Hyperlocal Delivery Model: Evolution and Innovation of Neighborhood Deliveries

Updated on: Feb 16, 2023

The hyperlocal services market size was valued at $1,324.2 billion in 2019 and is estimated to reach $3,634.3 billion by 2027, registering a CAGR of 17.9% from 2021 to 2027. – Allied Market Research, Hyperlocal market services by type, 2021-2027

The past few years have seen convenience play a big role in the consumer’s shopping experience. With a few clicks, we get food, grocery, household essentials or medicines delivered to our doorsteps within minutes. The delivery business model that works behind these lightning-speed deliveries is the hyperlocal delivery model.

What is the hyperlocal delivery model?

The Hyperlocal delivery model is an on-demand delivery service that focuses on delivering goods from local merchants to customers within a small geographical area. It typically involves the use of technology platforms, such as mobile apps and websites, to connect customers with nearby merchants and couriers for fast and efficient delivery.

• Food delivery
• Grocery Delivery
• Vegetable and Fruit Delivery
• Home services like cleaning, repair, salon services, pest control, maintenance
• Pharmacy, etc.

The major USP of hyperlocal delivery is the geographical boundary and the delivery timeline. E-commerce models do not prioritize customers’ immediate needs and impulse purchases in short timeframes. They operate on a larger scale for fulfilling customer needs that are not too urgent.

For instance, if a customer wants a sanitizer urgently, they cannot get it from a regular e-commerce vendor within an hour. But a hyperlocal vendor can accept this order, and deliver the product to the customer within a maximum time frame of 90 minutes.

https://blog.locus.sh/how-to-build-business-around-a-hyperlocal-ondemand-delivery-model/

How does the hyperlocal delivery model work?

Hyperlocal delivery businesses fulfill orders of customers belonging to a specific geographical area. E-commerce companies build partnerships with local retail stores to deliver orders quickly to customers. The visibility of retail stores involved in hyperlocal deliveries is within that specified locality covering a specified radius of the delivery area.

For a product to reach customers doorsteps using hyperlocal deliveries, there is a process involved.

• Retail outlets (grocery stores, hotels, pharmacies, etc.) establish a partnership with e-commerce players and delivery agents 
• Once customers place orders, it is forwarded to a retail outlet by the e-commerce partner 
• The retailer then  packs the order and keeps it ready for delivery
• As the package gets ready for delivery, it is assigned to delivery agents
• Delivery agents pick up the parcel and deliver it to customer locations

Overview of hyperlocal delivery services

Hyperlocal businesses that were once startups have seen massive growth since the pandemic as they offer convenient delivery experiences by partnering with neighborhood retail stores.

Factors behind the success of hyperlocal delivery businesses

Hyperlocal deliveries have come a long way since 2015. Today these delivery services are executed in just 10 minutes. Some of the reasons behind the massive success of hyperlocal business model in developing nations include:

• Improvement in logistics infrastructure 
• Increasing mobile internet users
• Penetration of smartphones 
• Growing urbanization 
• Improved lifestyle
• Changing consumer preferences
• Increase in business digitalization 
• High funding for e-commerce businesses

Why do retail businesses opt for hyperlocal delivery models?

There are some interesting reasons for retail businesses to use hyperlocal delivery services such as:

• An opportunity to optimize sales
• Improved business growth with minimal efforts
• To build a sustainable delivery ecosystem
• Easy to get orders on a unified app-based marketplace

Difference between hyperlocal delivery & last-mile delivery

Points of difference	Hyperlocal deliveries	Last-mile delivery
Definition	Hyperlocal deliveries involve the delivery of goods directly from sellers to consumers. It may even involve delivery partners or courier agents picking products from sellers and delivering them to consumers.	Last-mile delivery is the final leg of the fulfillment process that deals with transporting packages from a central distribution hub to a customer location. It is the final leg before the order reaches the customer. All hyperlocal deliveries are last-mile deliveries, but not vice versa.
Area of Delivery	Hyperlocal deliveries are made within a 5-15 km radius and are much smaller compared to last-mile delivery. Even intra-city deliveries take place when the distance of deliveries is greater than 20 km.	Last-mile delivery agents can travel up to 30 km to deliver goods to customers. The area of last-mile delivery depends on the location of the central transportation hub.
Time taken for delivery	The geographical perimeter is smaller for hyperlocal deliveries compared to last-mile delivery, so the time taken to deliver a product is 2-3 hours or 6-8 hours maximum.	Depending on the distance, the resources at hand and priority, delivery time can vary from 12-16 hours to the next business day.
Volume and weight-based restrictions	Hyperlocal deliveries have a cap of 10-12 kg as products are delivered through two-wheelers and three-wheelers and these weight restrictions may vary for different businesses. When product weight exceeds the predefined number, extra delivery charges are added.	The delivery charges in the last mile are based on volume and metric weights and there are no extra charges levied from sellers.
Type of products	Being carried out in a small area and with shorter delivery times, essential and perishable items are best suited for delivery through hyperlocal delivery models.	All types of non-essential and durable products are delivered through the last-mile barring perishable products like fresh food items, meat, etc.

What are the critical aspects of hyperlocal delivery service?

Higher adoption of hyperlocal deliveries is seen in industries like food, grocery, medicines and meat. Many organizations are now looking to launch their own hyperlocal models for saving profit margins. With large enterprises and retailers increasingly adopting hyperlocal delivery services, the biggest concern for them is to balance service quality and costs. Apart from this concern, there are some crucial aspects that businesses in hyperlocal deliveries should address.

Effective demand management

The fulfillment and inventory management in hyperlocal deliveries differs when compared to a traditional brick-and-mortar setup. Businesses in the hyperlocal delivery model have to rightly balance their foot traffic and delivery demands effectively. Whether they own a delivery workforce service in-house or partner with a delivery business, they should effectively manage their fleet to changes in demand.

Adherence to Expected Time of Arrival (ETA)

With access to customers in the vicinity, businesses should strictly follow the ETA and deliver orders on time as it determines the quality of customer experience.

Error-free delivery scheduling

To make deliveries on time, it is crucial for businesses to schedule the right set of delivery agents at the right time to deliver. As delivery volumes increase and the customer base expands, it is crucial to schedule and make deliveries in an error-free way, which requires proper technological support.

Challenges of hyperlocal deliveries

Despite the growing appeal among customers and sellers, hyperlocal deliveries have faced considerable hurdles, all of which have increased complexities and inefficiencies in the delivery processes.

Inefficient delivery workforce management

Businesses in hyperlocal deliveries are tested when they encounter a larger number of orders.  With fewer dedicated delivery workers, it becomes difficult for them to handle orders.

Ineffective route management

Incorrect addresses and inefficient delivery routes are the biggest obstacles to hyperlocal deliveries. It becomes difficult to make faster deliveries without a proper tracking mechanism and optimal routes.

Lack of flexibility in delivery operations

The frequency of orders changes and there are special occasions when order volumes spike. There are even unexpected times when order volumes can go up. A major difficulty for businesses in hyperlocal deliveries is their lack of flexibility to handle volatile demand.

Saturation in delivery expansion

For retail outlets operating in a hyperlocal business model, it is difficult to expand their delivery services at a far distance. Businesses can only engage with customers in a limited geographical area and have fewer options for delivery expansion like opening new outlets.

Managing varied delivery preferences

With spiking order volumes, it becomes challenging for businesses to manage the varied delivery preferences of customers. It drives up operational costs and makes fleet operations burdensome for the delivery workforce.

Emerging trends in hyperlocal deliveries

The demand for fast and convenient delivery options has led to the growth of hyperlocal delivery services, which aim to meet the needs of consumers in a localized and efficient manner. With the advancements in technology, the expansion of the gig economy, and a focus on sustainability, the future of hyperlocal delivery is poised for continued growth and evolution. These are some of the recent trends shaping the future of hyperlocal delivery:

Increased demand for same-day and on-demand delivery

Consumers are becoming increasingly impatient and are demanding faster delivery times. To meet these demands, hyperlocal delivery companies are offering same-day and on-demand delivery options, which have become extremely popular.

Growth of last-mile delivery technologies

The development of new technologies such as drones and autonomous vehicles has led to an increased focus on last-mile delivery solutions. These technologies are helping companies to improve delivery speed and efficiency, while also reducing costs.

Expansion of the gig economy

The gig economy, where people earn money through short-term, flexible jobs, is growing rapidly. Many hyperlocal delivery companies are taking advantage of this trend by building out their delivery fleets with gig workers.

Integration with e-commerce platforms

Hyperlocal delivery services are increasingly integrating with e-commerce platforms to provide a seamless shopping experience for consumers. By leveraging the reach and capabilities of e-commerce platforms, hyperlocal delivery companies are able to expand their reach and offer a more convenient delivery experience.

Personalization and customizations

Consumers are looking for delivery options that are tailored to their specific needs and preferences, and hyperlocal delivery companies are responding by offering personalized and customized delivery solutions. This includes options such as choosing specific delivery times and locations, as well as delivery tracking and notifications.

Can the hyperlocal model be sustainable?

While the focus on sustainability and eco-friendliness has become one of the more pressing concerns in the light of climate change, there is the bigger question of whether it is even possible for the model to be sustainable.

Hyperlocal delivery models have greatly impacted the way we consume food, but there are debates about their sustainability. The average ticket size for meal-kit or grocery delivery in India is not high enough for restaurants to pay for 3PL delivery services. Some businesses have chosen to handle deliveries in-house, but for most, using 3PLs is a more viable option. To make hyperlocal 3PLs more sustainable, real-time order clubbing can help increase per delivery profitability.

However, this requires order clubbing across multiple businesses while maintaining customer SLAs. Smaller businesses are vulnerable to poor service standards by 3PLs, but cross-subsidization can be a solution.

How a dispatch management software helps businesses efficiently manage hyperlocal deliveries

With shorter delivery times and tighter delivery windows, it is often difficult to manage hyperlocal deliveries and satisfy customer expectations. As businesses in hyperlocal delivery models struggle to balance customer preferences and rising operational costs, it is the right time to adopt the technology for a better delivery experience.

Dispatch management software comes in handy for hyperlocal businesses that want to optimize their delivery process and gain a large share of revenues by incurring lesser operational costs. Read on to find out how.

Data insights to forecast demand and expansion

The most crucial factor towards the success of hyperlocal delivery is how a business manages its demand. To effectively manage demand over time, data insights are indispensable. Sellers and retailers involved in hyperlocal business need data from various localities in an urban area to estimate the future demand for their goods.

With the help of dispatch management software, retailers and delivery partners can get insights on customer orders. They can analyze past data to know on which days and times they received a greater number of orders so that they could fill their stocks appropriately. Using its insights on high-priority orders and tight delivery windows, it can manage their future fleet operations effectively.

Example

A retail outlet involved in hyperlocal deliveries with the help of dispatch management software finds out that it receives more than 45% of orders outside the delivery radius of 20 km from the shop. It becomes difficult to manage as hyperlocal deliveries can only be handled in small delivery areas. But the data generated from a dispatch software allows them to set up another retail outlet in that area. Using the dispatch solution, businesses in hyperlocal deliveries can forecast demand and plan their expansion.

How to Keep the Promise of Same-Day Grocery Delivery

Adds more visibility and automates the delivery process

When a retail outlet or delivery partner in a hyperlocal business starts receiving more orders, they suffer from visibility and managing the delivery process. Failing in either one of them or both of them would lead to fall in revenues.

A dispatch management software with its end-to-end tracking abilities provides a comprehensive view of their supply chain. By tracking on-ground executives, it helps sellers or delivery partners eliminate delays, rectify inefficiencies and manage their ETAs. Its automation capabilities help them effectively assign drivers and vehicles based on delivery constraints and Service Level Agreements (SLA). By adding more visibility and increasing automation, dispatching software helps businesses in hyperlocal models to avoid failed deliveries.

Rightsize fleets and maximize their utilization

A hyperlocal delivery model’s cost savings and profit margins depend on how a business utilizes its fleet.

Dispatch software allows hyperlocal delivery businesses to decide on their optimal fleet size. Its Artificial Intelligence (AI) capabilities calculate constraints, goals, and past delivery performance and provide fleet utilization recommendations. Based on its analytical insights, it can rightsize its fleet and maximize its utilization without burdening the drivers or compromising the SLAs.

Makes communication effective and transparent

Communication in logistics becomes effective when a customer feels that they are an integral part of the delivery chain. This happens when they get timely updates on their deliveries. Communication and the overall customer experience become even more effective when customers are given the option of rescheduling their delivery preferences.

With dispatch management software, hyperlocal delivery businesses can update their customers prior to any operational or unexpected delivery delays. Whenever customers make rescheduling requests, it enables them to effectively manage rescheduled orders without affecting the SLA targets of scheduled orders.

Dynamic optimization of delivery routes

Hyperlocal deliveries require efficiency at every step as the time windows for deliveries are tighter when compared to last-mile deliveries. With the rise in order volumes, it becomes difficult for businesses to manage operational costs for hyperlocal deliveries. Especially since rising fuel costs and increasing, empty miles can impact profitability.

How Implementing a Logistics Dispatch Software Can Improve Your Last-Mile Efficiencies

A dispatch management software generates optimal routes after factoring in traffic updates, vehicle capacity, delivery time windows, delivery locations, driver breaks, number of parcels and other real-world constraints. By mapping optimal routes for each driver reduce the delivery time and minimizes fuel costs. It helps delivery managers dynamically reroute deliveries when there are last-minute delivery changes without burdening their resources and increasing empty miles.

Future of hyperlocal deliveries

Retail businesses adopting hyperlocal delivery models will become more accurate in audience targeting. They will gain increased traction by catering to lucrative demographics and with insights from the psychographic segmentation of their customers.

Many e-commerce and retail giants are moving toward the hyperlocal delivery model because they see an opportunity to capitalize on the customer loyalty that smaller stores enjoy. The future of hyperlocal delivery looks promising for sellers and customers due to the following evolving trends. 

E-commerce giants will redefine last-mile delivery

E-commerce giants will be re-exploring new opportunities in last-mile delivery. They will build a combination of locally owned warehouses that are integrated with local stores for a robust supply chain framework. They may acquire retail stores in different cities and build hyperlocal delivery chains.

Hyperlocal deliveries will be explored in non-essential goods

Some retail outlets will start to extend the hyperlocal deliveries to categories like apparel, cosmetics, liquor, etc. Instead of being exposed to large crowds in places like malls, fashion stores or supermarkets, businesses could think of executing a hyperlocal delivery strategy.

Hyperlocal deliveries will help non-essential retail businesses expand their online presence and broaden their customer base. It will offer a unique opportunity for businesses to utilize new technologies and increase their customer reach.

Retail outlets will expand storage spaces

In order to keep product flows perennial, retail outlets will consider expanding their storage facilities.We may see retail stores creating separate storage spaces near their physical stores for hyperlocal delivery and omnichannel options like BOPIS (Buy Online and Pick Up In Store).

Increase in the adoption of AI-based technologies

The hyperlocal delivery business model will see increased Artificial Intelligence (AI) technology adoption. The profitability of businesses involved in hyperlocal delivery depends on two factors. They are:

• Route Density: The number of packages delivered on a given delivery run
• Drop size: The number of parcels or items delivered at each stop.

Real-time dynamic routing software is an application of AI that can majorly benefit the hyperlocal delivery industry. It enables businesses to execute on-time and cost-effective deliveries leading to quicker turnaround times. It factors various constraints like pickup windows, delivery window preferences, no-entry time, waiting costs, tonnage, driver-route mapping, etc. before designing optimal route plans.

This dynamic routing software enables businesses to assign hyperlocal orders based on driver proximity, service time constraints and capacity. By proactively assigning highly efficient routes, it helps them reduce empty miles driven, optimize the productivity of delivery professionals and eliminate the idling time of vehicles.

AI helps hyperlocal businesses with improved network planning, capacity planning and demand forecasting. Its insights help them rightsize the total number of vehicles needed for transport in a particular route and direct them to delivery locations where demand is expected. It cuts down operational costs and reduces complexity in the hyperlocal supply chain.

Conclusion

The adoption of a logistics technology like dispatch software is increasing among businesses involved in hyperlocal deliveries. The hyperlocal delivery space is becoming more competitive as customers demand more convenience. With the help of these technologies, they are effectively mitigating the complexities and inefficiencies of hyperlocal deliveries that stop them from providing an extremely satisfying customer experience.

Locus’ Dispatch Management Platform has helped businesses in the hyperlocal space to improve the operational efficiency of their deliveries. Its real-time fleet tracking and timely alerts assist delivery managers in making accurate and quick operational decisions. Its dynamic route recommendations enable companies to improve their on-time delivery rates without driving up operational costs or burdening their resources.

To meet your promised SLAs without driving up operational costs, try a demo with Locus!