How is Logistics in Online Stores?
According to Pashoutan Pourpezeshk, the CEO of Padro, an online shopping and payment platform, online order deliveries account for up to 25% of the revenue for e-commerce stores. In this report, we will examine the status of online stores based on data from Padro.
As reported by IDEA, The growth of e-commerce, although not limited to online stores, increases the demand for online purchases. This, in turn, leads to a rise in logistics costs worldwide over the next five years. Customer expectations for receiving proper services also grow correspondingly.
Pashoutan Pourpezeshk, the CEO of Padro, stated that the common reasons for this global price increase include a shortage of operational workforce, high labor costs, energy and storage expenses, rising raw material costs for packaging, increased fuel prices, and a shortage of delivery drivers and couriers. The postal system in Iran is also not exempt from these challenges.
Pashootanpoor continued, “Due to subsidy-driven pricing regarding the services provided by the national postal company, which is the largest player in this industry, the postal and logistics system in Iran will have limited opportunities for growth and adaptation to market conditions. Currently, most online stores calculate the total shipping cost as lower than the actual cost. In fact, setting lower prices for postal companies indirectly increases other costs for online stores, which are ultimately passed on to other sectors of the business.”
These conditions prevail while, due to the widespread presence, diverse services, and pervasiveness in the market of postal and retail cargo services in the country, there is potential for differential and market-based pricing. This involves a pricing model based on supply and demand factors, ensuring a balanced price in the best interest of all stakeholders, given the inherently sensitive nature of this market to prices from both operators and end customers.
Is the Postal Industry Supporting or Hindering the Growth of Online Stores?
Pashoutan Pourpezeshk, the CEO of Padro, believes that regulated pricing imposed by Iran’s postal service is one of the major drawbacks in the logistics industry. He explains, “Although this pricing is aimed at consumer attention and maintaining an artificial low price, it has resulted in skewed pricing within the country’s postal ecosystem. However, it has limited the equilibrium between supply and the desire for private sector development. Ultimately, this policy will be detrimental to the development of Iran’s postal industry and will deprive the primary beneficiary of this cycle, which is the end customer, of receiving proper services.”
He continued, “Currently, due to unrealistic prices, investors do not have a clear perspective on the development of this sector and are unwilling to invest in infrastructure development. Consequently, entering the logistics market is unprofitable and complex for the private sector, making it unattractive.”
According to the CEO of Padro, in addition to a 40% increase in postal tariffs, this company still offers services with subsidies. Referring to an overview of the company’s costs, including warehousing, fuel, human resources, and more, he states, “Regulated pricing eventually affects the end consumer’s expectations, forcing online businesses, as one of the major consumers in the postal market, into a misleading competition with postal companies.”
This leads to online sales platforms attempting to falsely reduce their direct postal costs by accepting indirect costs placed on the overhead section. These indirect costs include owning or renting space closer to postal processing centers, establishing or expanding domestic fleets, increasing wage and salary expenses overall, and even accepting the transport of their shipments to the operations centers of postal companies. In the end, this only leads to hiding the direct logistics costs and ultimately absorbing a significant portion of the revenue of these postal companies.
According to him, in recent years, the national postal company has not acted in the interest of its customers and has incurred losses in the online (non-presence) market through its regulated pricing for logistics services.
Deregulation of prices, creating competition among key players in the postal industry, and providing comparative services and choices through technology will greatly benefit the postal industry, and of course, its complementary industry, which is e-commerce.
The goal of the interaction between these two sectors should be to provide services that are in line with needs and cost-effective. Resource management-based technologies, such as PadroPay, can increase efficiency by up to 20% and reduce costs. This cost reduction will undoubtedly benefit the primary stakeholders of the postal industry, namely online stores and end consumers.
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