Last-mile delivery is one of the most important and costliest aspects of eCommerce fulfillment — accounting for a global average of 41% of the total delivery cost. It’s also a key factor in meeting customer expectations, as this is where the order moves from a distribution center into the customer’s hands. Getting eCommerce orders picked, packed, and to the carrier within an increasingly limited delivery window has become more complex. It requires a careful blend of omnichannel, Smart technology; order fulfillment best practices; carrier network optimization; and a streamlined, transparent supply chain. Overcoming delivery services challenges and containing costs are continually top of mind for retailers.
Challenges of Last-Mile Delivery Logistics
Numerous issues make it difficult to maintain an efficient last-mile process:
- Complexity. Carriers are handling more packages than ever, with various deadlines, rural and urban delivery routes, and broad territories. Managing delivery process inefficiencies and wasted costs is a constant.
- Errors. Packages may get damaged, misdelivered, stolen, or lost in the shipping process, which adds to the cost and hurts customer satisfaction.
- Multiple delivery attempts. Some packages require signature, and if the recipient is not available for home delivery, a second attempt must be made. This requires more route planning to streamline delivery times. Carriers like FedEX take photos when they deliver a package as proof of delivery and to provide location details.
- Reverse logistics. Returns double delivery and order fulfillment costs. Unwanted orders must be sent back to the distribution center, brick-and-mortar store, or fulfillment center.
- Sustainability. Governments are requiring transportation, couriers, and third-party logistics (3PLs) to mitigate pollution, emissions, and traffic congestion. Automation and more efficient delivery operations help address these issues.
Those are just a few of the major challenges. As we move into 2024, what’s changing in last-mile delivery trends?
Consumers Are More Patient Now, But Not Always
During the pandemic years, customers firmly expected same-day delivery or two-day delivery; today’s online shoppers aren’t in a hurry. In the Radial 2023 Peak Consumer Survey, only 19% of consumers said 1-2 days is an acceptable and reasonable delivery timeframe for online orders. More than one third (37%) said 3-5 days meets that description, and 35% felt one week was reasonable. However, part of this flexibility implies choice. Consumers want shipping and delivery options, including expedited or fast shipping. Delivery speed remains a key purchasing factor.
The good news for eCommerce is that the intense pressure to deliver at record speed has eased. The challenging news is that retailers need to be able to meet any speed, at any time to maintain a positive delivery experience.
That said, as Radial continually stays abreast of what’s next in eCommerce fulfillment, we encourage eCommerce retailers to consider how these last-mile delivery trends will impact them in 2024:
- Productize delivery solutions for customer satisfaction. Many retailers are eliminating free shipping or bundling it as a perk in their membership programs, despite the fact that 68% of shoppers say that free shipping is the biggest influence in their decision to buy from a retailer (outranking discounts at 64%). For brands that do not offer standard free two-day shipping, it’s imperative to productize multiple shipping choices and price points to ensure consumers have the variety to meet their unique needs.
During Cyber Week 2023, 80% of shoppers chose standard shipping when free shipping was not an option, but as peak season gets closer to key holiday cutoff dates, fast delivery becomes essential. At any time of year, customers want to be able to select the shipping speed and cost that they prefer.
- Implement smart tracking for real-time supply chain visibility. Omnichannel order fulfillment requires real-time visibility into the location and status of every SKU. Customers expect near real-time tracking notifications, and shippers and logistics companies are implementing practices to create that transparency. Many are using GPS, RFID (radio frequency ID) tags, and embedding sensors in packages to gain the traceability needed for every participant in the supply chain. Identifying the best way to gain this visibility is essential, as is making sure the technology selected integrates with providers, suppliers, and carriers. A powerful order management system is a key starting point to facilitate this.
- Make optimizing last-mile logistics a strategic priority. With last-mile eating up so much of the delivery budget, retailers are zeroing in on ways to optimize it. This includes refining distribution center practices and locations, keeping products closer to end customers, re-negotiating carrier contracts and shipping costs, as well as improving store fulfillment processes. Some retailers partner with 3PLs like Radial, to take advantage of Final-Mile Optimization expertise and support that optimizes speed and cost with a select blend of carriers and service levels.
- Manage the growing impact of subscription services. In addition to traditional eCommerce order fulfillment, a significant rise in subscription services adds pressure to the last-mile problem. The global subscription eCommerce market is expected to reach US$165.64 billion this year, accelerating at a CAGR rate of 70.07% for that period. This puts added strain on an already busy network; but, the predictability of subscription fulfillment dates also makes planning easier. Retailers can encourage subscription customers to bundle their orders with cheaper shipping perks to help consolidate final-mile services costs and minimize the impact on the environment.
- Bolster micro fulfillment centers. With the popularity of store fulfillment options like BOPIS and curbside pickup, retailers with brick-and-mortar sites are creating micro fulfillment centers either in store or in nearby commercial spaces. Processing eCommerce orders through micro fulfillment locations keeps products closer to customers, reduces transportation costs, and improves on-time delivery timeframes. Promoting store fulfillment options with discounts or incentives can help lower last-mile costs significantly.
- Prepare for autonomous delivery. While major retailers like Amazon are experimenting now with autonomous delivery vehicles and drones, every eCommerce retailer needs to start thinking about how these delivery methods will eventually impact them. Once autonomous delivery achieves reliability, consistency, and cost-effectiveness, it will most likely become widely adopted. Retailers should plan now for how this change will alter their order fulfillment operations.
- Consider outsourcing last-mile delivery services to a partner. Some major retailers have the infrastructure and capital to own an inhouse delivery network, including transportation hubs and fleets. Others are creating a hybrid of in-housed and outsourced. However, most eCommerce retailers do not have the means to take delivery in-house. For these retailers, outsourcing final-mile delivery to a 3PL partner like Radial can be the most efficient and cost effective way to manage the process. Radial offers the automation, Smart technology, infrastructure, and carrier network relationships to truly drive efficiency in final-mile delivery.
Last-mile delivery requires continual optimization. eCommerce retailers that prioritize it reduce total costs, improve efficiency, minimize waste, and generate positive customer experiences. Now is the time to address challenges and open to new ways of doing things.
Radial can help with last mile optimization.