Last Mile Delivery Divides Retail Industry

Wil Kenney

Sep 26, 2018

One of the great challenges to a retailer adapting to a seamless omnichannel shopping experience is shipping, and one leg of it in particular. Last mile delivery accounts for the final stretch from a local delivery hub to a customer’s door. Through prophecies of doom and gloom, retail shopping has evolved rather than died out over the last few years. While brick and mortar growth has kept steady at 6 percent over the past decade, online shopping is rocketing at 47 percent growth over the same period with some forecasters seeing a multi-trillion-dollar market by 2021.^[1]

With that growth in mind, retailers of all sizes are ramping up last mile delivery solutions to keep pace with competitors.

Much of the driving force around competition for that last mile comes from differentiation in a world of e-commerce. Consumers have numerous local options and countless more online, so retailers that can deliver promptly and with excellent service are poised to gain and build on brand loyalty.

The omnipresent Amazon Prime has made free delivery a standard, complicating an already maddening logistical nightmare. In short, retailers are scrambling to cut down their shipping times while ignoring the cost in the short term.^[2]

The cause of last mile delivery costs are numerous and vary on the destination. In suburban settings, drivers may face long routes with only a handful of deliveries at each stop while urban drivers face traffic congestion and tightening regulation around temporary parking and noise complaints.^[3]

Currently, small and midsize retailers can guarantee shipping within two weeks. Pressure from consumers and well-established competitors are pulling that timeline toward a week or less which merely exacerbates the current challenges.

For now, larger retailers are shouldering the costs and pushing ahead to build last mile systems. On-demand and crowdsource solutions are growing in popularity, combining the agility of Uber with the consumer data of a retail chain.

Amazon Key has grown to nearly 40 cities, allowing drivers to deposit packages without a resident necessary, cutting down on costly and time-consuming return visits.^[4] While they are not doing so yet, many observers see advantages of smaller retailers sharing data or even systems to consolidate, boosting effectiveness and minimizing costs.^[5]

In the short-term the challenge of last mile delivery lies in the unknown. While costs pile up and companies patch together ad-hoc solutions, a definitive cure is for now, out of reach. Many companies are banking on strong, costly service now to pay off in consumer loyalty down the line.

^[1] https://www.datexcorp.com/last-mile-delivery-part-2-adapting-retail-e-commerce-order-fulfillment/

^[2] https://www.businessinsider.com/last-mile-delivery-shipping-explained

^[3] https://www.datexcorp.com/last-mile-delivery-part-1-omni-channel-retail-affecting-transportation-logistics/

^[4] https://www.jllrealviews.com/industries/logistics/why-retailers-are-taking-the-reins-on-last-mile-delivery/

^[5] https://www.businessinsider.com/last-mile-delivery-shipping-explained

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