Last mile logistics : The road less traveled

08:52 | 07/03/2017 Information Technology

(VEN) - Vietnam Economic News’ Nguyen Phuong spoke with CEL Consulting Director Pieter Pennings about last mile logistics opportunities and risks.

last mile logistics the road less traveled

What are the risks of Cash on Delivery (COD)?

COD allows buyers to pay when having goods delivered. But while this method is beneficial to buyers, it can be risky for sellers and/or distributors, as buyers can ad-hoc cancel the purchase or reject the goods without incurring any fees.

Many e-commerce businesses in Vietnam have suffered from this, as the COD payment rate in Vietnam is more than 90 percent, much higher than in other developing countries.

How can e-commerce businesses minimize risks?

E-commerce businesses in Vietnam should invest to minimize order-cancel and order-refusal risks.

Specifically, they should provide faster delivery services. Although they can help decrease delivery failures, faster delivery services increase operational costs.

Enterprises should accelerate credit card-based payment and have promotions for prepaid orders while improving skills of delivery staff.

In general, COD increases instability of order fulfillment and service provision processes and directly affects businesses’ revenue. It creates a tough business environment where only financially strong enterprises can survive. That’s why e-commerce is not easy at all for startups in Vietnam.

While e-commerce is experiencing strong growth in Vietnam, the demand for connectivity between e-commerce and logistics businesses has increased. However, the number of Vietnamese logistics businesses applying e-commerce remains small. Why?

Last mile logistics is quite different from conventional logistics. Conventional logistics refers to handling large volumes of cargo over long routes, while last mile logistics refers to shorter, fast deliveries.

This is why conventional logistics enterprises have found it difficult to apply last mile logistics. They also question if last mile logistics could yield a profit when the profit from conventional logistics remains humble.

Last mile logistics service providers are usually startups, such as fast delivery companies or postal businesses. Both groups of business have been encountering difficulties. The startups are rich in ideas and operational capacity but need a nationwide logistics network so they are mostly good at delivery within such big cities as Hanoi and Ho Chi Minh City. Meanwhile, most postal businesses are state-owned companies that have had difficulties in operation modernization. This is why here in Vietnam, there is no logistics business that is strong in terms of both service quality and service network coverage.

Nguyen Phuong