Last-mile Delivery Services Increase Base Prices as Fuel Costs Rise

Last-mile delivery services across Nigeria are facing a significant challenge as they increase prices in response to rising fuel costs.

The surge in fuel prices has compelled many logistics companies to reevaluate their pricing structures, leading to a wave of price hikes that could affect consumers and businesses alike.

This adjustment is crucial for maintaining operations amid escalating operational costs.

Rising Fuel Costs Affect Delivery Services

The economic landscape in Nigeria has shifted dramatically due to soaring fuel prices, prompting companies like Remedial Health, a health-tech startup, to notify customers of necessary adjustments in their delivery processes.

In an email to clients, the company acknowledged the impact of these economic conditions on their services, stating, “In light of the current economic conditions, particularly the significant rise in fuel prices, we find it necessary to adjust our delivery process.”

Several logistics providers have confirmed that they are either raising delivery prices or planning to do so.

For instance, Fez Delivery recently announced a price increase from ₦2,500 ($1.52) to ₦3,075 ($1.88) for deliveries weighing between 0 and 5 kg—a 23% increase.

CEO Seun Alley explained the rationale behind this decision: “Our prices definitely have to change. But what we want to do is to ease our clients into that phase. So, at the moment, we are taking serious blows to keep operations running.”

Last-mile Delivery Services Increase Base Prices as Fuel Costs Rise

Challenges of Price Sensitivity

The decision to raise delivery service prices is particularly challenging for last-mile delivery companies operating on thin margins.

Many customers are sensitive to price changes, which can lead them to seek alternative delivery methods. Seun Omotosho, COO of Gokada, noted that some customers prioritize cost over speed when choosing delivery options.

“Depending on the urgency required, some customers don’t mind going for the least priced service when items to be sent are not needed urgently,” he said.

As a result of these price increases, some consumers have begun relying on public transport for their delivery needs.

Olawale, an online vendor specializing in phones and gadgets, shared his experience: “I now use public transport to aid my business because DHL prices jumped from ₦12,000 to ₦14,000 for phones and for laptops from ₦12,000 or ₦13,000 to ₦21,000.”

This shift indicates that customers are actively seeking cost-effective alternatives as last-mile delivery services adjust their pricing.

Strategies for Retaining Customers

To navigate these challenging times and retain their customer base, last-mile delivery companies are exploring various strategies.

Some firms are implementing incentives for delivery riders based on the number of orders completed while offering discounts for loyal customers.

These measures aim to maintain service quality and customer satisfaction despite the necessary price adjustments.

Moreover, there is a growing optimism among some logistics providers regarding the potential of electric vehicles (EVs) as a long-term solution to mitigate rising operational costs associated with fuel.

By transitioning to more sustainable transportation options, these companies hope not only to reduce their dependence on fossil fuels but also to lower overall delivery costs in the future.

Also Read: Glovo: The Food Delivery Company Creating a Stir

Conclusion

The increase in last-mile delivery service prices due to rising fuel costs marks a significant shift in Nigeria’s logistics landscape.

As companies grapple with the dual challenge of maintaining profitability while catering to price-sensitive consumers, innovative strategies will be essential for survival.

The ongoing adjustments reflect broader economic trends affecting various sectors and underscore the pressing need for sustainable solutions in the face of fluctuating fuel prices.

As this situation evolves, both businesses and consumers will need to adapt to the changing dynamics of last-mile delivery services in Nigeria.

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