Aurora Magazine

Promoting excellence in advertising

Published in Mar-Apr 2019

The last-mile delivery challenge

Start-ups have risen to the challenge, but can they sustain in the long-term?

According to Murad Saeed, Federal Minister for Postal Services, the logistics sector in Pakistan is worth $34.2 billion and has registered an annual growth of 18%.

Pakistan’s state-owned postal services recently introduced a set of improved services including EMS Plus, a 72-hour export parcel service aimed at the e-commerce sector. EMS Plus allows the delivery of parcels weighing up to 30 kilograms to Australia, Japan, Saudi Arabia, Thailand, the UAE and UK. In 2016, TCS signed an agreement with UPS to facilitate international express services in Pakistan. This allowed parcels from anywhere on the UPS network to be collected and distributed by TCS’s 4,500 delivery professionals. The agreement also allowed parcels from Pakistan to be shipped internationally using the UPS global network. A similar agreement was signed between M&P (previously OCS) and FedEx.

These big logistics companies can move massive quantities of documents, parcels and freight around the world efficiently. The process is fast, cost-effective and almost perfect. However, it is the last-mile delivery that proves to be a challenge and a costly logistical issue for both retailers and delivery companies. Last-mile delivery costs are estimated to represent half of the supply chain costs due to a combination of issues including lack of local knowledge (complicated addresses), the high cost of single item deliveries, overheads of retail outlets and on-ground HR. At the same time, customers have become more demanding and want things to happen instantly. Similarly, retail is changing rapidly and more and more businesses are providing door to door delivery. All this has created a gap and an opportunity for on-demand delivery services.


Theoretically, a single founder can set up an on-demand delivery service with a Facebook page to market it, a mobile phone number to take orders and a contract employee with a motorcycle to deliver the orders. There is no need for an office. However, it becomes complicated once the numbers grow (a necessity for success). Receiving orders on a single phone number can be tricky as is keeping up with the orders and assigning them to the closest available rider to ensure they reach customers on time.


On-demand delivery is nothing new. Restaurants, especially fast food chains, have been delivering food to consumers for decades. What has changed is the explosive growth in recent years. In Pakistan, where almost every big city is clogged with traffic, customers find it more convenient to order their food, groceries and medicines from the comfort of their homes with their smartphones. This gap – which was unlikely to be filled by the bigger logistics companies – was quickly filled by start-ups including Bykea, Darewro, Delivery Chacha, Delivery Walay, Forrun and Taiz Raftaar to name a few.

The on-demand delivery business model is simple. It bridges the gap between the seller and the buyer in return for a small fee based on distance and usually charged to the buyer. The service provider employs people who deliver riding their own motorcycles as independent contractors. This makes setting up a delivery service easy as well as dirt cheap as it requires little or no investment. Theoretically, a single founder can set up an on-demand delivery service with a Facebook page to market it, a mobile phone number to take orders and a contract employee with a motorcycle to deliver the orders. There is no need for an office. However, it becomes complicated once the numbers grow (a necessity for success). Receiving orders on a single phone number can be tricky as is keeping up with the orders and assigning them to the closest available rider to ensure they reach customers on time. This is when such services require telephone exchanges to handle multiple calls to take orders and provide customer support as well as technology to track the orders, and not the least, a legal structure to allow them to operate safely and adhere to the laws including labour laws – all this involves hiring more staff and having an office. However, even at this scale (thanks to the availability of turn-key technology solutions) this does not require a lot of capital. Managing the service during the scale up is another story.

In addition to fierce competition and thin margins, delivery start-ups have to deal with a host of operational challenges. In Pakistan, almost all delivery start-ups offer highly-customised orders, which can be quite complex, and some may argue, not profitable at all. To top it all, the entry of players like Careem and Uber into this space has made life more difficult. As the Careem and Uber models offer higher returns and provide more freedom to motorcycle riders (including the option of using their motorcycles to transport people), delivery start-ups are finding it hard to hire or retain riders.


The entry of players like Careem and Uber into this space has made life more difficult. As the Careem and Uber models offer higher returns and provide more freedom to motorcycle riders (including the option of using their motorcycles to transport people), delivery start-ups are finding it hard to hire or retain riders.


In this context, it is pertinent to look at investment trends in delivery start-ups in Silicon Valley. According to a Reuters analysis of publicly available data, between 2006 and 2016, at least nine billion dollars were invested in 125 on-demand delivery companies. However, this trend slowed down significantly after the entry of Uber into the delivery business (UberEats and UberRush). UberRush closed down in June 2018, while UberEats still operates in multiple countries with an expected launch in Pakistan in the next few months. Another player in Pakistan which operates on a slightly different model is Foodpanda, which operates in 10 countries and generates revenues by charging a percentage of the value of the order to the restaurants with no extra cost to the customer.

What does this mean for local start-ups? In my opinion, many will either end up being bought out by bigger players or go bankrupt if they continue to focus solely on the complex, low margin business of on-demand delivery service. To survive, they will have to innovate and look for multiple layers of revenue-generating businesses. This could include partnerships with the larger logistics companies which are struggling with their last-mile deliveries or exploring the e-commerce space.

Muhammad Uzair is Founder, Blimp – a digital marketing & PR agency based in Peshawar.