How Much Does It Cost to Create an On-Demand Delivery App?

The modern e-commerce market has shown sustainable growth over the recent years, and that growth has been greatly accelerated by the coronavirus pandemic. A report by eMarketer stated that in 2019, retail e-commerce sales reached $3.5 trillion worldwide, accounting for 14% of total retail sales, and projected e-commerce sales to reach 16% of total retail sales in 2020. But the global situation in 2020 has totally reshaped the retail market, causing the e-commerce sector to grow by nearly 20% in 2020.

The increase in online shopping has also meant a growing demand for package delivery. Logistics companies are seeking to become end-to-end solution providers and are starting to offer last-mile services, delivering parcels right to customers’ doorsteps.

XPO Logistics, the leading third-party logistics provider globally, has added new last-mile capabilities to its XPO Connect freight platform. In 2018, shipping giant Maersk shared their intention to add parcel delivery to their list of services, and they soon made good on this promise. Following the example of market leaders, more and more logistics companies are thinking about becoming end-to-end business-to-business (B2B) and business-to-customer (B2C) logistics providers. 

The Maersk app

Previously, we’ve talked about the technical side of entering the B2C market. Now let’s look at the business side. We’ll discuss the current market situation, the cost of building an on-demand delivery solution, and ways to make your business successful.

Market analysis

The global courier, express, and parcel (CEP) market reached ‎€330.4 billion in 2019 and is projected to grow at a CAGR of around 6% between 2020 and 2025 according to Research and Markets. CEP companies use business-to-business, business-to-customer, and customer-to-customer (C2C) business models, combining them with various value-added services.

The growing popularity of e-commerce and the fast growth of cross-border trade are among the key factors driving the rapid increase in the size of the CEP market. E-commerce stores usually partner with courier service providers to deliver their products to domestic and international locations. Additionally, technological advancements including the use of internet technologies with crowdsourced delivery models are creating a positive outlook for the CEP market. 

We can divide the leaders in this industry into three distinct categories:

  • Established delivery companies with a strong market presence. This category includes three market leaders — UPS, DHL, and FedEx — that in 2018 handled 91% of courier and local delivery services globally according to Statista. Despite the dominant positions of these firms, however, the global logistics market is highly competitive and presented by other logistics providers. 

  • Startups. On-demand delivery startups like Uber, Postmates, and ZigZag provide a broad range of services, delivering parcels, food from restaurants, and even groceries from local stores. Typically, startups offer local delivery. 

  • Third-party logistics companies looking to diversify their services. These logistics providers want to solve the empty leg problem, generate additional revenue, and smooth out customer demand. They’ve started working not only for business customers but also for individuals. Third-party logistics companies can handle either domestic or international shipments — or they can handle both. Existing logistics companies have a competitive advantage over startups as they have a deep understanding of the logistics market, fine-tuned business processes, and fleets. Maersk is an example of reputable logistics providers that have started providing courier services for individual customers.

Let’s take a closer look at third-party logistics companies and calculate how much they’ll spend on entering the B2C market.

Cost of creating an on-demand delivery app

Let’s assume you’ve decided to provide on-demand delivery services. To organize your staff’s work efficiently and provide an excellent user experience, you should create a solution consisting of three elements:

  1. Client portal — Build a convenient mobile-friendly web application where users can create, edit, and track orders in real time. 

  2. Management portal — Allow logistics managers to build routes and manage all orders at a glance. 

  3. Courier app — Create a feature-rich Android, iOS, and web app for drivers. For more on this topic, read our guide on how to create an app for couriers.

Let’s calculate the cost of developing these three components. To do this, we’ve made the functional decomposition and calculated the effort and price to build each function.

Key features for an on-demand delivery app

A courier app should provide quick access to goods or services. The most important features of an on-demand delivery app are:   

  • Instant quotes

  • Order placement

  • Delivery scheduling (Users should be able to choose time frames when their orders will be delivered. This complicates route optimization but improves customer satisfaction and decreases the number of failed deliveries.)

  • Delivery tracking on a map 

  • Payment for deliveries (via Google Pay, PayPal, credit card, cash)

  • Feedback on deliveries

  • Delivery notifications

Give special consideration to mobile friendliness. M-commerce now amounts for 67.2%  of total e-commerce sales according to Oberlo. Moreover, this rate is projected to hit 72.9% in 2021, meaning nearly three-quarters of all e-commerce purchases will be made through mobile devices. To capture these sales, you can create a native iOS or Android app or at least develop a mobile-friendly responsive web application. 

The problem with some delivery services is that they totally neglect the user experience in the driver app while putting all their focus on the customer app. Don’t make this mistake; build an app for drivers with usability in mind.

The features your driver app should include:

  • Onboarding

  • Dashboard with all orders

  • Automatic invoice generation

  • Proof of delivery

  • Payments

  • Location awareness

  • Convenient navigation

  • Crash detection

The Courier exchange driver app

Last but not least is the admin panel, where logistics managers can manually edit hubs, driver information, and orders. When creating a delivery and logistics platform for one of our clients, we made a feature-rich web-based admin panel for logistics managers that includes the following must-have features: 

  • Quote calculator for several types of quotes (economy, same-day, etc.)

  • Employee management

  • User management

  • Manual and automated route planning 

  • Delivery zone management

  • Customer support

  • Price and formula configuration for quote calculations

To make apps scalable, we deploy them in the AWS cloud. Using cloud computing services, you can easily expand to new locations without worrying about system downtime. You should take this into consideration when you calculate the final price of the platform.
Cost of the on-demand delivery app

If you want to stuff your delivery apps with other features and are curious about the cost of an app with custom functionality, contact us. We’ll provide you with a free quote for your custom delivery platform. 

Increasing the cost-effectiveness of delivery and logistics services

Last-mile delivery is one of the most expensive parts of the supply chain, accounting for 53% of overall shipping costs. Here are some tips on how you can cut the costs of last-mile delivery and realize a fast return on investment:  

  • Optimize route planning. Building a cost-effective route for a fleet greatly reduces fuel costs and improves driver productivity. On the other hand, logistics managers can spend several hours a day optimizing routes. This leads to increases in operational costs and can result in delays. You can greatly facilitate route optimization by creating or implementing a sufficient routing algorithm. For instance, with the route planning algorithm we created for Smart Logistics, work that took a logistics manager two to six hours every day is now done by a route optimization algorithm in 30 minutes. If you want to learn more about implementing route planning functionality, read our recent article on how to optimize in-app route planning.

Mapbox route planning

  • Decrease the number of failed orders. Before seeking a solution to failed deliveries, you should first find the root cause. One of the most frequent problems is customers being away from home. To eliminate this problem, implement push notifications to alert customers that their orders will soon be delivered. Also, allow customers to choose time frames when they’ll be home. These simple features can greatly reduce the number of failed deliveries.

Read also: Implementing Push Notifications in Your iOS or Android App

  • Use energy-efficient transportation. One more option to save delivery costs is to use bikes. UPS recruits bike couriers to deliver small packages. Bike couriers are in demand, and this job is a great fit for students looking to earn some money. Delivery by bike cuts costs, as bike maintenance is much cheaper than car maintenance.

  • Hire seasonal couriers. Demand fluctuation is another problem for package delivery businesses. There’s always a rise in shipments before Christmas, while in summer demand falls. This results in both inefficient use of warehouse space and an insufficient number of couriers in high seasons, resulting in overtime, unhappy customers, and broken delivery deadlines. One possible solution is hiring seasonal contractors like UPS and FedEx do. This year, UPS plans to hire 100,000 seasonal contractors before Christmas.

Read also: Writing a Request for Proposal to Your Potential Software Partner

Making your B2C business successful

To compete on the crowded CEP market, you should find the right strategy for attracting and retaining users as well as for retaining drivers. We’ve gathered some top tips that can help you do this.

Tips for growing your user base

Regardless of their niche, on-demand services promise cheaper and faster delivery. This is where their competitive advantage lies. In order for your business to also hold this competitive advantage, you should do the following:

- Advertise your new service even before launching your app. Use all promotional channels including social media and engage in public relations. Another great idea is to acquire users through an in-app referral program. With a referral program, your customers can invite friends to use your app and get a free delivery in return, for example.

- Collaborate with retailers and manufacturers. This is a great way to grow your user base. The direct-to-consumer segment in the US is showing growth, D2C sales have grown up from $6.85 billion in 2017 to $14.28 billion in 2019 according to Statista. What’s more, this number is forecasted to reach $21.25 billion in 2021. And with manufacturers looking for ways to deliver goods directly to consumers, a manufacturer partnership would be a win-win scenario. 

Tips for retaining customers

Statistics for delivery companies show that customers are loyal. Once they’ve tried a company, they tend to stay with it. Few people want the inconvenience of trying out a new delivery company if they’ve already found one that can satisfy their needs. Reliability and impeccable customer service are the two most important ways for an on-demand delivery app to retain customers. Here are a few things that will help you win trust and increase your attractiveness.

- Provide great customer support. Customers should receive quick and friendly responses to inquiries or complaints. Make sure your customer support is easily accessible from your app.  

- Make special offers. Customers will want to use your app again if they can get discounts, vouchers, or gifts. These special offers can be implemented via loyalty programs. For example, you can give your customers higher discounts if they use your app longer.

Ensuring a seamless user experience

There are things to remember when designing an on-demand delivery app.

Tips for main screens and components

Most cargo delivery apps have a number of screens and screen components that – with slight variations – can be found across all apps of this class. In our experience, it can be difficult to decide where to focus your attention, especially if your company is starting with an MVP. That’s why we’ve narrowed  the options down for you to the six most essential components:

  • list of orders – a list of delivery orders that can be sorted through and bid on by contractors; appears on the first screen

  • delivery card – an individual entry within the list of orders; each delivery card shows the most important information about the particular order

  • delivery details – additional information that unfolds underneath the delivery card itself and that contains complete  information about the order: client name, order status, current bids, category of goods and weight of the cargo, destination, etc; this part of the screen changes to reflect the status of the delivery

  • delivery dashboard – a screen that appears only after the client and the contractor have agreed on the order details, and the delivery has been initiated. The Delivery Dashboard is a simplified version of the Delivery Card, with a map of the delivery route and the delivery status

  • quotes – a list of delivery cards that a particular contractor has accepted

  • active deliveries – a list of deliveries that are in progress

Tips for navigation design for different user roles

Different types of users will use cargo delivery apps in different ways. A driver will use the app on the go, and almost certainly on a mobile device. A client might place an order on their desktop, then follow its progress on a mobile device. How do you account for different environments and contexts?

The first step is to define your user roles. The three most typical user roles for a cargo delivery app are:

  • transportation provider – the driver who accepts the order and delivers the cargo to its destination.

  • dispatcher – the user who accepts orders and shares them with transportation providers. In some apps (such as Uber), the role of dispatcher is omitted and drivers accept orders directly.

  • client – the person who orders delivery of their cargo; clients may be individuals or companies.

Transportation providers and clients are most likely to use apps on the move, and therefore their primary devices are mobile phones (or perhaps tablets). Keeping this in mind, we came up with a list of recommendations for designing navigation in cargo delivery apps:

Tips for status tracking design

People expect regular updates from delivery apps. So what’s the easiest way to provide routine updates to users without being intrusive? We recommend a delivery dashboard.

After a transportation provider and a client have agreed on the details of a delivery and the delivery is in progress, the driver already knows all the pertinent details about the shipment. Therefore, information about size and weight are of secondary importance at this point. As we can see, it’s important to keep the dashboard clean so a driver can easily find relevant information.

We recommend that a user dashboard focus on the following:

  • Visual display of delivery status

  • Visualisation of the delivery route

  • Communication with the delivery crew

Offering a comprehensive dashboard, you can provide customers with convenient access to all necessary data and keep users informed about delivery status.

Tips for the core features

Go with swipe gestures, because swiping is faster and more convenient than traditional buttons when the app is used on the go.

Make sure the tab bar doesn’t contain more than three or four elements, as more buttons make it easier to mistap.

Place secondary features (settings, profile info, message archives) under a “More” button.

If we use such a minimalist navigation system, we’ll be able to save the action bar space for search and notifications. Secondary features can be transferred to side menus, or you can add a “more” button to one of the four parts of the tab bar.
design for daytime and nighttime regimes
Deliveries happen in all kinds of weather conditions, so the delivery app has to be comfortable to use both when it’s bright and sunny and when it’s dark and stormy. When the app is used during the day, the screen should be bright. When the app is used at night, it shouldn’t blind users.

We can solve this issue with alternate color schemes that are activated automatically based on the level of ambient light. Similar solutions are used in car navigation systems, running trackers, and navigation systems for planes and boats. Alternate color schemes make the app easy on the eyes.

As you can see, starting a courier delivery service can be challenging. But with the right strategy and a reliable development partner, you can quickly return and even double your money. If you’ve decided to enter the B2C market and want a technical consultation on your idea or price of an app, we can help you. We have a proven track record of developing logistics apps and can help you add courier delivery to your list of services.

 
 
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