Created on September 2, 2022
Although constant fluctuations in fuel price hikes are healthy, the recent drop of 13% in fuel prices in the UAE is good news for logistics businesses, food delivery providers, and grocery delivery brands.
Fuel price hikes in UAE have been the center of global attention for months. It posed significant challenges for businesses when it came to keeping delivery charges minimum. After all, choosing between cost and customer experience is never easy. And a harmonious marriage between the two needs a lot of work.
For instance, delivering to your customers with the same service levels when logistics costs are hitting through the roof gets difficult. It is one reason why even the likes of Amazon and Uber Middle East had to relook at their pricing structure to share the cost burden with distributors and other stakeholders involved.
So, while passing the cost baton to customers is not a good option, bearing the pain all by yourself seriously impacts the bottom line. Having said that, businesses that rapidly embraced advanced logistics management tools were able to save their customers from bearing the burden of fuel price hikes.
For instance, using AI, ML, and automation-powered route optimization, businesses in the UAE were able to shrink last-mile costs by 12%, reduce trip volumes by 6%, boost deliveries per driver by 14%, and shrink fuel consumption by reducing the overall distance traveled by 5%. Achieving these efficiencies drastically reduces delivery costs while ensuring customer demands are met.
Let’s look at how the plunge in fuel prices will affect logistics-powered businesses and food and grocery delivery providers.
Lesser Cart Abandonment: High shipping costs are the primary reason visitors leave without completing a purchase. An unprecedented rise in barrel costs leads businesses to devise ways to mitigate the risk of any business loss by pushing some part of these costs onto customers. The result is an increase in the shipping fees, which plays a critical role in the cart abandonment rate in UAE. As per research, even a Dh1 increase in delivery costs slashes customers’ net value by 75%.
As cost curves lower in intensity, businesses are less likely to see cart abandonments driven by high shipping costs. More sales efforts will materialize, and carts will convert to orders.
Low/no delivery fee: The promise of 30-minute delivery comes with a delivery charge ranging from Dh 5.5-11. This can range from 5-15% of the total cost for eCommerce transactions. An increase in fuel price has a direct impact on delivery fees. For every 5% hike in fuel price, delivery charges can go up by 1%, a significant number in this part of the world.
To know ways to safeguard your customers from unprecedented fluctuations in fuel prices, read this.
Technology-backed logistics management processes combined with lower fuel costs will introduce opportunities for companies to boost delivery profitability and increase customer loyalty drastically.