Hyper Local Supply Chain

HyperLocal supply chain as the name suggests is a supply chain that is used to provide
convenience and efficiency to both supplier and buyer through on demand deliveries in a
short span of time. Such supply chains are located in close proximity of the seller and buyer
and are used to serve a limited geographical area.
It is generally located in areas with high population and high retail density. The products are
services are locally sourced and delivered to the customers in the shortest span of time
possible. This model opens the doors for a number of small-scale businesses.
The USP of Hyper Local supply chains is their speed as they are able to deliver at
unbelievably fast speed and Trust as the consumer is put in a position where they can see
and understand all the steps of the supply chain from purchase to sourcing to delivery.
Consumers know where the product is made and most likely who will be delivering it to
them.

Opportunities: During the pandemic, there was a huge shift in the pattern of how customers
started purchasing. Due to the ongoing restrictions and lockdowns, customers shifted to
online mode of shopping and especially to hyperlocal businesses to get the essential
products and services delivered at the earliest.
This is the right time to get online, especially for offline merchants who might be facing
business ups and downs during this crisis. It’ll be a fully wise decision to starting with an
online business today so that even after the COVID19 crisis, you can get better growth.
Given the very focused geographic spread of a hyperlocal space, the local ventures are
almost guaranteed visibility and customers until they ensure good product and service
quality.
The hyperlocal supply chain is a promising venture for on-demand delivery. This model is
appealing enough for your online business to engage and fulfil faster deliveries.
Challenges:

 Increasing competition as a greater number of players are entering the market.

 Fleet management can be cumbersome and also the resources spent on the
management can be a lot.
 Irregular Operations as the hyperlocal deliveries are extremely scattered and see
seasonal spikes.
 Even though hyperlocal model provides the required visibility to stores, sellers have
to shell out additional costs for getting their products listed on these marketplaces. 
 Fight for exclusivity
 Hyperlocal delivery sellers do not have a huge profit margin on their sales.
Therefore, investing in elaborate offline marketing can be a challenge.
 Difficult expansion as the scope of hyperlocal model is limited a small geographical
area.
  The delivery people are not long-term loyal workers and hence constant hiring and
training process is a huge challenge and adds to the cost.
Examples:

Dunzo:  

This amazing Bangalore-based start-up was founded in 2014 by Ankur Agarwal, Dalvir Suri,
Kaber Biswas, and Mukund Jha.
They started taking orders on WhatsApp, but as the business and the customer base
increased, they switched quickly to an omnichannel model, marking presence with the
Android app, iOS app, and website. 
Dunzo has diversified its revenue stream into five significant streams.

1. Commission Rate– Dunzo charges a specific commission from the partner store per order;
this commission rate can vary from 15% to 30%.

2. Delivery Charge– Delivery charges range from Rs. 10 to Rs. 60 depending on the distance
and the order value.

3. Surge pricing/ Demand pricing– If the demand in an area increases suddenly, then surge
pricing is applied for that area.

4. Service– Repairs, home service, etc.

5. Miscellaneous Category– This is the #kuchbhi request category launched by Dunzo, thus

the customer for Dunzo can be a 65-year-old man ordering medicines or 12-year-old kid
ordering notebooks.

Dunzo calculates the number of orders per kilometre to decide whether to keep serving a
PIN code as density is an important notion in on-demand delivery. About 500 orders per
kilometre makes economic sense. Anything less would mean delivery persons are covering
longer routes, which makes it uneconomical.

Uber Eats:
Uber Eats is a three-sided hyperlocal marketplace connecting a driver, a restaurant owner
and a customer with Uber Eats platform at the centre.
1. Restaurants pay commission on the orders to Uber Eats.
2. Customers pay the small delivery charges and at times, cancellation fee.
3. Drivers earn through making reliable deliveries on time.

Key Highlights about Uber Eats are:

 Fast delivery: Uber Eats promises to deliver within 30 minutes in most of the cities
where they are currently operational. It works on the principle that “We don’t want
your food traveling halfway across town.”
  No minimum order concept: The customers can order their favourite snack instead
of a full meal. The standard delivery fee ensures that all orders are fulfilled
irrespective of the order value.
 Existing customer base: They already have millions of active Uber users across the
globe who can be potential Uber Eats users.
 Better utilization of Uber’s resources: They already have cars/drivers on the road
and an effective system to manage it. The inclusion of Uber Eats will only help to
increase the utilization across Uber’s different verticals. For example, a cabbie who
just finished a trip may handle a food delivery order right afterward.
 A top-class algorithm: It has a neatly organized algorithm for order management,
order allocation and order dispatch.

Revenue Streams for Uber Eats:

 Standard Delivery Fee OR Convenience Fee: Uber Eats charges a delivery fee
from its customers irrespective of the order value.
 Recurring Revenue Share from Restaurant Partners: Uber Eats takes a cut of 15%
to 40% on every order that is fulfilled from the Restaurant partners. 
 Marketing & Advertising Fee from Restaurant Partners: Uber Eats provides more
access to its restaurant partners and at the same time enables them to reach out
to a larger customer base by providing them marketing through various means
and charging for the same.
Source:
https://www.shiprocket.in/blog/hyperlocal-delivery-challenges/
https://www.livemint.com/news/business-of-life/the-fall-and-rise-of-startups-in-the-
hyperlocal-delivery-space-11605447484485.html
https://www.supplychain247.com/article/3_things_you_should_know_about_hyperlocal_s
upply_chains
https://fourweekmba.com/uber-eats-business-model/