Busting the ecommerce delivery cost barrier

Deliverider delivery van  credit: Deliverider
Deliverider delivery van credit: Deliverider

Buying a single cheap item online isn't worthwhile. Deliverider believes it has the solution.

On its way to a second financing round and a pilot operation with major ecommerce companies, Israeli startup Deliverider seeks to change the way people think about deliveries, and to make low-price products (even ten shekel products) more accessible. Such products are often not available online because dispatch costs make ordering a single item not worthwhile for the consumer.

Deliverider’s proposition is for businesses to cooperate with the strong ecommerce websites, usually in food or pharmaceuticals, and to attach their products to existing deliveries to consumers’ homes at no extra cost, thereby enabling consumers to benefit from a range of cheap products online at the same price as in the store. Deliverider collects the products and brings them to the retail chains’ distribution centers, and from there a consolidated delivery is made to the consumer.

Behind Deliverider is Ido Raz, the company’s CEO, who in the past was business development and innovation manager at retail chain Shufersal; and Elad Kantor, the company’s chief technology officer. Among the company’s directors are Udi Dagan, formerly CEO of FedEx in Israel, and Alon Feit, co-founder of Splitit.

Deliverider employs twelve people, some of them overseas. It has raised $2 million from family offices and investors specializing in the field, and it is about to raise a second round.

The Carrefour effect

Broadening the product offering is a challenge facing online players. Consumers behave differently online from the way they behave in a physical store, for example in unplanned purchases prompted by coupons or sales floor promotions.

Deliverider’s proposed solution is to collect products from businesses located within a radius of 10 kilometers from a food or pharmaceuticals retailer that sells online. Consumers can order a single, low-price product from, say, a nearby bookshop or toyshop, and receive it along with an order they have made from a supermarket chain.

Deliverider will collect the small orders in several daily rounds, and bring them to the retail chain, which in turn will add them to a delivery of products that the consumer has ordered from it directly. In the event of a product return or exchange, consumers can either go physically to the store from which the product was bought, or return it via Deliverider.

In this way, Raz explains, consumers can obtain delivery even of products that cost NIS 20 each, where an isolated delivery can cost more than the product itself, without having to buy other things to bring the purchase up to the amount that qualifies for free delivery.

Small businesses can thus increase online sales, while the retail chains can increase the volume of purchases made via them by 5-10% and maximize the profitability of their online activity.

According to Shufersal’s financial statements, for example, 22% of its sales are currently made online, and this proportion is expected to grow. In the case of equivalent retail chains overseas, online sales account for 30% of the total. French chain Carrefour is due to begin operating in Israel shortly, and it will try to take online market share from its competitors, so all players have a clear interest in broadening their online offering.

Deliverider has patented its method, which it has presented to international players. The company is in contact with Shufersal, and the two companies will probably launch a pilot operation soon.

The profit model challenge

The B2B logistical platform that Deliverider has launched is driven by algorithms that connect businesses to online retail platforms. This delivery network has a social aspect (aiding small businesses) and an environmental aspect (consolidation of orders into one delivery, thus reducing air pollution).

For the model to be profitable, it will have to work with sufficient volumes to justify each round of product collection. The business model rests on commissions paid by the peripheral businesses, amounting to about one fifth of the order value.

The businesses receive notification of orders for their products through a designated tablet computer installed in their stores, where the product to be collected by Deliverider is prepared within a short time.

"We found that products worth up to NIS 50 such as hardware products, household items, mobile telephone accessories, toys, books, and personal care items have the highest conversion rate as products added to the shopping basket," Raz says.

"Nevertheless," he adds, "because of their low cost, online stores around the world find it difficult to display them on their websites, because they don’t ‘carry’ the delivery charge. So the customer is forced to compile a large basket of products in order to obtain a reasonable delivery price in relation to its value.

"With us, the drivers collect the products that have been ordered with a pickup truck or a motor scooter, and take them to the distribution center of the online retailer for consolidation with the basket of product ordered from it, even same day, which allows for a small carbon footprint."

Published by Globes, Israel business news - en.globes.co.il - on August 16, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.

Deliverider delivery van  credit: Deliverider
Deliverider delivery van credit: Deliverider
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