More than ever, the consumer is king. To make shopping more convenient and pleasant, retail companies are using last-mile delivery to ship products directly to consumers’ doorsteps rather than the traditional model of delivering to warehouses and stores.
McKinsey & Company estimates last-mile delivery costs about $86 billion annually and e-commerce growth is the most significant market force driving last-mile innovation.1 Joerss, Martin, Florian Neuhaus, and Jurgen Schroder. How customer demands are reshaping last-mile delivery. McKinsey & Company. October 2016. Last year, e-commerce giant Amazon shipped more than 5 billion items worldwide and the company even announced plans to launch its own delivery service. 2Ewen, Lara. Solving for the last mile is retail’s next big disruption. Supply Chain Dive. February 27, 2018.
Getting the last mile right is an imperative
for all retailers, big and small 3Ibid.
Retailers and suppliers of all sizes now focus on last-mile service and collaborate more closely with their entire supply chain, including logistics experts. Such collaboration helps companies stay competitive, keep up with consumers’ expectations of fast, reliable service, and inspire brand trust and consumer loyalty.
A recent survey found 80% of consumers will switch brands if their goods aren’t delivered on time, proving the business rationale for last-mile speed to keep shoppers happy.4Patrick, Kate. Solving for the grocery last mile is harder than you think. Supply Chain Dive. April 26, 2018. Speed is so imperative that 78% of logistics companies expect to provide same-day delivery by 2023 and 40% anticipate two-hour delivery windows by 2028.5 Amato-McCoy, Deena M. Study: Nearly half of online orders to be delivered within two hours by 2028. Chain Store Age. April 9, 2018.
In response to these market pressures, here are some recent innovations shaking up retail’s last mile:
Demand shaping:
Some retail companies are influencing consumer demand for certain products by offering different incentives. For instance, if Amazon Prime members forego delivery within two days and wait for five days instead, they can receive discounts off future Amazon purchases.6 Ewen, Lara. Solving for the last mile is retail’s next big disruption. Supply Chain Dive. February 27, 2018.
Ship-from-store:
To deliver products to consumers on time, more retailers rely on their network of stores to pinpoint the one closest to an online shopper for fast home delivery. To fill online orders, 76% of retailers use store inventory and 86% of companies plan to implement buy online, pick up in store (BOPIS) programs in the next year for a phygital experience that blends physical stores and digital commerce.7Amato-McCoy, Deena M. Study: Nearly half of online orders to be delivered within two hours by 2028. Chain Store Age. April 9, 2018.
Disruptive delivery:
To arrive at consumers’ doorsteps faster, retailers are implementing inventive solutions, including:
- Crowdsourcing: One study found 87% of retailers expect to use crowdsourced delivery, or a network of drivers that can get orders to customers faster, by 2028.8 Ibid. For last-mile delivery, retailers like Best Buy, GNC, Walgreens and IKEA have teamed up with services like Deliv and Task Rabbit.9Ewen, Lara. Solving for the last mile is retail’s next big disruption. Supply Chain Dive. February 27, 2018. Crowdsourcing can be cost effective in markets where same-day delivery is popular.
- Deploying associates: To expand its home delivery service, Walmart has tested a program in which its store associates deliver e-commerce orders on their way home after a shift if the consumer lives in their neighborhood.
Bad supply chain performance can be a brand killer10Ibid.
E-grocery partnerships:
In e-grocery, last-mile efficiency is critical to protect foods’ freshness. That’s why grocery retailers like Aldi and Target recently developed strategic partnerships with grocery delivery startups Instacart and Shipt, respectively. Experts predict online sales of will account for 20% of all grocery sales by 2025, proving e-commerce and delivery investments have evolved into strategic necessities for grocery retail.11Patrick, Kate. Solving for the grocery last mile is harder than you think. Supply Chain Dive. April 26, 2018.
Autonomous delivery:
This exciting space is heating up, as the following retailers prove:
- Kroger partnered with Nuro, a self-driving vehicle designed specifically for last-mile delivery of e-grocery order, over short distances to consumers’ homes. Nuro can also act as a delivery vehicle, connecting with distribution centers to handle the final distance packages travel.12Johannson, Anna. What Nuro’s focus on last-mile delivery might mean for the autonomous vehicle sector. VentureBeat. February 21, 2018.
- Farmstead, a California-based farm-to-fridge disruptor, uses autonomous vans to make deliveries with partner Udelv.13Wiggers, Kyle. Farmstead partners with Udelv for autonomous grocery delivery. VentureBeat. October 29, 2018.
- Walmart partnered with Ford Motor Co. and logistics company Postmates on a pilot to use grocery delivery vehicles driven by humans to evaluate whether self-driving vehicles could play a role in e-grocery delivery in the future.14Patrick, Kate. Solving for the grocery last mile is harder than you think. Supply Chain Dive. April 26, 2018.
Come right in!:
Innovative technology ideas like Latch and Amazon Key take retail even further than your doorstep – they allow couriers to deliver your products right inside your home using a combination of smart locks and cameras. Not to be outdone, Walmart has also tested a program to enter consumers’ home to place groceries directly into their fridge.15 Kulp, Patrick. Walmart is teaming with a smart lock startup to deliver food straight to your fridge. Mashable. September 24, 2017.
Catering to consumers
When I interviewed last-mile expert Tony Jasinski, Senior Director, Business Development at Metro Supply Chain Group, he explained last-mile’s strategic significance, saying, “The delivery experience is so much a part of today’s retail brands. Hyper-connected consumers demand both choice and flexibility when it comes to receiving their online orders (and will not hesitate to shift their loyalty for more favourable delivery terms).”
“Keeping the customer at the core of last-mile innovation
is a trend that’s here to stay.”
~ Last-mile expert Tony Jasinski
Yet fast shipping alone is insufficient. “Delivery is about an experience that includes engaging the customer throughout the process. This is the biggest driver of last-mile innovation. Fulfillment giants have been focusing heavily on geographic among other advantages that allow retailers to offer increasingly more and better delivery options,” Jasinski noted.
As with many emerging retail trends, Amazon and Walmart are among the retailers demonstrating leadership in last-mile innovation. Grocers like Kroger are also innovating to make grocery shopping more convenient with efficient home delivery. To get closer to consumers, supply chain partners are collaborating to extend retail’s influence from physical stores to consumers’ doorsteps (and refrigerators), making shipping a meaningful part of shopping.