Same-day, final-mile delivery has become crucial for winning business, as customers have come to expect speedy fulfillment and distribution in the online shopping experience. According to a June 2022 FarEye survey, while most US consumers typically wait two to three days for digital orders to arrive, more than one-third (38%) would prefer to only wait one day or less for delivery. That’s why businesses are developing new technologies and experimental supply chain models to increase parcel volume and expedite deliveries.
What is last-mile delivery?
Last-mile delivery is the final phase of the delivery process. In a product’s journey, it is moved from the warehouse shelf (often at a distribution center), to the back of a truck, to the customer’s doorstep—the final step of this process, known as the last-mile of delivery. High shipping costs are often associated with last-mile delivery.
While last-mile delivery is the most expensive and time-consuming part of the shipping process, it is key to overall customer satisfaction.
Benefits of effective last-mile delivery strategy
- Faster delivery and increased convenience delights consumers: Last-mile delivery offers consumers the ability to get their purchases quicker and enjoy the convenience of having their packages brought directly to their door, rather than having to travel to a store or designated pickup point to retrieve their items. Last-mile delivery often begins at a retailer’s local distribution center, speeding up delivery times.
- Increase sales and revenues: Companies with quick and dependable delivery services are more likely to acquire and retain clients, which boost revenues. If last-mile delivery allows businesses to provide delivery services to remote and rural areas, their sales and revenues may rise as a result of greater access to new clients.
- Increase efficiency: Last-mile deliveries can help businesses streamline their operations by reducing the time and resources required for delivery. By leveraging automation and digital technologies, retailers can eliminate manual labor and administrative tasks, resulting in more efficient and cost-effective delivery operations.
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Types of last-mile delivery players
Despite Amazon’s reign in last-mile delivery due to its superior delivery speeds, several types of players are vying for a spot in the last-mile delivery space.
Major retailers have invested significantly in their own end-to-end delivery infrastructure to offer faster delivery speeds. Amazon has been the only retailer to have its parcel volume perform better than traditional carriers like FedEx, with the help of its Amazon Logistics platform.
“Amazon’s delivery speeds have long been best in class—and they’re only getting faster. As of July 2022, the retailer’s average click-to-door time for US digital purchases was less than two days sitewide—more than twice as fast as the industry average,” per NielsenIQ analysis from our Future of Last-Mile Delivery report.
Target has leveraged its acquisition of Shipt to enhance its ship-from-store strategy. These larger retailers have the benefit of leveraging their physical locations and technology to send out delivery orders faster and reach more remote and rural communities.
Delivery intermediaries have joined forces with retailers to offer same-day delivery services. These third-party companies play a pivotal role in connecting consumers with retailers and enabling quick deliveries. However, they charge retailers a commission.
Instacart is the leader, accounting for 73.0% of grocery delivery intermediary sales in 2023, per our forecast. These intermediaries play a significant role in the US digital grocery market, accounting for 26.0% of US digital grocery sales in 2023.
Quick commerce startups focus on ultrafast deliveries, usually catering to consumers who need a smaller assortment of goods in a matter of minutes. This approach yielded positive results during the pandemic, but growth has since slowed.
While the standalone model may face sustainability issues, these platforms are finding ways to integrate with larger, more established delivery platforms and retail chains. “Quick commerce will eventually move behind the scenes and integrate into a larger network of delivery options,” Insider Intelligence senior analyst Blake Droesch wrote in our Future of Last-Mile Delivery report.
What retail, logistics, post, and parcel companies need to know about the future of last-mile delivery
What is the last-mile problem?
The last-mile problem is when a package’s real-time status online reads “out for delivery,” but customers still have to wait for an extended period of time before they receive it. This occurs because there can be numerous stops and delays in the final stretch of shipping.
In rural areas, delivery is slowed by long distances between stops, with only a couple of packages being delivered at each one. The situation isn’t much better in urban areas, as there are delays caused by traffic congestion.
The high shipping costs and inefficiencies linked to the last-mile problem are made worse by the ongoing surge of ecommerce sales in the US. This has increased the volume of packages delivered daily, and customer expectations have risen to demand both quick and complimentary delivery.
What are the costs of last-mile delivery?
Last-mile delivery can cost more than a shipment that makes its way through a typical fulfillment center. As free shipping is now available on many retailer sites, customers are less willing to pay a delivery fee, and retailers are more likely to incur the extra costs.
Amazon makes up for some of these costs by collecting a $2.99 fee per order that doesn’t meet the retailer’s $25 minimum.
How does crowdsourcing solve the last-mile problem?
Crowdsourced delivery helps eliminate the bottlenecks of last-mile delivery by assigning someone local to keep track of both the package’s origin and the customer’s delivery location, which can speed up fulfillment and improve the customer experience.
A benefit of crowdsourced delivery is that it is technology-driven and requires few resources. Similar to ride-sharing, contracted couriers use their own vehicles to make deliveries, often from the retailer’s store (as opposed to distribution centers). They are typically paid per delivery or shift. This approach relieves companies from having to deal with logistics, which makes the process cheaper and simpler. Amazon has adopted this model with Amazon Flex.
Crowdsourced delivery speeds up online order deliveries. It caters to younger, digital-savvy consumers who are looking for instant gratification. This delivery method also offers scheduling options to ensure packages are delivered when someone is home, reducing the need for multiple delivery attempts.