How to Start / Open A Parcels Courier Business in Kenya

Parcels and Courier Retail Business Business Plan (Kenya)

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This guide covers two main types of courier businesses:

Intercity Courier Service – The long distance courier business dealing with transportation of items largely between two major towns. Although the parcels could be of any size and weight, this guide is a little biased towards larger goods.

Intracity Motorcycle Service - Couriers using motorcycles to pick and deliver parcels; and operating within limited a radius of a city or town.

While some of the information overlaps and is applicable irrespective of the kind of courier business you are running, we have segmented part of it so as to go into the particulars of each.

Overview and Trends

The courier business space has expanded geometrically in the last 15 years. Whereas a decade ago the space was dominated by a handful of multinationals and midsized local businesses there are now over 141 licensed courier companies and many others operating informally without proper licenses.

This growth can be attributed to several factors. Among them is the expansion of the economy which has led to the growth of small and medium enterprises. Such enterprises are involved in service and also manufacture importation and distribution of goods.

Devolution has also spurred urbanization, opened up regions which were previously inaccessible and created new economic centers away from the major towns. These new centers need all manner of supplies and courier companies help get goods and related documentation get there.

The number of more demanding and ‘exposed’ consumers has also increased. To fill the needs of these consumers entrepreneurs are importing all manner of items. And these too need to be transported from ports and airports to various destinations across the country.

The barriers to entry in the business have also gone a notch lower. Despite there being more regulation in the business compared to say 15 years ago, barriers in terms of capital and acquiring customers are much lower.

Of note, and especially for the intracity courier business (those that operate within a city or town), is the contribution of online retail and hospitality industry to growth of couriers. There are now hundreds of small businesses selling all manner of wares through various internet forums, and a significant number of them use couriers to get their goods to customers.

Also restaurants and even individuals have moved into the food delivery business, taking food to where the customers are, rather than waiting for them to walk in. Likewise many of these rely on courier services.

Types of Courier Operators

According to the Communication Authority, the market regulator, courier companies in Kenya can be grouped into the following broad categories:

Public Postal Operator – Universal service obligations operator with widest international and domestic coverage. In this case it’s the Postal Corporation of Kenya.

International Operators – Operates internationally with worldwide and domestic networks.

International In-bound Only – One way operator receiving goods from overseas for local delivery

Regional Operators - A major operator within Kenya and has an East African network

Inter-country Operators – A regional operator but with less capacity

Intra city Operators - Operates only within a city/town boundary.

Document exchange operators

Beyond the CA classification we can further categorize courier companies by market structure market structure and mode of operations:

Small operators – Have one to five motorbikes and operating within an urban area or small radius.

Mid Sized Operators – Have at least 5 motorbikes and a van. They could also have a number of five or seven tonnes trucks , mostly operating between two or more major towns

PSV Operators – These start of as PSV (Public Service Vehicles) but take advantage of their network to deliver parcels. Sometimes they will deliver parcels using the same vehicles they use to ferry passengers or if the volumes are big have a dedicated vehicle.

Informal Courier Services – These could be typical boda boda riders, or individuals purchasing a motorbike and using it to deliver parcels. Some don’t even have a motorbike and will pick and deliver using public means of transport. They don’t have any form of licenses, not to mention proper courier licenses.

Subcontractors – These don’t source for clients directly, rather they are subcontracted by larger courier services to deliver parcels on behalf of their clients.

Large Courier Operators – These have over ten high capacity trucks and have secured large government, non-governmental organizations or other corporate contracts. They have moved beyond simply delivering parcels to managing logistics and offering other related services.

Licenses

Communication Authority License

To get the license or not?

The Communication Authority (CA) is the licensing body for couriers in Kenya. Its mandate comes from the Kenya Information and Communications Act.

By law all courier operators within the country are supposed to acquire a license from the CA. However that does not always happen.

There are many startup courier companies using motorcycles or even trucks, which operate without this license. There are several reasons for this.

First the startups consider themselves less of courier companies and more of errand services (or typical transport companies). Often there is a thin line between the two.

Secondly there are start up courier businesses which are not aware that they are supposed to have this license. Thirdly many consider the license an extra business cost, unnecessary at the beginning and which will just exert regulatory pressure on the business.

Fourthly the customers of such courier services, individual and small businesses, rarely seek to know if the courier company is licensed by the CA or not. Some, just like the courier companies themselves, are not aware such a license is required. They are more focused on the charges.

Lastly the CA does not have the capacity to monitor each and every business or individual offering “courier” services. This does not mean that the CA is not on the lookout; it is. If caught operating without a license there are penalties, specifically a jail term not exceeding one year or a fine not exceeding Ksh.300, 000 or both. Of course if caught there could be ways to wiggle around it, but then why get yourself in that situation in the first place.

Thus some courier services will always remain below the radar. But a company can only remain below the radar if it’s not growing. As a company expands not only does it attract the interest of the CA, but also bigger customers who seek to know whether they are dealing with a properly licensed business.

Sometime in 2013 and 2014 the CA conducted a media campaign to create awareness among members of the public on the advantage of dealing with licensed courier operators. Even now in 2016 you will occasionally see posters and other small scale campaigns on the same.

According to the CA campaign a licensed courier is more likely to be trustworthy; she operates with some set regulatory standards and there is a fallback mechanism just in case of any comebacks say failure to deliver.

This makes it harder for the intercity courier services to operate without licenses. The bigger your courier company is the easier it is to attract the attention of authorities. And the bigger you are the more you are likely to deal with corporate clients who might demand licenses or at the very least a Kenya Revenue Authority (KRA) Personal Identification Number (PIN). It makes business sense to have a CA license if you are operating an intercity courier service.

For a new motorcycle courier service, either single or several bikes, it’s possible to operate without the CA license, but only for some time.

As you grow you will definitely have to acquire it. Even in the early stages the license from the CA can be used to validate your business. To make potential customers trust you much more easily.

As a point of note in April 2016 the CA there are 141 licensed courier operators but estimated there could be over 1000 courier operators.

The CA license is a compliance license and should be displayed clearly at the premises, both the main office and branches.

Also note that once in a while the CA cancels licenses of some courier companies. In 2016 alone over 50 courier licenses have been cancelled. Often the CA will give reasons for cancellation as a licensee being put under receivership, failure to comply with the license conditions and ceasing to engage in the business for which the license was granted.

Here are the key licensing guidelines, quoting verbatim from information acquired at their offices and website:

Firms that require a license

All firms offering postal/courier services are legally subject to licensing. These include:

The Public Postal Licensee that is the Postal Corporation of Kenya (PCK)

All courier firms

Delivery companies, i.e., transporters, freight and forwarding companies that handle documents and parcels appropriately falling under the definitions given by the Act

License term

The license issued to the Postal Corporation of Kenya is valid for 25 years from date of issue (subject to payment of annual operating license fee).

Licenses issued to other postal/courier operators are valid for 15 years from date of issue (subject to payment of the annual operating license fee).

Penalties for illegal operation

Any person who operates a postal/courier business without a valid license from the Authority commits an offence and is liable to a jail term not exceeding one year or a fine not exceeding Ksh.300,000 or both.

Licensing Procedure

The licensing procedure is as follows:

All applications for postal/courier licenses should be addressed to the Authority as provided for by the obtaining sector legislation.

Upon receipt of the application, the following process ensues:

Payment of the prescribed non-refundable application fee (currently Kshs 5,000)

Upon receipt of the application fee, the Authority checks whether the applicant has provided the following:

certified copy of proof of shareholding from the Registrar of Companies (FORM CR12)

certified copies of identification documents of company directors

certified copy of proof of registration or incorporation in Kenya

certified copy of proof of PIN certificate

VAT Compliance proof

Letter of application with company seal indicating the category applied for.

A business plan in line with the guidelines provided in the application form.

A Tax Compliance Certificate.

Co-operative societies should provide Minutes of their last AGM held, By-Laws and Letter of proof of

Registration by the Ministry of Cooperatives or the appropriate ministry.

Memorandum and articles of association for Limited Companies only.

The firm’s Compensation policy/Complaints resolution mechanism.

Once it is established that the applicant has met these conditions, the Authority:

Publishes the applicant’s name in the Kenya Gazette upon endorsement by the Communications Licensing Committee, and awaits the expiry of 30 days within which representations on the application from interested parties could be raised

Determines appropriate categorization of the applicant following successful gazettement

Advises the applicant of the category and license fee payable

Issues the appropriate license upon payment of requisite fees

From the above it is clear that in order to get this license you need to be a registered company. Registration of companies is done by the Registrar of Companies at the Attorney General Chambers. The exact cost will depend on whether you are doing it yourself or using a lawyer. Budget at least Kshs. 20,000 for this.

Courier services are VAT chargeable you also need a PIN from KRA, this is issued free of charge.

In addition to the application fee you also need to pay the actual license fees, and also an annual fee which is tied to the turnover:

CA License Fees

License Category

Application Fee

Annual Operating Fee

Period of Payment

 

 

0.4% of Gross annual

 

 

 

turnover or the figure

 

 

 

below in KSHS

 

 

 

whichever is higher

 

Public Postal Operator

5,000

100,000

On/or before 1st July of

Responsible for USO

 

 

each year

with widest international

 

 

 

and domestic networks

 

 

 

International Operator

5,000

200,000

On/or before 1st July of

Operates internationally

 

 

each year 0.4% of

with domestics and

 

 

annual turnover

worldwide networks

 

 

 

International Inbound

5,000

50,000

On/or before 1st July of

Operator One-way

 

 

each year 0.4% of

operator receiving items

 

 

annual turnover

from overseas for local

 

 

 

delivery

 

 

 

Regional Operator A

5,000

500,000

On/or before 1st July of

major operator within

 

 

each year 0.4% of

Kenya that has an East

 

 

annual turnover

African network

 

 

 

Inter Country Operator

5,000

30,000

On/or before 1st July of

An operator within

 

 

each year 0.4% of

Kenya

 

 

annual turnover

Intra City Operator

5,000

20,000

On/or before 1st July of

Operates only within a

 

 

each year 0.4% of

city or town boundary

 

 

annual turnover

Document Exchange

5,000

10,000

On/or before 1st July of

Operator Exchanges

 

 

each year 0.4% of

postal articles or

 

 

annual turnover

documents between

 

 

 

members

 

 

 

County Single Business Permit

This is issued by respective county governments for all the business within the county. The price will vary from county to county but budget at least Kshs. 15,000. Some counties will have particular rates for “transport” companies. And courier companies could be taken such. The fee depends on the county and the size of the fleet. Such as a small transportation company, which means 2-15 vehicles will pay an annual license fee of Kshs. 30,000.

Outdoor Advertising License

If you are going to brand your offices or your vehicles and motorcycles then you will require a license from the county government. The license will depend on the county and the kind of branding that you will do. Budget at least Kshs. 20,000 for the licensing only.

Starting

The basic premise of a courier business is the ability to deliver a parcel from point A to point B within an agreed period of time and cost. This means in addition to having facilities to help you move the parcel from point A to B, the parcel owner, who is your customer must trust you: Have confidence that you will actually get the parcel to the intended recipient intact and at the right time.

Thus as you start, any form of courier, some of the things to think about are:

Means of delivering parcels – Will you use vans, trucks, motorcycles, public means or a combination of all? What is the least you can start with considering your target market, business prospects and capital?

Building trust – What will make consumers trust that you will actually get the work done in the agreed manner and timelines? This could be by how your brand, the technology you use, marketing, location and general presentation.

Most efficient method of delivering parcels– You want to deliver the parcels on time while keeping your costs at the minimum and maximizing your time. Hence you have to look at the most efficient methods in terms of actual routes to use, the means to use and the service level agreements you get into with customers.

We look at different forms of all these factors in detail.

Intercity Courier Operator

Route Choice

You can have a truck which can deliver anything anywhere as need be. Although this open policy could work it always makes marketing sense to be a little ‘specialized’ on the destinations you can pick from and deliver to.

Also, as a way to protect consumers, the CA requires you to have a physical presence in the major towns of your operation. Say your customer is sending a parcel to a recipient in a peri urban town, where will the latter collect it if she is not ? What if not available immediately at a accessible physical location?

So even if you are able to deliver to many destinations it helps to have a route or routes that you are a ‘master ‘of. This helps in your marketing, building networks and growing your business.

Some Factors To Consider When Picking A Route

Economic Activity – Consider if there are economic activities along a route which make it favourable for an intercity courier business. Of course any town has things moving in and out, but some have more activity than others by virtue of industry, lifestyle, population and demographics, self sustenance and vibrancy of the local economy.

You should look for areas with the ability to generate business throughout the year and merely seasonal. For instance the Nairobi – Mombasa is lucrative because of the size, populations and the economic activities of the towns.

Mombasa being a port city means that there will be a lot coming from the end. The town being the economic hub of the coast region means that there are more than average quantity goods needed and flowing to the city. Many manufactures are based in Nairobi and the goods they produce need to get all over the country.

Some other areas stand out not by a variety of economic activities but one major activity say revolving a produce which needs to be transported all over the country. An interesting recent example is Embu town, which has become the source town of muguka, the leafy elixir that rivals miraa. Muguka is grown in Embu and Mbeere regions. Over the last few years has become popular among young men in most parts of the country.

Some courier companies identified the opportunity and are now involved in distributing the leaves all over the country.

Other positive indicators are new companies opening up in a region, or towns that are growing relatively fast.

Of course the more opportunities there are along a route the higher the likelihood of competition. Yet like in any business if you have business advantages you can snatch opportunities from the competition. Then again if opportunities in the route are increasing rather there will be enough for everyone to sustain the business.

Specialization: When picking a route decide whether to specialize on one route or be all over. If you are doing more than one route you will need more resources in terms of vehicles, manpower, offices and other equipment.

For a beginner courier service without enough resources you will strain to go to into several routes. An alternative strategy is to enter a route and then gradually explore others. Your customers can also provide a clue of what other routes to explore. (Wish you operated along this and that route). For a small player the advantages of specialization are mastery which leads to better grasp of the market, ease in branding and also efficiency.

Even with resources it could be better to start with one route get some practical realities of the business then expand to other areas. A number of the more established long distance courier services have started this way.

Networks - When considering the route also think if you have existing networks that could help you win business. For instance do you have contacts at a company that uses or could use courier services? Do you have contacts that can provide you with information of their present transport costs, and thus give you edge when marketing or proposing?

The reality of the courier business is that blind marketing is not necessarily enough to win customers: you need relationships to acquire and maintain customers.

It is common among midsized companies for all manner of managers to seek a slice of the contracts they are giving you or upfront compensation if they have to give you business. Networks can be of any form, but the more of the right networks you have in a given area the higher the chances of getting new customers.

Competition – However lucrative a route is you can’t ignore the competition. The presence of many courier services operating along a route means that the route is rewarding: it’s more of a positive sign than a negative one.

On the other hand if the market is not growing and the competition intense then it becomes difficult to break into such an area unless you are offering some exceptional value.

It takes a while for business to trust a new courier. Where the options are many and varied then consumers will tend to stick with the more established brands. This does not mean you can’t break into a route with lots of competition; you can with value or aggressive marketing. Still it won’t be as easy as breaking in a lucrative route with less competition.

Weaknesses - There is always an opportunity to identify the weaknesses of the existing players along the route you want to establish and find ways to seize on it for business. Such weakness

could be due to unreliability, limited collection options, no credit period, vehicles not made to carry some types of goods, poor marketing and such.

Equipment

An intercity courier service means that you will be transporting parcels from one town to another. The parcels could be small letters or heavy bulky goods. The main equipment you need are:

a)Means of Transport - To transport between two towns say Nairobi and Mombasa you need a vehicle. When thinking of a vehicle consider :

Fuel consumption

Nature of goods that you are likely to be transporting

Capacity

Potential business

Capital and budget

You want a vehicle that will comfortably help you fill your orders without struggling. Many midsized intercity courier services start with a five or seven tonne diesel lorry. Seven tonnes is considered standard enough to handle parcels of individuals and SME who form the bulk of their customers.

Depending on your budget and business prospects you can start with one lorry and increase the number as more business comes in. If your business prospects are positive, like if you have some ready or possible contracts from your networks, then you can buy the number of vehicles that would meet those needs.

Do also keep in mind that if your vehicle delivering a long distance away it could take up to three or even four days to deliver, wait for new parcels, load and be back. If you only have one vehicle then it means you have to give longer service level agreements. (“We will deliver within two days”)

When there is more business than expected the alternative is to subcontract to other courier companies or lorry owners. Some couriers companies complement trucks with vans.

Nowadays there is the option of leasing a vehicle or purchasing one. With leasing you reduce your start up costs but depending on the lease terms it could also tie you to a monthly cost even before you start to break even. With buying the lorry is yours and you have more leeway in how you use it. Buying means that you have to dig deeper in your pocket but then the lorry will be a business asset and you can use it to acquire a loan if need be. Not that leasing is a bad option; it could be even a great option depending on the terms.

You can either decide to buy a completely new vehicle or second hand. The advantage of new is that you expect lesser problems and enjoy the extras such a service and parts that a dealer will offer for some time. Still a second hand vehicle in good condition will do just as fine.

When purchasing a truck, you get the chassis then take to a fabricator build the body. You can either choose between a closed top or open top. For long distance travel a closed top is preferred for security reasons. Also for some items like electronics or foodstuff you need to protect them proper from weather elements.

On the other hand an open body is more preferred when transporting some bulky goods like plastic chairs. Some courier companies have an open top and use canvas to close the top if need be. Canvas presents a bigger security and parcel protection risk. So that’s when in doubt start with a closed top.

We can’t out rightly recommend a particular brand but we note that presently one of the most popular vehicles used by small and medium scale courier companies is the Toyota Hino. A brand new truck will average Kshs. 4.5 million. The price of a second hand truck will depend on condition, mileage, year of manufacture but will average Kshs.3.2 million.

There are many financing options available in the market. Look for the best one keeping in mind that you are unlikely to breakeven in the next one year.

b)Weighing Scale – You need a weighing scale for items that you charge by weight. You could have a small weighing scale for small packets and a larger one for large parcels. A 300kg weighing scale averages Kshs.30, 000, 500kg will average Kshs.45, 000. These have the physical form to weigh bulky items. For lesser weights you can get a digital weight that averages Kshs. 9,000.

c)Receipts books, delivery books, order books, invoice books, rubber stamps, tapes,

mark pens, record books and other office stationery – These are needed for record keeping, billing and management of the business. To look professional you need to have them custom printed with the name of your company. The costs for this will depend on the copies and quality that you want to print. Budget at least Kshs. 25,000.

d)Trolleys – To move items you could need a trolley. For a start three trolleys could be enough. And since these are easy to acquire, you can buy them as need be. Budget at least Kshs. 7,000 for one trolley.

e)Racks – You could need racks to place some items which might get damaged if placed on the bare floors say if they are items that could spoil because of cold or dampness. The number of racks that you require will depend on the space you have at your premises or the size of your vehicle. A wooden rack averages Kshs. 2500. The exact cost will depend on the size and the person selling to you.

f)Office Furniture and Accessories – You need the usual office furniture to keep your business running. These include tables and chairs for the clerks, chairs for the customer, and depending on the management structure you could have some for the accountant, operations manager, yourself and any other such official. The exact cost will thus depend on the kind of furniture you settle for. There is no need to start with very fancy

furniture, something decent without necessarily expensive will do just as fine. Budget at least Kshs. 40,000 for the furniture.

g)Computer, Internet Connection and ETR Machine – You need a computer to keep records. Also as is the trend nowadays many corporate are requesting for electronic invoices rather than the traditional paper invoice. You also need to have an internet connection so as to respond to email correspondent. VAT should be charged on courier services which means you should have an ETR machine to issue receipts. Budget at least Kshs. 25,000 for an ETR machine, and Kshs. 40,000 for a good computer and printer.

Premises

To run an intercity courier service you need to have a permanent premise. This is both out of business necessity and also by law. Although a courier business involves receiving and delivering goods you don’t necessarily need a lot of space.

You don’t have to store parcels longer than required. Ideally parcels should not stay at your office for more than 24 hours at your offices before recipients collecting them or you delivering door to door. Don’t let the premise become a store; deliver goods as soonest as is profitably possible and have them collected as soon as is fairly possible.

The premises should have a sufficient ‘loading zone’ to load and offload items. Your premises should be accessible but not necessarily within the central business district. The challenge with the central business district is the often limitations in loading space both for you and the customer. Again depending on who your target customers are you can locate on the outskirts. For instance locating in Industrial Area, Nairobi. Or near the port in Mombasa.

Of course other considerations are security, both for customers’ and your business. So get a room which is big enough to store goods say for a day or two before dispatch or collection by clients. But don’t get a room so big that you are tempted to turn it into a typical store both for you or your clients. The exact cost of the room will depend on the location. Budget at least Kshs. 120,000. Remember eventually you need premises in the two towns at both ends of your route.

Capital Breakdown

Item

 

Breakdown

 

Total

 

 

 

 

(Kshs.)

 

Licenses

 

 

 

 

 

 

CA Licenses

 

1

 

35,000

County Government Business License

 

1

 

15,000

Outdoor Advertising License

 

1

 

15,000

Miscellaneous

 

1

 

10,000

Company Registration

 

1

 

20,000

Insurance and Related

 

 

 

120,000

Sub Total

 

 

 

215,000

 

 

 

 

 

 

Equipment

 

 

 

 

 

 

7 Ton Truck ( New)

 

1

 

4,500,000

Weighing Scale

 

300 plus kg

 

30,000

Weighing Scale (Small )

 

1

 

9,000

Receipts books and Related

 

1

 

25,000

Trolleys

 

3 @ Kshs.7000

 

21,000

Racks

 

10 @Kshs.2500

 

25,000

Office Furniture and Accessories

 

 

 

40,000

Computer, Internet Connection and ETR Machine

 

 

70,000

 

 

 

 

 

Sub Total

 

 

 

4,945,000

 

 

 

 

 

 

Premises

 

 

 

 

 

 

Rent

 

2 months deposit + 1

 

60,000

 

 

month rent. Will depend

 

 

 

 

on location. (@

 

 

 

 

Kshs.20,000 per month)

 

 

Renovation and Remodeling

 

Repainting and any

 

20,000

 

 

branding

 

 

Sub Total

 

 

 

80,000

 

 

 

 

 

 

Working Capital

 

 

 

 

 

 

Salaries

 

3 months @ Kshs.90,000

 

270,000

 

 

Payroll

 

 

Marketing

 

3 Months @

 

90,000

 

 

Kshs.30,000 per month

 

 

Miscellaneous

 

3 months @ Kshs.20,000

 

60,000

Sub Total

 

 

 

420,000

 

Grand Total ( Adding all the above sub totals)

5,660,000

 

 

 

 

 

 

 

 

 

 

 

Pricing, Expenses & Margins

By law you should a price of at least five times the current minimum postal charges for letters, which are defined as parcels of up to 350 grammes. This is a way of protecting the Postal Corporation of Kenya, the universal postal service provider, from going out of business. Presently the lowest post office fee is at Kshs. 35. So the minimum you should charge should be Kshs. 35 *5, which is Kshs.175.

There are generally two methods to price:

By Volume

By Weight

Think of volume like filling a 7 tonne lorry with cotton, while weight is packing the same lorry with iron bars. See if you are carrying the cotton and you charge by weight then you will suffer losses. A more practical example is if you are transporting a five seater sofa set to Mombasa. If your standard charge per kilogram is Kshs.100 then you could end up charging as low as Kshs. 3000 assuming the sofa set is 30 kilogram. The sofa set will occupy almost a third of the truck

So what to do? How should you charge? Though weight is usually the preferred standard, you should judge case by case, and not stick to weight since, well; it’s the most common method of charging. Some courier companies will charge by weight then if the product is bulky (voluminous) they charge an extra fee per cubic meter of space occupied.

You should have a clear idea of the costs you incur per trip and a sort of minimum revenue per trip. This means whether you are transporting cargo for one or several customers in one trip then you should have a set minimum amount that covers your direct and indirect costs plus margins.

Prices will also be based on the distance you will be transporting the goods. Your vehicle consumes a certain minimum amount of fuel per kilometer. This should act as a quick guide of the minimum direct costs that you incur covering the distance.

When pricing also considers the level of risk transporting those particular goods. For instance, if you are carrying fragile items like televisions then you should charge more. Such items require careful handling, the risk of theft or damage is also higher. More on this will become clear below.

As a point of note cargo on transit should be insured against theft. The fee will depend on the insurance company and the goods being transported. To illustrate tyres being transported along the Nairobi – Mombasa could attract higher premiums because of the risk of theft along the route.

In case of theft the insurance protects you. Imagine for instance you are transporting goods worth Kshs. 2 million, and you have charged Kshs. 80,000. If all or part of the cargo is stolen your charges won’t be enough to compensate the customer.

Consumers, and especially corporate, also prefer courier companies that have their cargo insured. Again insurance helps when seeking finance by banks or other financial institutions. These are likely to act in a favourable manner if you are insured. Insurance reduces your exposure to losses although it might not totally wipe it out.

Other kind of theft includes goods disappearing when stored at your office. This kind of theft which is tied to the staff is for the management to control by using appropriate checks and balances.

You might also experience breakages when transporting some goods. What happens in such cases depends on the relationship you have with the customer, and whether the customer is a corporate client or just an individual transporting goods for their personal use.

For companies if an item is broken they cannot resell. While an individual if it’s an item that can be repaired, they are most likely to accept repair rather than you buying the whole item. This happens when it’s your fault. So be careful about accepting damage which is not a result of you handling items.

There are no rules cast in stone for these situations, you have to handle them as they come and in the best way possible; minimizing your losses while still keeping the customer happy.

Now how much should you charge per trip? There is no standard guide for this, and prices are based on the agreements a courier has with the client. That said prices should be within market rates, based on the type of goods being transported, distance and your other costs.

To illustrate let us use the example of a courier company with a 7 tonne truck along the Nairobi - Mombasa Route. To transport human hair for one client from Nairobi to Mombasa the company charges a flat rate of Kshs. 50,000. The amount is a flat rate, not tied to weight rather filling the truck to capacity with the hair.

The truck consumes an average of 180 liters of diesel to and fro. Meaning going from Nairobi to Mombasa, and back (Mombasa to Nairobi). The cost of diesel in the month of May in Nairobi averaged Kshs. 71 per liter. This means that fuel costs for the to and fro trip amounted to Kshs. 12, 780.

Other direct expenses include Kshs. 500 per day allowance for the turn boy during the trip. And Kshs. 1,500 per day for the driver. The driver’s amount is be used to bribe the police if need be and for any such contingencies. (When the situation is extreme say a major breakdown then the driver can request more cash from the office.)

This means that a three day trip will cost Kshs. 500 * 3 + Kshs.1500*3 = Kshs.6000 + Kshs.1400 accommodation = 7400

So total expenses will be Kshs.7400+ Kshs. 12780 = Kshs.20180.

This will result in gross profits of Kshs. 24,820.

There might be other miscellaneous costs for such a higher cost of accommodation, parking, county charges and similar.

This is just one scenario. There are variables which will affect how much you make. For instance, if on the trip back you carry an equal amount of goods then your profits will be higher. Also if you fuel at a town where the price of fuel is lower then your costs will come down.

For long distances ensure the truck does not travel back empty. It should at least have enough goods to cover the cost of fuel and allowances. When charging don’t assume you will have parcels to transport on the way back trip. Assume that you won’t be carrying anything back. Your one way charge should be enough to make you money whether you have parcels to transport on your way back or not. This lowers the risk of losses.

For fragile goods like televisions, the above company charges Kshs.75, 000 from Nairobi to Mombasa because of the higher risk. Normally courier companies charge more from Mombasa to Nairobi because it’s uphill.

Not always will you fill the truck with goods belonging to one customer. Thus you could be transporting a sofa set, because of its bulk charge a third of the cost of filling up the whole lorry, but then because there are spaces left you carry other small parcels, and charge for them separately. Still don’t overload as you have to pass through the weighbridges.

It’s always preferable to load during the day and transport at night. At night there is less hustle and though you will meet policemen, it’s less problematic when compared to the day. On the flip side insecurity is more at night.

There are no fixed ways of pricing in the long distance intercity courier business. Don’t be stuck with weight or volume. You have to make the most profitable call at all times. Consider the distance, your costs, the customer needs, the kind of goods and risk involved, the credit period (see below), market rates and the margins you expect.

When dealing with corporate organizations it’s unlikely you will be paid in cash and immediately so. Different companies have different credit periods ; some as low as 30 days while others as high as 90 days, with the average being 60 days. A rule of thumb is that the longer the credit period the higher your charges should be.

While credit is not the preferred method of payment, you cannot escape offering it especially when dealing with mid and large organizations. And as competition increases more courier companies are accepting longer credit periods; so when you decline to give credit there will be a competitor waiting to seize the moment.

Still like with many companies where there is some level of bureaucracy there are ways to speed up the payment process. This is by identifying the accountants responsible and giving them a monetary consideration tied to processing your payment faster than the agreed period.

Again this is one of those informal situations where there are no proper rules and you make judgment as need be.

Operations

The main operations of a courier company involve picking or receiving parcels, loading and offloading parcels, delivering the parcels, sales, marketing and accounting.

A courier service can either pick parcels or have customers bring the parcels to your premises. When the parcels are heavy and bulky it’s preferable to pick from the customer’s premises, more so if she has requested so.

Whether customers bring the parcels to your office or you pick from their premises you need to properly document. You should have all the documents in duplicate or triplicate.

For walk in customers the general template is to receive the goods, find out what they are, state how much it will cost based on weight or volume, issue a receipt if paying in cash or mobile money, wrap and label the parcels.

For corporate customers the process will be more or less the same with the major difference being that you might need to pick items at their premises, quantities could be bigger and you will not be paid in cash. You need to ascertain the goods, decide what to charge if there is no agreed standard already, store the goods for transport later, or load and start the journey immediately.

So basically receive, weigh, bill, label and deliver. And in the case of corporate invoice later.

To insist you should arrange the parcels in such a way that you maximize the space and carry as much value as possible in a trip. You put the heavy goods at the bottom and the lighter at the top.

For individual customers you should take their contacts and those of the recipients. When the parcels arrive at your offices then you call the recipient to pick. Some courier companies charge 10% of the weigh bill - courier charge- if the recipient does not collect the parcel within 24 hours. This is so as to prevent the recipient from turning your offices to a store: a dumpsite of sorts.

It is important to insist on proper identification from recipients when they are collecting parcels. There have been cases of impersonating or other forms of fraud due to poor identification. Even when someone is collecting goods on behalf of another note down all the names as they appear on the identification document. If they have a vehicle note down the vehicle registration number too. That way you will be able to follow up in case of any issues.

Manpower

Based on the above operations structure then it follows the basic staff you need to run an intercity courier business are:

Staff

Description

Reward

Driver

He drives the trucks. He used

In the courier business a

 

to be trustworthy and

driver is paid salaries ranging

 

responsible. Seek to know

between Kshs. 15,000 and

 

the safety record of the driver.

Kshs.20,000. On the higher

 

 

side the range the salary gets

 

 

to Kshs. 25,000.

Turnboy

He is the driver’s right hand

A turnboy is paid between

 

man. He also assists the

Kshs. 5000 and Kshs.10,000

 

driver with loading.

per month.

Loaders

Loaders are casual and paid

Wages will range between

 

per day. They are not

Kshs.400 to Kshs.600 per

 

employed permanently.

day.

Clerks / Tellers

These keep the records,

Salaries range from

 

receive and document parcels

Kshs.12,000 to Kshs.15,000.

 

as need be. Two tellers can

 

 

comfortably run a mid sized

 

 

courier service.

 

Operations Manager

He is involved in the day to

Salaries in the industry range

 

day running of the company

between Kshs.30,000 and

 

from managing the staff to

Kshs.50,000.

 

marketing and making sure

 

 

everything is running okay.

 

Acquiring Customers

The most common way to acquire business is to use networks to get references. This is because of the importance of trust in the business.

This does not mean you can’t canvass for contracts. A good starting point is to look for midsized companies which are growing fast or with the potential to grow. Such companies are sensitive to cost and timelines and keeping everything constant they will choose the best option in terms of cost and efficiency.

Among the common items transported long distance are spare parts, plastics, hardware items pipes, supermarkets items, books, print materials, promotional items, paints and cosmetics.

There is also a lot of subcontracting in the business. This is where the bigger courier or logistics companies sub contract to small players either to do the last mile or even the whole route. For instance one of the companies which often does this is DB Schenker which handles some of the large logistics contracts in the country.

Often with most of the companies you need to be “Kenyan “ that is giving incentives to those who are involved in the subcontracting; one so that they can sub contract your company, two so

that they can keep subcontracting you, and more so giving you the more lucrative routes, thirdly so that your payment can be processed quicker.

There is no exact formula on how to get customers but you have to be aggressive. Incentives should of course depend on your expected returns. Once you get to know a couple of employees then you can work your way up to the influencers.

This does not mean that you cannot get such contracts in a straightforward manner; you can, but be well prepared for such hiccups. You will get employees of such big logistics companies with the networks and knowhow but no capacity. They can partner with you, and they being insiders know how to make sure you keep getting contracts. Larger companies tend to be more bureaucratic compared to the smaller ones,

Sometimes there is a chain of up to four players from the original person managing the contract. For instance now that Bollore is distributing EABL products you find that they have subcontracted a person with a ‘courier’ company, for reasons of capacity subcontracts another person, who goes ahead and subcontracts another person. In the above example a person with a 28 tonnes and third in the chain nets an average of Ksgs.300, 000 in a good month. And how does one get such a contract? By lobbying and relationship building.

At the port in Mombasa there are those with port passes, they get into all areas of the port. This helps them know who has imported and cleared goods but does not have transport. Many small and midsized courier companies will forge relationships with such people so they link you with those with goods to transport. For this you pay them a percentage of the cost of transport. Usually the percent is 1%- 5%

All in all you have to be aggressive. This is not the kind of business where you sit and wait for customers to just walk in. You have to go out there to do so or even employ salespeople.

Motorcycle Intracity Courier Service

A motorcycle courier uses motorcycles to pick and deliver parcels. The business models could vary but the gist of it is that the motorcycle is the means that you use to transport parcels from one point to another.

Equipment

For a motorbike courier service the main equipment is the Motorcycle. The things to consider when purchasing a motorcycle for use in the business are:

Fuel consumption of the motorcycle - The motorcycle will be used for business purposes so you want one that is efficient so as to keep your costs low. If your costs are low you are able to enjoy higher margins and compete on price if need be. Get a compromise point between the fuel consumption and the power of the motorcycle so you don’t end up with a very weak motorcycle in the name of low fuel consumption.

Robust – You want a motorcycle which is robust enough. This means a motorcycle that is strong enough and which will not keep breaking down as a result of running all day. A motorcycle that won’t strain. Your motorcycle should last long enough until you breakeven, and then after that.

Service and availability of parts - You should go for a motorcycle that is easy to service and with parts readily available. Thus in case the motorcycle breakdowns you won’t have to keep off work for long as you look for parts.

Price – Even when starting you want to keep your costs low. Thus price should be major consideration when choosing which motorcycle to use. You should balance between price and functionality.

One of the most common motorcycles used by small scale courier services is the Boxer 150cc (Baja BM 150cc). This is because it’s robust, strong, economical with fuel .Spare parts are also easily available. Brand new ones average Kshs.120, 000 while second hand ones could range between Kshs. 65,000 and Kshs.90, 000 depending on the seller, condition and age.

Courier Box

Once you have the motorcycle you need to modify it to properly perform the courier function. The most crucial of this is to fit a courier box on the cycle. This is used to put in and carry the items that you are delivering. There are various types of boxes varying size and material.

You should choose the box based on what you expect to be delivering most and future prospects. Better still you should go for a multipurpose box that could carry anything from food, fashion items, documents or anything else. If you can’t go for the biggest boxes then go for the medium sized. The box can be used for branding, and you should keep that in mind when choosing which one to use in terms of colour and material.

Courier boxes are available from motorcycle dealers and some supermarkets. A box averages Kshs. 10,000.

Other items that you will need include insurance for the motorcycle. It’s always good to take a compressive cover. If you employ a rider he will be more careful with the motorcycle when he knows it has a comprehensive cover. Otherwise when you have covered the motorcycle alone then the rider feels ‘used’ and worries more about his life and cares little about the cycle. In the end both the motorcycle and rider end up run down.

You also need protective items for your rider, basically a helmet and reflective jacket.

Pricing, Margins and Expenses

The basic unit of charging for courier is weight tied to distance. Small motorcycle couriers are sometimes not strict with weight and will charge a flat fee after negotiating with the customer.

Courier companies zone regions based on distance.

This is makes it clear, both for the customers and couriers, when pricing.

To illustrate here is an example of the charges of a small courier running seven motorcycles and two vans in Nairobi:

Zone A – CBD

Zone B – Westlands, Parklands, Eastleigh, Buruburu, Industrial Area, Muthaiga and all within the radius

Zone C – Outerring, Kaberia, Dagoretti, Kangemi and all within the radius.

Zone

0-500grams

0-5kgs

Urgent Mail (0-5kgs)

 

 

 

 

A

200

250

400

B

250

300

450

C

300

350

500

 

 

 

 

 

Up country Charges

 

 

 

 

 

 

 

0-5kg

Per extra kg

 

 

(Kshs)

 

 

Nairobi - Mombasa

350

20

 

Nairobi – Nakuru

300

20

 

Nairobi – Eldoret

350

20

 

Nairobi – Kericho

350

20

 

Nairobi - Kisumu

350

20

 

Nairobi – Kitale

350

20

 

 

 

 

 

The rates above are for 5km radius from the above town. Any deliveries outside the zones will be charged Kshs.100 per kilometer.

Voluminous items will be charged at Kshs. 2500 per cubic meter.

Dedicated Motorbike Courier – Kshs.55,000 including fuelling and maintenance

Pricing Observations

In every region there are what are considered market rates.

It’s important to keep the rates as simple and clear as possible

As much as weight is the key consideration when charging, do always consider the volume. Consider the example of volume versus weight example which we gave above.

Be flexible with pricing models, don’t just stick with volume and weight. Some courier companies don’t actually weigh items. They gauge with their eyes and determine a fee agreeable to the customer. Although this works and especially if the business is operating semi professionally it’s good to have a formula based method of charging, which factors your costs and guides the customer.

When pricing don’t just consider direct costs such as fuel do also keep in mind other expenses like manpower, maintenance and operations. Then determine the level of margins. On average and economical motorcycle can do 40 kilometers per liter. Of course depending on the traffic and road conditions it could be higher or lower.

The more items you carry per trip the lower will your costs be, meaning your margins will be higher or prices more competitive. As a startup courier it might not always be possible to accumulate items for bulk delivery. This is because you will not have acquired a critical number of customers to help you achieve this.

As a courier companies become more established and acquire more customers they segment their services so that immediate delivery is considered a premium service with the norm being delivery within 24 hours.

Small businesses are sensitive to prices so unless you have a value that really benefits them then your prices should fall within the market rates.

As competition increases there are cycle couriers who charge way below the market rates. Often these are ‘couriers’ who are not fully registered and often grow on the relationships they have with clients or references. When the prices are low but combined with other elements like trust and professionalism then it works since most businesses are sensitive about costs. Very low prices sometimes could hint at unprofessionalism so you have to find a way to balance between low prices and the professional look. Then if you have fully registered and charging below the CAK recommended prices then you will be breaking the law, and if caught or reported by rivals your license could be canceled.

Increased operating costs are brought up by inefficiencies in such functions as allocating riders and deciding on routes. Every extra kilometer a rider travels unnecessarily means more cost. An intelligent way to manage couriers would help ease such inefficiencies.

Quick Case Study

To help you understand the purchase process of some of the emerging major users of courier companies let’s give an example of how one of the online mall works. The company has subcontracted individual motorcycle couriers and companies to deliver parcels all over the city of Nairobi.

Recruitment of the new couriers is largely by exercising the network of couriers: “We need a few more motorcycle courier, who knows of someone great?” The company trusts the old courier and expects him to bring in somebody who is dependable.

The company allocates the motorcycle couriers small items and specific areas of the city. Previously the company offered them a monthly contract. The contract started at Kshs.35, 000 per month per motorcycle. The courier was supposed to deliver a certain minimum number of parcels in a day and get a bonus if they exceeded the minimum.

Generally the way it worked a customer makes an order on the mall’s website and she will pay on delivery. Once an order is received a courier is alerted to pick the item from the company’s warehouse and deliver to the customer’s address. In case the customer rejects the item then the courier has to take it back. And if the customer pays for the item then the courier deposits the money in the mall’s bank account and takes the deposit slip to their offices.

In a way, a big way, the couriers were also supposed to act as salespeople of sorts; trying to make sure the customers converts. Yet there were no penalties if the customer rejected an item; the courier was not to blame and he was still paid.

Perhaps to reduce the returns and to make the courier put more effort in selling, the company changed its policy such that now couriers were to be paid on successful delivery; which meant that a customer didn’t reject an item rather accepted and paid for it. The monthly contract was gone, and couriers generally made less money.

There are different versions of this. One of the leading fast food companies has contracted a small courier company with 31 motorcycles. The courier owner employs riders who he pays a fixed salary of between Kshs.13, 000 and Kshs.15, 000 per month. He charges the restaurant a fixed amount per motorcycle per month. After paying salaries and deducting operational expenses he makes an average of Kshs.6000 per motorcycles though not all the 31 cycles are under contract with the fast food company.

Types of Intracity Courier Services

As the courier market grows and competition intensifies courier companies at all levels are trying to create products which help them differentiate and suit the needs of particular clients. The most common services are:

 

Service

 

Description

 

 

 

Express Service

 

This means that the courier company delivers

 

 

 

 

within an hour. (For some its two hours).

 

 

 

 

Startup motorcycle couriers without volumes

 

 

 

 

often have this as their only option. Also

 

 

 

 

informal courier services have this as the main

 

 

 

 

option; you are given a parcel and you embark

 

 

 

 

 

 

 

 

 

 

 

 

 

 

on the delivery immediately.

Everyday Service

This is targeted at companies or individuals

 

who have a regular schedule of sending

 

parcels. Thus a courier company sends a

 

motorbike or van to them every day at specific

 

hours. Picture a restaurant which has to

 

deliver food to particular office blocks along

 

Ngong Road everyday at noon.

Same Day Service

This means that though the courier will receive

 

the parcel it will not be delivered immediately,

 

but within the day. For example a courier could

 

receive a parcel at 9AM and deliver it at 2PM.

Errands and Messenger Service

This means that the courier company offers to

 

run errands on behalf of the customer. These

 

could include paying bills and shopping.

Overnight Service

In this case a parcel is picked but stays

 

overnight with a promise to deliver it the next

 

day by some agreed time, usually noon.

Dedicated Courier

The courier company provides a customer with

 

a dedicated “messenger” who takes orders

 

from the customer. Imagine a busy law office

 

which has to keep pushing documents from

 

one office to another. They request such a

 

service and the courier company provides a

 

motorcycle and rider who is stationed at the

 

company’s offices or just nearby and he is

 

allocated duties as need be. Often such

 

agreements are on monthly basis.

Specialized Couriers

This is an emerging trend where couriers

 

target very particular segments of the market.

 

Take for instance couriers targeting

 

restaurants, lawyers or as is becoming

 

common pharmacies.

When pricing consider the distance, the condition of the route and timing.

Many times a small business or individual will choose a smaller motorcycle courier rather than the more established couriers because of immediacy. A customer calls a motorcycle, gives the parcel and expects the delivery to be the start immediately. Here is a parcel, take it to XYZ office at Upper Hill. And the courier is expected to leave immediately. So aim to deliver as soon as possible, while seeking to maximize deliveries along a route. This will keep costs low and margins high.

Acquiring Customers

Now that you have the equipment and license you are set to go. But the next question is how will you acquire customers?

We have covered a bit in the intercity part above.

You can acquire customers either before you have bought the motorcycle, or after you have purchased everything and are ready for operations. Both methods could work, and their effectiveness depends on who you are targeting. For instance if you are after a large company which say has floated a tender you might need to have a license, a physical address and perhaps show you have the capacity to meet the organization’s requirements.

In the first case, where you acquire customers even before setting up, it can either be a matter of faking it till you make it, or forming a courier company with a particular customer in mind. You can approach businesses or organizations marketing your service, passing as if you have the motorcycle and are capable of starting the business immediately. And if you get a contract or it looks promising you walk to a dealer, buy a motorcycle and start your business. If you are expected to start almost immediately after getting the contract you can lease a motorcycle or subcontract someone to do the delivery.

There are courier companies which have start this way before expanding and acquiring their own equipment. Some of the bigger companies still use leased motorcycles in addition to their own fleet.

The main reason for seeking business before setting up is to test the waters, prove concept and then invest. It could work but it could also backfire especially if you are required to produce licenses, show the motorcycles you will be using and more important the premises from where you are operating. If you don’t have a Plan B there is a chance you will lose the contract.

To use this strategy you need to have everything well planned. You should have the cash to buy a motorcycle if need be. Alternatively if you plan to subcontract or hire a motorcycle you should have a clear idea of where you will get the appropriate motorcycle to conduct the work.

You should have a very clear idea of the cost of subcontracting or leasing. If you are subcontracting you should negotiate the lowest possible prices so that your prices also remain competitive. For instance if you are delivering within the CBD, and the usual charges are Kshs. 200, then you should negotiate with the contractor so that he charges you at least Kshs.100 or lower so that you make profit.

Terms of leasing vary from one person to another but will often go in tandem with the bodaboda leasing rates, which means Kshs. 400 to Kshs. 600 per day. You should negotiate the lowest charges possible and say a weekly contract so as to have some certainty. Leasing of motorcycles can sometimes be tricky especially if being done in an informal manner. It might affect your productivity and service. Say you have an order and the person who was to provide you their motorcycle is nowhere to be found.

Subcontracting saves you the cost of day to day running but eats into your profits and sometimes your professionalism. More so there is no guarantee the contractor will meet the standards you have set. The person you subcontract will represent your company so choose him or carefully.

Owning a motorcycle make you more confident when soliciting for contracts.

In both cases the question is how do you get these contacts or assignments? There is no full proof method or all-round template. To win customers you have to depend on your sales skills, networking or just sheer luck. The biggest barrier as is to make customers trust you with their parcels, that you will actually deliver them and then on time.

Start up motorcycle courier services uses a variety of methods to win customers and build trust. These include:

Own networks / Word of Mouth/References – Often and because of the trust factor initial customers of beginner motorcycle courier are own networks: people you know and those that they know. So start by spreading the word. Once you have a customer and she is happy with your service then word of mouth starts taking over.

It’s not always that your own networks will generate business, but it’s a great place to start, and don’t underestimate it. Word of mouth will be triggered by great service, competitive pricing or some problem solving feature you have relative to your competition or a major challenge the customers face. For instance delivering to an area that other couriers normally don’t, having a great tracking system compared to other companies.

Cold Calls and Salespeople – Even as you use your networks you should make some cold calls. This means that you introduce your company to those businesses that have the potential of using your service. A cold call could involve a well written introduction letter, a telephone call, or being in a place where prospects could be and verbally introducing yourself. In all these communicate the distinct and necessary value that you could add to the customer relative to what you they are using now. With cold calls the more people you reach the higher the chances of converting one to a customer.

Related to this is having salespeople out there marketing your company. Salespeople to sell small businesses are usually easy to get, but hard to keep. Because due to the nature of product they don’t close sales as soon as they want to. If they are on commission this demotivates them. It’s always better to have one dedicated salesperson than have many unfocused. Where you have some working capital put them on a small basic salary and commission. This makes them more dedicated and with a longterm perspective.

.

Presentation – The way you look when making your pitch or simply asking for business. Though nowadays even conmen dress sharply, it still pays to look decent without looking rigid. Who wants to send some ruffian to deliver a meal? The way you talk and how confident and conversant you sound also matter. You should try understanding the customer and their business or their industry so that you can comfortably have a conversation.

Let any letters you write to prospective customers be grammatically correct. Invest in a domain name so that you have a professional email address. Your logos and business cards should also be professionally done. Simple and decent. If you decide to have a website let it also be professional. It’s better not to have a website at all rather than have a poorly done confidence killing website.

Reference point – Of course you can survive without a reference point or office of sorts, but it helps to have one. This is more so when your potential customers are people outside your network. You can start with a small very basic office and grow from there. Where an office is not possible let it be clear where people can easily find you just in case.

Branding - Simple branding activities also help. Like painting your motorcycle, like wearing well branded uniforms. Let your name be out there, and professionally so.

Advertising – Consumers are more likely to trust a company they have previously heard of. Advertising on platforms such as Facebook could help you target your prospective customers. When using social media you need to have a professionally done Facebook page or website.

Use the page not just to promote your business but to post materials which could be of interest to your audience especially in terms of delivering parcels. Advertising creates awareness, making a brand stick in consumers mind even though they might not purchase immediately.

Compared to other businesses courier company’s use advertising on a relatively small scale, though that is gradually changing.

Currently most of the advertising in the courier business whether formal or informal seems aimed at announcing presence rather than showing the benefits that a courier company is offering. Hence most of the advertisements which run on social media, posters, leaflets and newspapers are of the nature “We deliver parcels all over Nairobi” and none of the kind “We will pick and deliver your parcels safely and timely. You will be able to track your parcel from the moment we pick it to the time we deliver”

Advertising the value that you are adding as compared to the competitors will help you win more customers and even charge a premium. But you need to have the value in the first place. One way to create value is to think of the problems and challenges customers are experiencing at the moment. These include reliability ;with numerous complaints of delays in picking and delivery, uncertainty that comes with being kept in the dark on whether a parcel has been dispatched and delivered and services which don’t deliver in particular areas of the city.

Create value. Announce the value. Charge accordingly. Grow your business.

Tracking system - A system that helps customers keep track of their parcels will go a long way in boosting the confidence of existing and potential customers. If in your pitch you tell the potential customers that they will be able to track their parcel at all times then it will be a big confidence boost. Whereas this means a high initial investment, its jumpstarts you.

Pricing - Another strategy that is commonly used is to offer prices lower than what available in the market. This again is meant to attract price conscious customers. Still without matching lower prices with great service won’t help win customers. At times lower prices could give an impression of bad service. So if you plan to compete on price match with value. If your service is

above average then by charging a low price you will be leaving money on the table. It doesn’t matter whether you are dealing with a corporate entity or individual.

Beyond trust there are key things that businesses will look for when picking a motorcycle courier. This especially applies to businesses which operate in a formal professional manner:

Appearance – They want people who are clean and dress decently. Often the customer will trust the company, consciously or subconsciously, by the appearance of the courier.

Communication Skills – They want couriers who can communicate effectively in English and Kiswahili. Communication is not just about education but being able to express yourself, to explain things and use the right words.

Honesty – Related to trust companies will look for people who seem honest. Someone who will be honest about his location, and any hitches despite the pressure to deliver.

To win customers you should to use a collection of all the above methods. Also have your ear on the ground to spot opportunities. For instance if a mall or a block of offices is coming up in an area then it means there is opportunity for to and fro delivery of parcels.

Beyond the physical space you should also look at the online shops and businesses coming up both big and small. For instance there are the individuals who sell small margin items through social media, and then there are the bigger companies like Jumia (and several others that have come up of late). All offer opportunities.

Some of the sure customer winners are:

ϒFlexible to customer needs

ϒDelivering on time

ϒGood customer service

ϒClear mode of charging

ϒConvenient mode of payment

ϒQuality of service

ϒFacilities

ϒNetwork

ϒCommitted well trained sales force

ϒStaff who are committed, knowledgeable, polite, positive, smart, presentable

ϒServices – well coordinated, smooth fast flow, simple processes to follow, modern equipment, accurate procedures

Among the major organizational customers served by courier companies are:

Non Governmental Organizations

Small and Medium Traders

Saccos

Lawyers

Hotels and Restaurants – Big and small

Online Retailers

Competition and Survival

Figures

To get a picture of the present status of the courier industry here are some statistics from the April 2016 – June 2016 Industry report of the Communication Authority. See notes below.

Courier Items Traffic

Post and

Apr-

Jan -

Quarterly

FY

FY

Annual

Courier

Jun 16

Mar 16

Variation

2015/16

2014/15

Variation

Traffic

 

 

(%)

 

 

 

(%)

 

 

 

 

 

 

 

 

Number of

16,615,196

12,855,103

29.2

 

60,072,233

59,472,262

1.0

Letters (Up

 

 

 

 

 

 

 

to 350 gms)

 

 

 

 

 

 

 

Posted

 

 

 

 

 

 

 

Locally

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

1,443,704

1,336,821*

8.0

 

3,832,946

2,564,899

49.4

Courier

 

 

 

 

 

 

 

Items

 

 

 

 

 

 

 

Sent

 

 

 

 

 

 

 

Locally

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

2,075,046

2,084,672

-

0.5

8,889,643

9,582,486

- 7.2

Incoming

 

 

 

 

 

 

 

Letters (Up

 

 

 

 

 

 

 

to 350 gms)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International

1,371,214

1,885,891

-

27.2

8,366,623

5,269,992

58.4

Outgoing

 

 

 

 

 

 

 

Letters (Up

 

 

 

 

 

 

 

to 350 gms)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

“The number of courier items sent during the period increased by 8.0 per cent to record 1.4 million items from 1.3 million items sent last quarter. The total courier items sent during FY 2015/2016 increased to 3.8 million items from 2.5 million recorded in

the previous year.”

Courier Outlets

Period

Courier Outlets

June 15

788

September 15

2117

December 15

2117

March 16

2117

June 16

1599

The decline of number of courier outlets was a result of deregistration of non compliant Courier operators.

Courier Revenue

Post/ Courier

2015

2014

20134

Revenue and

 

 

 

Investment

 

 

 

Revenue ( Kshs)

4800

8,530

7,086

Investment ( Kshs)

327

397

519

“During the year 2015, the total revenues recorded by the postal and courier sector declined by

43.7percent to post 4.8 billion shillings compared to 8.5 billion posted in the FY 2014/15. The total investments also experienced a decline of 17.6 percent during the year 2015 to record 327 million Kenya Shillings down from 397 million shillings recorded in 2014.”

Observations

The number of courier items has been increasing over the years. This means that there are more consumers using courier services and the average volume per consumer has risen. This is a positive sign showing there is still demand for courier services, and it’s going up.

As seen above, and as observed by the CA, the number of courier outlets has decreased. Courier outlets mean the registered premises of a courier company. Thus if a courier has an office in Nairobi and Eldoret then those are two outlets. In the last two years the CA has become more vigilant in its monitoring role. Compliance involves meeting a range of attributes including but not limited to filing annual returns, paying annual license fees, charging the right fees and registering premises. In May 2016 the CA deregistered 38 courier services including some prominent ones like Dial – A – Delivery.

Despite the decrease from 2177 to 1599, it’s noteworthy that in June 2015 the number of outlets had increased from 788 to 2177. The rise in the outlets within just a quarter is such a significant rise, which points to growth in the business. That the number of outlets has increased also means that courier companies are expanding to more areas away from the traditional big urban centers. Like we mentioned Devolution and infrastructure development have opened new economic centers which are attracting business.

Revenue and investment in the courier business has taken a dip. Partially this can be blamed to the deregistration of some couriers, downward price pressure because of increased competition and slowing down of the economy.

Of note is that despite the reduction in revenue investment in the courier business has not gone down with a similar magnitude. Investment could be in assets, premises and other tools. It’s a vote of confidence in the prospects of the business.

Still there is a lot of activity in the business which is not captured by the statistics. These include the tens of informal errand services that have cropped up in urban centers not to mention boda boda riders who have inched into the delivery business without out rightly declaring so. A motorcycle and a mobile phone are more or less the basics to start a simple courier service.

Without an office to pay rent, taxes and professional staff informal courier companies can afford to charge the lowest possible. The entry of Public Service Vehicle (PSV) companies into the courier business has also led to increased price competition. Since often PSV companies transport parcels using the same vehicles that they use to ferry passengers they don’t incur extra costs in management and delivery of packages.

Critical Success Factors:

Easy accessibility – This means that you are located at a place where a customer can easily walk to and drop her parcel if need be. Depending on the type of courier service such a place could have parking, be n a busy place, be near your customers and secure. For a new small motorcycle courier which picks parcels from customers you don’t necessarily need such a strategic location; just a point of reference and center of operation for a start.

A highly visible location is not necessarily a must but it helps in selling you and winning walk ion customers. This is more so if you are in the midst of a commercial center of sorts, say like an industrial area, or area with a number of office or business complex. Think of the major malls coming up in urban areas.

Efficiency – Using the most economical routes, maximizing deliveries without compromising quality and keeping the costs low.

Trusted Staff – Staff who are honest in terms of theft and reporting.

Speed – Delivering as fast as is profitably possible.

Mobility – This means that you can pick parcels from the customer’s premises and deliver as need be. There are couriers who will insist that the customer has to drop parcels at particular places or charge high prices if they are to collect the parcels from the customer’s premises

Flexibility – Don’t just stick with established practices be flexible in operations, timing, pricing and business models to best suit the customer needs.

Challenges

Despite the increase in the number of businesses that are using courier services there are challenge faced by new and even exiting businesses. These include:

Low Prices – This is more because of the increased competition both from the formal licensed couriers, and informal unlicensed couriers. Small businesses delivering low margins products will look for the lowest prices. And ay businesses will try keeping its costs low. This has exerted pressure on prices. Whereas the CAK has set the minimum possible prices, the informal couriers will often disregard them. The rise in the number of motorcycles riders means there are now more relationships and options to pick from.

Slowing growth – The growth of the courier business is tied to the growth of the economy, and especially the small and medium enterprises. When this section of the economy is slowing down then it means the business will be affected negatively. Perception among courier businesses we talked to is that the economy is growing slowly among this sector. This affects different courier in various ways depending on their strengths and who makes their core customers. Thus as much as there are more parcels being delivered growth is slowing down especially for couriers who have in business for less than two years.

Increased Costs – The rise in fuel prices means that the cost of doing business for the curer business also increases, despite prices remaining constant. Other costs are tax and insurance premiums.

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