3 Things You Need to Know Before Starting a Delivery Service BusinessDemand for food and home product delivery services are at an all-time high. Here are three issues to consider before launching your own.

BySarah Austin

Opinions expressed by Entrepreneur contributors are their own.

Boston Globe | Getty Images

Onlinefood deliveryis a natural progression of ride-hailing services like Uber and Lyft that use crowdsourced labor as the delivery provider's own infrastructure. The pandemic has caused a spike in demand due to health concerns and shelter-in-place. The hiring spree is eye-popping: Instacart announced in April that it'shiring 300,000 shopperswhile Amazon is looking to employ175,000 new workersfor its fulfillment centers and delivery network. Walmart isadding 50,000 people分布和联邦快递hiring 35,000 workers.

Related:105 Service Businesses to Start Today

Entrepreneurs may consider starting a delivery business in their city. Startup costs can be low by using independent contractors and by licensing an appropriate app. Demand is certainly high. If done right, an operator may coordinate with grocery chains and distribution centers to sync systems. Or a small business could integrate with a large company's IT infrastructure. One option that increases profits is to charge a mark-up for purchased items in addition to shipping fees. Or perhaps certify orders as prepared using stringent health practices to gain new customers.

But what can go wrong? Here are some things to be on alert for.

1. Customers want near-perfect execution

Business owners may think that a 95 percent success rate for deliveries is good enough. It probably isn't. Not with Amazon's extreme disruption of the industry via Amazon Flex and Amazon Prime. For example, Prime has one-day shipping for over 10 million items, according to the company's website. Thanks to Jeff Bezos's constant striving for flawless logistics, consumers too have increased their expectations for gig drivers. Thus, only a tiny fraction of deliveries can involve wrong items, damaged goods, delayed drop-offs, etc. if you want your startup to succeed.

"Delivery services involve more than just dropping off items," says Vanessa Gabriel in an interview. She's cofounder and CEO of Drop Delivery, a cannabis delivery management software. "A critical success factor is the overall experience for the customer. From browsing items, placing an order and finally receiving it. Customers expect cannabis delivery to be convenient, reliable, safe and on-demand. Drop Delivery allows cannabis retailers to provide that great experience."

Related:12 Business Leaders on Rebuilding in the Post-Pandemic Economy

客户正在寻找避免排长队和getting exposed to infected people. But their hired gig grocers may not find items or products may be sold out. Other disruptions include worker strikes such as those that hit Instacart, Amazon and Walmart during the pandemic. A mobile app can have security and privacy flaws such as those that plague video app Zoom.

2. A small business must optimize for last-mile logistics

If you're not experienced or disciplined to optimize operations, it could be tough competing in this business. An operator can do almost everything right and still see problems near the finish line. Hot food can be delivered cold. There can be payment errors. An app can direct a driver to an adjacent but wrong address. A user isn't notified of an arrival. A thief signs the order. The car runs out of fuel.

A delivery provider must optimize for last-mile logistics. After a gig shopper buys the ordered items, last-mile logistics involves bringing the goods from distribution to an office or personal residence as fast as possible. No excuses during the final lap, especially with perishable food. An independent contractor must have the passion or initiative to find routes that overcome traffic, pinpoint the exact location, rely on the mobile app to work seamlessly (such as no connectivity issues), and send user notifications to receive the order.

Related:3 Federal Loan Programs You Can Take Advantage of Right Now

"Our software clients have successfully delivered over 51,000 orders and have seen an average repeat customer-purchase rate of 76 percent," says Vanessa Gabriel. "Because of the new normal, clients have seen a 31 percent increase month-over-month in deliveries since February. We're always looking to provide the best technology to help our clients be as efficient as possible when it comes to delivering."

3. Being careless with pandemic safety protocols

Finally, gig shoppers must have the discipline to follow new health protocols like social distancing and wearing personal protective equipment. Safety practices can include barcode scanning and contactless delivery confirmations and payments.

It's hard to believe that Uber is 11 years old. Given Uber's status as a multibillion-dollar unicorn, it's not surprising that technologists have copied its crowdsourcing approach in industries as diverse as home-stays (AirBNB) to groceries (Instacart, DoorDash, GrubHub and Uber Eats).

Amazon and other big players are preventing delivery services from becoming a commodity: Their investment in infrastructure is continually increasing consumers' expectations from shelf to doorstep.

The industry's hiring spree coincides with struggling Americans turning to gig jobs for a paycheck. In March, Uber Eats saw a30 percent increasein independent drivers signing up to deliver food. Delivery, transportation and logistics are contributing to the U.S. economy adding a record2.5 million jobsin May. (Although this number will be revised due to a "misclassification error" reported in June by the Labor Department.)

An entrepreneur can capitalize on the high demand for online delivery service if she runs an efficient operation.

Sarah Austin

Entrepreneur Leadership Network® Contributor

Author & Podcaster

Three-time venture-backed startup founder. Reality TV star, Bravo's 'Start-Ups: Silicon Valley'. Vanity Fair calls her "America's Tweetheart." Today, Sarah is Head of Content for KAVA, the DeFi for crypto startup company based in Silicon Valley. Previously Forbes, Oracle and SAP.

Editor's Pick

Related Topics

Business News

'Please Fix This': Elon Musk Frantically Emails Employees During Livestream Glitch

Musk attempted to livestream his visit to the U.S.-Mexico border.

Business News

'No Question, We Probably Went Too Far': Delta Airlines CEO Backtracks on Sweeping Changes to SkyMiles Accounts, Sky Club Access

The unpopular changes set to roll out in 2025 were announced earlier this month.

Business News

Costco Isn't Facing Devastating Surges in Theft Like Target and Walmart — and the Reason Is Very Simple

The retailer's CFO revealed its strategy during a fourth-quarter-earnings call.

Business News

These NYC Roommates Created a Fake Restaurant and Accidentally Garnered a 2,000-Person Waitlist — So They Opened a Pop-up for Real.

The Gen Z'ers dubbed their apartment "Mehran's Steak House" on Google Maps during the pandemic.

Business News

Video: Mass Flooding Takes Over NYC Streets, Subways and Parks

All of New York City is under a state of emergency.

Personal Finance

5 Entrepreneurial Mindset Principles That Empower Financial Literacy

Adopting the right mindset is key to financial literacy. Follow these five guiding principles to enhance your understanding of wealth creation and growth.