Hyperlocal Delivery Business Model Decoded

1) Introduction

How many of us have not heard of Swiggy or Instamart? Especially if we are living in an urban center. Who wouldn't like the leisure of choosing products on an app and getting them delivered to our doorstep in an hour? The hyper locality of deliveries has changed our perception of standard delivery in eCommerce. 

Hyperlocal delivery has eased getting products from our local market without stepping outside our homes. Though the hyperlocal delivery model existed for quite some time, the 2020 Covid pandemic hyped the model for delivering urgent necessities. 

The hyperlocal delivery model emerged at a crucial curve when eCommerce businesses were experimenting and expanding their logistical services. Customers were initially ecstatic to receive an item from across state lines.

An art connoisseur in Bangalore suddenly got a painting from Shillong, so she didn't care if it took 6-10 days or even longer.

However, now such deliveries have become commonplace. So e-commerce businesses had to get creative and team up with the logistics industry to offer scheduled delivery, two-day delivery, next-day delivery, and even same-day delivery.

But customers are ever-consuming, and the logistics industry is ever-providing. It enters hyperlocal on-demand delivery. This delivery model takes same-day deliveries to the next level, offering deliveries within 45 minutes to 4 hours. 

As normalcy has returned to the country, many households have used these hyperlocal delivery services simply for convenience. And who can blame them? In this article, we'll break this delivery system down so you can see if the hyperlocal on-demand delivery model is what you want for your business.

2) Decoding the Hyperlocal delivery model

The term hyperlocal suggests a limited geographical area of the neighborhood. So the hyperlocal delivery business model refers to companies catering to the consumer needs of an area. The hyperlocal delivery model is an emerging trend in the logistics industry. 

Shipping carriers and shipping aggregators combine efforts with local suppliers, retailers, and vendors to supply products to customers in a locally concentrated area. This makes the hyperlocal model a good example of a micr0-marketplace. 

The hyperlocal delivery model balances the demand and supply in the local market while uplifting the local businesses in catering to consumers in a city of suburbs. 

The evolution of the hyperlocal business model has much to do with changing consumer preferences and an inclination for superfast deliveries. The proliferation of eCommerce companies and marketplaces, growing urbanization, improved lifestyles, and a pandemic have evolved the model to newer standards.

3) Features of the Hyperlocal Delivery Model

Now that we understand the basics of the hyperlocal on-demand delivery model, let’s decode its features:

• The hyperlocal model is restricted to consumers of a limited geographical area. 
• Normally, it is centered around urban pockets with high demand.
• It uses the automation and technology of a logistics platform, carrier company, and eCommerce platform to set up the business model.
• Its popularity is based on the speed at which it delivers products to customers’ doorsteps.
• It builds an ecosystem around consumers, aggregators, eCommerce marketplaces, and local vendors to uplift the local economy and market conditions.

4) How does the Hyperlocal delivery model work for eCommerce Companies?

The hyperlocal delivery business model relies on the partnership between logistics companies and local vendors. A consumer places their order on the company’s mobile application or website. As the vendor accepts and packages orders, a delivery agent picks them up and delivers them to the customer. 

The model is a favorite with the FMGC (Fast-Moving Consumer Goods), like restaurant food, groceries, and medicine.

But more eCommerce verticals are incorporating the hyperlocal business model in their omnichannel strategy. The hyperlocal business model has many forms. It can be focused on inventory, aggregators, marketplaces, or a hybrid account. 

In an inventory, led-model, businesses opting for hyperlocal deliveries have their inventory, either they produce the items or procure them. They keep track of customer demands and team with a delivery company to fulfill local orders.

They can also keep in-house agents as Dominos does. The drawback is that maintaining and tracking inventory can be expensive.

In an aggregator-based model, a company acts as a link between vendors and customers. eCommerce companies form partnerships with vendors/retail outlets to get local inventories and fulfill orders.

There is no need to store inventory in a warehouse or store. Different retailers sell goods and services under the aggregator’s banner, like Zomato. 

Customers can choose an in-store pickup or home delivery in a hybrid account, like Instacart and Deliveroo. 

5) Market Impact of Hyperlocal On-Demand Delivery Model 

Hyperlocal on-demand delivery works like Superman's heat ray: it's fast, precise, and highly effective. So much like with the boy in blue, it may make you wonder if other players in the industry (be it the superhero or the logistics industry) are rendered obsolete.

The answer is a resounding no. At the end of the day, we need surgical strikes just as much as we need wide-range strikes. You can get groceries for your home in Bangalore while still getting that painting from Shillong.

These two markets are constantly intertwining and finding new ways to learn from each other and beat each other. With that in mind, here are some major advantages that a hyperlocal on-demand delivery model can bring to the entire logistics and Ecommerce markets.

5.1). More competition

Competition is the best way to learn. Using the hyperlocal on-demand delivery model gives traditional stores and ecommerce stores a chance to compete on a level playing field. Through this process, both industries can share resources and pick up more tricks to compete in larger markets.

As tech keeps updating the hyperlocal on-demand delivery model, both sides must compete to stay updated. This process enables the quality of services provided to keep improving.  

5.2) Use of local vendors 

Traditional stores are given greater exposure to the various elements of logistics technology and an opportunity to partner with other businesses like ecommerce companies to sell more stock. 

Local vendors have the opportunity to make use of the entirety of their resources, from personnel to stock. They’re also given a chance for greater outreach and delivery to a wider range of customers. This can also increase brand awareness for the store and give them access to a more streamlined delivery mechanism. 

5.3) Faster Delivery 

The hyperlocal on-demand delivery model can sometimes become a race that resembles video game speeds. This is because a major USP of the hyperlocal on-demand delivery model is these fast delivery speeds that promise customers delivery completion within 45 minutes to an hour.

Even in the case of scheduled deliveries, vendors and delivery agents must complete the task within a certain time frame to ensure the safety and freshness of the goods and avoid the repetition of effort.

5.4) Tech-Enabled Visibility 

Another major USP of the hyperlocal on-demand delivery model is its optimal use of all types of technology to provide these services most efficiently. IoT and RFID (Radio Frequency Identification) help to track orders in real-time and allow customers to do the same.

Seeing their orders en route enables customers to better prepare for the order's arrival. Furthermore, greater visibility is granted in terms of route optimization and cargo safety. And the final notch of convenience is that all orders with a particular hyperlocal on-demand delivery model can be managed from a single app.

5.5) Reduces Logistics Costs

The hyperlocal on-demand delivery model combines fast delivery speeds with intuitive technology and maximum resource utilization. A natural result of this combination and a well-planned system will be a cost reduction. 

This is because more and more processes within this complex infrastructure can be automated to reduce manual efforts, reduce wastage and optimize delivery speeds and customer experience.

Customers may be more inclined to pay delivery fees and other fees that cover your logistics costs when the experience is better. Plus, having a well-established network of reliable partners also allows for negotiations and mutually beneficial financial arrangements.

6) How to Set up a Hyperlocal On-Demand Delivery Model? 

If you're still reading, that means we've piqued your interest. I'd love to chalk it down to my incredible narrative style, but chances are you're more interested in how a hyperlocal on-demand delivery model works.

The phrase on-demand implies that customers make their demand and then get the product within a short enough time frame that they don't need to demand twice.

But how do you set up a system like that, especially in localities where you may not be headquartered? It's quite simple and only requires careful planning, strategic implementation of ideas, and intelligent use of a wide range of resources.

Keeping in mind that local vendors play a huge role in hyperlocal on-demand delivery, here are the steps you need to follow to set up your hyperlocal on-demand delivery model.

6.1) Identify your Industry 

The hyperlocal on-demand delivery model works most effectively for a specified list of industries. Food, pharmaceuticals, groceries, services, and electronics are just a few on this list. More and more industries are indoctrinating the hyperlocal on-demand delivery model keeping in mind the restrictions on the weight and fragility of products being delivered.

6.2) Choose a Specialty

This is what you would call an optional step, as choosing a specialty or a niche within an industry may have various advantages and disadvantages. In most cases, narrowing down a specialty makes it easier to select a target market and allows you to operate with minimal competition. However, selecting a niche market may not necessarily be sustainable for your business or industry. 

6.3) Scope Out Your Target Market

Your target audience is your profit source. Honing in on the exact market you will serve enables you to do two important things. First, it allows you to project your order volumes in specified locations.

The second is that it enables you to perfect your services to suit that target market, giving you advantages that help you take over the competition. If your target market is working professionals, you can provide options for scheduled deliveries. 

6.4) Build Your Delivery Network

Remember how I said your target audience is your profit? Well, it’s half of your profit. The other half is what you receive from various partners. The beauty of the hyperlocal on-demand delivery model is that it is a joint venture. 

It uses various resources, from delivery aggregators to local vendors. All of these together make up your strong hyperlocal on-demand delivery network.

6.5) Finalise Your Revenue Model 

Once you’ve decided who you’re partnering with for what, you can finally put together the final tally of numbers. These numbers will indicate the sustainability of your hyperlocal on-demand delivery model.

This maps out exactly how you will balance out the commissions given by partners, costs paid to other charges, and delivery fees paid by customers. This model may change over time as business picks up, and rearrangements must be made. 

7) Some Advantages and Challenges of the Hyperlocal Business Model

7.1) Advantages

Here are the prime advantages of the hyperlocal business model:

Benefits for local vendors

The hyperlocal models, be they single-retailer-centric or aggregator centric, provide ample visibility to local vendors. The hyperlocal business model has helped local vendors, restaurants, and service persons generate revenue by connecting them with potential customers. 

Speedy Deliveries 

The unique feature of hyperlocal deliveries is their speed. From a Domino’s 30 min delivery to an afternoon’s BigBasket delivery, speed has eased up the shipping process in cities. The speedy convenience deliveries provide to customers is the main reason they repurchase items from vendors. This establishes their hold over the local market.

Expansion for Quick Commerce 

The hyperlocal business model leans more towards quick commerce, where the time gap between order placement and delivery is less than in a common eCommerce venture. The fastest an eCommerce company can offer final delivery is on the same day, but hyperlocal deliveries are done within hours.

Nod to sustainability 

It is without a doubt that logistics and shipping have major contributors to greenhouse gas emissions. Since hyperlocal deliveries are locally made without extensive shipping, their carbon footprint is lesser.

Reductions in logistical and warehousing costs

One of the major benefits hyperlocal delivery offers its investors is the reduction in logistics and warehousing costs. The aggregator model especially highlights this fact. Without the need to hold inventory, it cuts down warehousing, packaging, and handling costs. 

7.2) Challenges

Though the hyperlocal model has advantages, it is not without faults.

Fleet Management and Cost Imbalance 

Fleet management is a critical area where hyperlocal business models generate costs. Whether it be in-house delivery partners or agents of a courier company, there is a significant cost involved in delivering products. Unlike eCommerce ventures offering free shipping, this is not an option for the hyperlocal model.  

The cost imbalance arises when the delivery charges do not meet customer expectations for the reduced delivery service price. Businesses can lose customers without properly managing the fleet and balancing the cost and expectation ratio.

Misaligned business management

In hyperlocal delivery, it is important to have a bird’s eye view of the customer’s demand, expectations, and the business’s alignment with these. Balancing online demand and foot traffic is important for a stable revenue model. So, businesses should carefully consider market conditions. 

Ineffective Route Optimization 

One of the critical challenges of the hyperlocal delivery model is ineffective route optimization. Ineffective route optimization can lead to mismatched addresses, trailing in traffic congestion, and losing out on delivery time. 

Less flexibility in Delivery Preferences 

Not every hyperlocal delivery company or aggregator offers major flexibility in delivery preferences. Unlike the eCommerce model, where customers can reschedule or cancel deliveries and expect a refund, the hyperlocal business model can’t offer these feasibilities. 

8) How Technological Platforms Can Optimize the Hyperlocal Delivery Business Model 

A hyperlocal delivery business needs excellent technological support and automation to overcome its challenges.

These tech platforms can be dispatch management software or SaaS-based multi-carrier software. The aim is to enhance certain crucial features of the hyperlocal delivery business model, like order tracking and dispatch.

From automating order management to monitoring SLA breaches, software like Locus and ClickPost helps hyperlocal delivery companies maintain service standards. Furthermore, company owners can rely on software that optimizes route planning and delivery slot management. The end goal is to streamline business processes that provide optimum service to customers.

9) The Future of Hyperlocal Delivery 

The future of hyperlocal delivery service is only broadening over the years. It is expected that in the near future, hyperlocal deliveries will have spread to rural areas and expanded to non-essential goods like local furniture. 

Moreover, the expansion of shipping technology that includes air drones can also feature in the hyperlocal delivery market. What is certain is that the hyperlocal delivery model is here to stay, with newer companies and services emerging in the area.

10) Final Words

Many Ecommerce businesses are taking the added leap to a hyperlocal on-demand delivery model, attempting to create a bridge to these slowly-growing delivery services. We've enumerated why this works, from greater visibility to faster tracking, all things that add to a top-notch customer experience.

With a well-crafted hyperlocal on-demand delivery model, you can serve customers their expectations with a heaping side of benefits that they didn't expect, like discounts and offers laid out by local vendors. 

Speaking of local vendors, this delivery system also allows you to use typically underused local vendors and severely reduce the wastage of resources. The hyperlocal on-demand delivery model has helped many companies provide a wider range of delivery options and truly maximize their order fulfillment.