storage spaces
In order to keep product flows perennial, retail outlets will consider expanding their storage facilities.We may see retail stores creating separate storage spaces near their physical stores for hyperlocal delivery and omnichannel options like BOPIS (Buy Online and Pick Up In Store).
Increase in the adoption of AI-based technologies
The hyperlocal delivery business model will see increased adoption of Artificial Intelligence (AI) technologies. The profitability of businesses involved in hyperlocal delivery depends on two factors. They are:
- Route Density: The number of packages delivered on a given delivery run
- Drop size: The number of parcels or items delivered at each stop.
Real-time dynamic routing software is an application of AI that can majorly benefit the hyperlocal delivery industry. It enables businesses to execute on-time and cost-effective deliveries leading to quicker turnaround times. It factors various constraints like pickup windows, delivery window preferences, no-entry time, waiting costs, tonnage, driver-route mapping, etc. before designing optimal route plans.
This dynamic routing software enables businesses to assign hyperlocal orders based on driver proximity, service time constraints and capacity. By proactively assigning highly efficient routes, it helps them reduce empty miles driven, optimize the productivity of delivery professionals and eliminate the idling time of vehicles.
AI helps hyperlocal businesses with improved network planning, capacity planning and demand forecasting. Its insights help them rightsize the total number of vehicles needed for transport in a particular route and direct them to delivery locations where demand is expected. It cuts down operational costs and reduces complexity in the hyperlocal supply chain.
Delivery Robots and Autonomous Vehicles
As hyperlocal markets get specialized and more diversified, logistics businesses will leverage delivery robots. They aim to provide delightful customer experiences with faster and more convenient deliveries. Food delivery startups like Postmates, Doordash and Just Eat have already started to adopt this technology.
Logistics companies are working on introducing upgraded delivery bots for hyperlocal delivery services. They are teaming up with research and development companies in the tech industry to help retailers address their customers’ rising expectations.
Air Delivery Drones
In the near future, hyperlocal logistics companies might team up with aviation companies to build delivery drones.
Drones could enable faster delivery options for items like medicines that are high priority and time-sensitive while supporting social distancing. Many retail giants like Dominos and Walmart, etc. are partnering with tech delivery startups to launch drone deliveries in the US.
In the future, microhub warehouses and retail outlets will have drone facilities that can serve a particular geographical area. Drone delivery devices and applications will see more applications in the pharmaceutical hyperlocal industry.
The adoption of a logistics technology like dispatch software is increasing among businesses involved in hyperlocal deliveries. The hyperlocal delivery space is becoming more competitive as customers demand more convenience. With the help of these technologies, they are effectively mitigating the complexities and inefficiencies of hyperlocal deliveries that stop them from providing an extremely satisfying customer experience.
Locus dispatch management software has helped businesses in the hyperlocal space to improve the operational efficiency of their deliveries. Its real-time fleet tracking and timely alerts assist delivery managers in making accurate and quick operational decisions. Its dynamic route recommendations enable companies to improve their on-time delivery rates without driving up operational costs or burdening their resources.
To meet your promised SLAs without driving up operational costs, try a demo with Locus!