SMEs face delivery pains as costs double

Prior to September 2024, Faith Idebuemi, chief executive of SeaFa Collections, ensured she dispatched every piece of jewellery sold by the store without delay.

But with two increases in the price of premium motor spirit (PMS), she now encourages customers to buy in bulk or stockpile purchases to cut delivery costs.

“Logistics cost has doubled, and sometimes it is even higher than the value of the items ordered,” she said.

Sometimes, she delivers items on her way home or while going for other engagements.

“It is cheaper than using delivery bikes,” she noted.

The price of PMS has jumped five times since May 2023 due to petrol subsidy removal and market liberalisation.

Consequently, small and medium-sized businesses (SMEs) that run online stores are struggling to serve and retain their customers owing to high delivery costs.

Faith Ogidan started her business as a student in 2014. She sold shoes, bags, and other imported goods from China and charged almost nothing for delivery.

Today, she can no longer sustain that due to high costs.

“I live around Owode Onrin in Lagos. Delivery to Ketu used to cost N1,500 but now goes for N3,000. It has increased to between N4,000 and N5,000 to Yaba from N2,500. Ikotun and Iyana Ipaja is now N8,000 from N4,500. Everywhere is now more expensive,” Ogidan said.

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She helps her customers stockpile items before sending them. “I help customers to buy large quantities of items and then send them at once. Most of the time, if they buy only one item, the delivery cost will be higher than the price of what they have bought, and they are discouraged from continuing the transaction. So, I offer them options like paired delivery or stockpiling.”

Ganiyu Adebola, chief executive officer of Moma Couture, said: “I engaged dispatch riders every day of the week before now. But I merge everything I want to dispatch and only do it twice a week now. The new behavioural pattern is to use delivery for bulk orders.”

SMEs are raising prices

Like other businesses affected by the recent increases in fuel price, logistics companies have increased their charges. “In the light of the current economic conditions, particularly the significant rise in fuel prices, we find it necessary to make an adjustment to our delivery process,” Remedial Health, a health-tech startup that supplies medications to pharmacies, wrote to its customers via email.

According to media reports, Fez Delivery, which previously charged N2,500 for deliveries between 0 and 5kg, now charges N3,075 for the same services.

Zainab Sadiku, general manager of Paralex Logistics, said: “The most important part of our business is fuel. Without it, we cannot move. The increase in fuel price has led to an automatic increase in logistics prices.”

Sadiku said prices have more than doubled, noting that customers are beginning to understand the situation.

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“For instance, Yaba to Lagos Island was about N1,200/N1,500 before, but now we can’t accept anything less than N3,000 to N3,500. A lot of our users understand.”

She also noted a growing trend of customers using commercial buses for local delivery. “People will go to Obalende to send something to Yaba. Before, it used to be interstate (say Ibadan), but we are increasingly seeing the growth of intrastate.”

This shift has affected the demand for delivery services. “Costs are higher, so the frequency of delivery has dropped. We used to earn about N25,000 per bike from 10 trips. Now, we make the same amount from just five trips, but overall demand has declined,” she stated.

Sadiku noted that small businesses that used to require delivery services daily have now shifted to twice-weekly arrangements. According to her, these businesses are helping their customers to stockpile for bulk delivery.

“Rather than use N5,000 to send something worth N5,000, people are telling businesses to hold on to their items until the delivery costs are justifiable.”

In Aba, Abia State, southeastern Nigeria, delivery cost has risen by at least 50 percent in the last two months owing to high petrol prices. Items bought for N1,500 sometimes require N1,500 to deliver them. The same situation applies in Abuja, where Jude Anite, a father of two, said he bought a household item for N2,100 but paid N1,600 for delivery.

Williams Fatayo, chief Executive Officer of TruQ, said: “Prices are changing everywhere. We are already seeing it in mobility, where there has been an almost 100 percent increase in pricing. When services become expensive, and people who are supposed to patronise the business can’t match the new pricing point, it is expected that you experience a bit of a dip in sales and traction.”

Industry experts agree that commerce cannot thrive without the ability to move goods efficiently, but the ongoing cost-of-living crisis is making delivery services less accessible. With weakened purchasing power due to double-digit inflation (32.70 percent in August), such conveniences are increasingly becoming luxuries.