In the UAE, this year, we’ve seen five price increases in fuel, which has led to the last-mile, logistics and delivery industry being affected drastically. In this article we talk about delivery riders in the UAE, we break it down to predict a dramatic shift in the operations and the affects to the industry as whole.
In case you are not familiar with the hyper-growth and uber-competitive UAE delivery market, the majority of companies operate with the riders being responsible for paying their own fuel.
Let’s run this scenario:
Since January 2021 fuel price was at AED1.80 a litre as of today (1st July 2021) this is currently AED 2.35.
The average delivery rider (food delivery aggregators) travels:
* 6,000kms per month
* Refuelling five times per week (partial filling)
Downtime is an additional in-direct cost — which has been calculated at five hours per month, per rider.
In January 2021 these riders were spending AED 3,784 per year.
Today, they are spending AED 4,941 per year. Equating to an increase of over 30%
If oil prices increase to $100 a barrel as predicted the cost per litre in the UAE could reach AED 2.90 increasing the costs further for the delivery riders by AED 1,156 — resulting in a delivery rider paying AED 6,097 per year on fuel. With the average rider earning AED 36,000 per year. Is this sustainable?
What could this mean?
- Delivery riders choose not to deliver — it’s not financially viable.
- Operators absorbing the cost of fuel — the industry will crash.
- Restauranteurs boycotting aggregators — already in discussion.
- Aggregators will fold — or we’ll see a consolidation/M&A.
Adopting a reactive response to the defined shortcomings of fuel increases is a disaster. Transport contributes around 40% of the cost of delivery. Not identifying the opportunities now, will surely…