Do Consumers Have the Last Word in Last Mile Delivery?

The “Last Mile” in eCommerce delivery has been a constant discussion topic over the last several years. The challenge of putting goods in consumers’ hands when and where they wish has produced a plethora of attempts find the right solution but the search continues.

The Last Mile discussion includes a number of issues including speed of not only delivery but end to end order fulfillment, security, cost, visibility and reliability.  These factors plus the fact that consumers have different and changing preferences almost guarantees that no one solution is ideal.  Indeed, startup companies in the last mile delivery business have found the issues daunting and a number of them, such as Doorman and Shyp have failed. Others such as, ShipBob, have altered their business model to find a profitable approach. Still some efforts, at least to date, appear to be viable such as Deliv where their business model properly considers the economic and market forces at work.

Let’s take a look at some of the key factors that currently have an impact on the key stakeholders in an effort to identify the best consumer delivery experience.

  • The Consumer – Consumers’ desire for convenient, secure delivery remains elusive for many. Package theft and re-delivery notices are only partially mitigated by locker boxes and alternative delivery locations. Creative approaches such as alternate delivery locations, unattended deliveries to car trunks and inside residences may improve the experience for some consumers but hardly the answer for most. Time/day specific delivery available through UPS’s My Choice and FedEx Delivery Manager are available but at additional cost to the consumer. In some multi-tenant residences, digital access lockers have been installed which provide secure, convenient delivery.
  • The eCommerce Merchant-The eCommerce retailer controls and pays for shipping of consumer’s orders. Consumers want free shipping, which is actually shipping subsidized by the merchant and is generally a slower service such as a ground delivery service. Consumers demand for faster, date certain delivery may result in an upcharge, but even those rates are subsidized.
  • The shipping/delivery carrier – Delivery density, measured by delivery stops per mile and packages per stop, are the primary metrics for carriers when calculating cost. Major parcel carriers have surcharges for residential delivery and remote areas. The US Postal Service is the carrier that enjoys the highest delivery density. Amazon, with its own delivery services, has taken steps to increase delivery density by expanding the products it carries and building Fulfillment-By-Amazon and Shipping With Amazon to generate more deliveries.

So, what might the best consumer delivery experience look like?  It needs to combine convenience, reliability, flexibility, security, and economical cost. Since consumer needs and wants vary, there probably is no single solution that will meet everyone’s needs.

The evolving delivery solutions in the marketplace today tend to improve the delivery experience for some customers but largely cater to the ecommerce merchants who pay the carriers or benefits the carriers as a means to lower cost. For example, FedEx and UPS leverage the density of the US Postal service to handle the last mile delivery.  This results in lower shipping cost for the merchant and potentially expands free shipping for customers but does little to improve the consumers’ delivery experience. Another example, Deliv provides a benefit for retailers that can fulfill from local inventory thus creating added sales and convenience for shoppers albeit from a narrow group of merchants.

The challenge remains to provide a superior delivery experience which can be cost effectively provided. It has been well demonstrated that providing such a delivery experience generates added online shopping.  Doorman proved that their customers shop online twice as much within 6 months of signing up. Doorman’s service offering was to be the delivery point for all their customers’ shipments and then make a consolidated delivery to the customer in a specific delivery window, often in the evenings.  Doorman’s failure was to generate the required delivery density efficiencies and failed to generate revenue from merchants, instead of relying exclusively on consumers to fund the business.

Enabling the consumer to determine the specific delivery date and time unquestionably improves the delivery experience. Consolidating all deliveries to a consumer increases packages per stop density.  The challenges of gaining merchant participation and increasing delivery stops per mile density remain. However, there are strategies to address each of these challenges.

One startup, Milkman, is attempting to bring this to reality initially in Italy. We will watch (and consumers will tell us) to see how this goes.

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