Top 10 Reasons Why Uber, Lyft and Other On-Demand Companies Will Struggle with Package Delivery
It’s a popular belief that the on-demand passenger delivery companies (Sidecar, Lyft, Uber) will soon — and easily — transition their technologies and driver networks to offer package delivery services. These companies do have great brands, cash to spare, and world-class apps, but that transition is going to be harder than most realize:
1. Pickup – Passenger pickup is straightforward, especially when everyone involved has a mobile phone, is ready and waiting, and has access to photos of who and what to look for. Package pickup is much more complex and involves parking (commercial license plates), waiting in lines, and far less help in identifying the right package.
2. Drop-off – Package delivery requires customer signatures, scan compliance, taking packages into buildings to seek out the correct addressee, and liability insurance if an item is damaged or mis-delivered — all new procedures for Lyft, Sidecar, and Uber.
3. Comingling – Human passengers are unlikely to put up with a driver stopping to pick up or drop off a package. That means that drivers will find themselves forced to choose between passenger or package delivery, eliminating potential density benefits. And given that choice, most will probably find passenger delivery more lucrative and more interesting.
4. Drivers – Drivers who do passenger delivery are not automatically suited for package delivery. Parking, pickups, drop-offs, liability considerations, and the lack of social interaction may be frustrating for drivers used to dealing with live cargo.
5. Pricing – There are already local delivery companies in every market, making 1 billion package deliveries every year. They may lack strong brands, but they are a tempting alternative for shippers because their price points are already optimized, and they are experienced specifically in the package delivery business.
6. Enterprise Tools– Retailers and other potential volume shippers need enterprise tools such as dashboards, package scanning, established pricing structures, and payment processing tools. These are beyond the capabilities of the current crop of consumer apps and will take time to develop.
7. Customer Service – When an Uber driver encounters traffic with a passenger on board, no problem, as the customer is aware of the challenge in real-time. A customer waiting for a package, on the other hand, has a much lower tolerance for traffic, pickup, and drop-off challenges that can make a driver late. Before they are ready to deliver packages, Lyft/Uber drivers will need more elaborate customer support tools, and the companies behind them will need to direct far more of a focus toward operations and customer service.
8. Exceptions – Package delivery generally comes with a predetermined time window, whereas passenger delivery is more open-ended. It will take time, and probably a lot of disgruntled customers, before Lyft/Uber customers readjust their approach to the realities of package delivery.
9. Packaging – Passenger delivery has a unique set of concerns (cleanliness, politeness) that don’t translate seamlessly to package delivery (packaging quality, damage claims, controlled substances, perishable substances).
10. Operations – On-time percentage? Damage rates? Signature capture rate? Scan compliance? Stops per hour? Refused deliveries? Package delivery comes with a universe of operational metrics that passenger delivery providers aren’t yet equipped to address.
For these reasons and more, look for on-demand app-based providers to hesitate, falter, and even damage their brands while trying to break into the business of local delivery.