The term last mile delivery is used in supply chain management to describe the final stage in the delivery network between courier, express, and parcel companies. This last leg of the journey is seen as the least efficient within the supply chain, and is estimated to account for 28% of the total cost of transport. With the role of e-commerce acting as a growth engine for a wide variety of brands, the ‘last mile’ has become more challenging and competitive. This is in part due to the ‘Amazon Effect’, with consumers now requiring more convenience at significantly lower prices, putting pressure on other businesses. As an ecommerce-based brand, UKPackaging have investigated the way in which emerging technologies are changing the ways that both consumers and business providers are having to approach the last mile problem.
As previously mentioned, the rise of Amazon has led consumers to become accustomed to quicker and cheaper deliveries. In a survey by Alix Partners, it was found that consumer expectations regarding shipping time have increased dramatically between 2014, 2016, and 2018, with the assumption being that these figures will only continue to rise.
Whilst it has also become clear that customers prefer their delivery to be free of charge, research from McKinsey found that 49% of shoppers would be willing to pay €6-7 shipping for a €59 purchase (rating it as either ‘would definitely use it’, ‘good value for money’, or ‘ok’), whilst only 27% saw this as being ‘too expensive’. Meanwhile, research firm Stuart found that 72% of shoppers would buy more online for their preferred retailer if it were to offer same day delivery. This same desire for speed and cost-saving is also evident in the increase of collect in-store services, with many customers concerned with shipping cost and speed.
Retailers have been shown to adapt to these expectations by increasing the number of delivery options that are available to customers. Footwear company, Schuh, are a brilliant example of this vast range of choice, offering 6 options to its shoppers, covering 3 distinct options; free delivery (which covers UK Standard 2-3 Day Delivery and Collect in Store), Free Collection (offering collection from a CollectPlus or UPS Access Point), and paid delivery options. These paid options offer the most convenience for customers, with a choice of Next Day Delivery, or ‘Choose Your Day). This selection is an ideal example of the way in which consumer’s expectations have already made a change to business habits, and it is through this increase in options that we can see a glimpse into the future of ecommerce delivery.
Whilst most business now offer a minimum of one free delivery option and one paid expedited service, the online giant, Amazon is again leading the way in providing a wider range of delivery options. In 2017, Amazon launched the Amazon Key, their latest tech which enables Amazon parcels to be delivered directly into the home of the consumer with the help of a smart lock and associated camera. Since this, they have also grown this technology to include garage and vehicle access, whilst also building their existing Amazon Prime Now service. The Prime Now service claims to offer 1-2 hour delivery in a range of selected cities, taking the battle over next-day delivery up a notch. Whilst Amazon Key is currently only based in the US, the retailer still offers UK customers a choice of 11 delivery options, not including the Prime Now service.
Another significant contributor to the increase in same day delivery options is the rising popularity of the crowdsourcing and the gig economy. This rise is particularly evident in the US, with on-demand delivery services such as UberRUSH, Postmates, and Amazon’s own Amazon Flex. These business models focus on business providers publishing any deliveries onto the mobile app which then alerts the drivers of the jobs which are available. Whilst this isn’t as efficient as conventional delivery, it is an increasing popular option in urban areas where locals can easily navigate around traffic and through crowds.
The growing pressure on online delivery could lead the industry to question whether consumers are driving up the demand, or whether the demand has simply grown to match supply. The DHL CEO Frank Appel called this relationship into question when discussing the use of automation in ecommerce orders, stating ‘people vote with their wallets and sometimes they tell innovations which are technically feasible that they do not actually need this at all’. This is backed up by reports that Amazon Prime subscribers simply are not interested in the in-home delivery service, or at least not currently, with a survey by Recode suggesting that only 4% of 7566 American adults would definitely buy the service. Appel further backed traditional delivery services by asserting that ‘If the front door service were unsatisfactory, far more people would be using lockers.’
Track and Trace
Outside of speed and convenience, several other factors have become increasingly important from both a consumer, and a business provider perspective. One of these such factors is the ability to track and trace a delivery. This not only makes for a better customer experience, but also gives providers greater peace of mind. This can also mean additional work for providers due to having to deal with weather problems, traffic issues, and the third party couriers themselves, but it adds to the customer experience, leading to a greater likelihood of the customer returning. Some key aspects of improving this customer experience include; clear and accurate tracking, consistent and proactive communication, and good support and guidance should any problems occur.
The majority of courier services currently use basic tracking to identify when a shipment has arrived at the local depot, when it is out for delivery, and when it has been delivered, however some companies have begun to use Radio-Frequency Identification (RFID) as a more precise method of tracking. RFID tags can be used to store information about the shipment electronically, this is currently only being used for location tracking, but it is expected that in the future the tags will be able to monitor additional factors including; light, temperature, and the physical condition of the package whilst it is in transit. The use of these tags would help both business providers and couriers to identify where, when, and which items are being frequently delayed, damaged, or lost. This information can then be monitored live to help prevent future incidents, and to provide the customer with a swift resolution should any incidents occur.
Whilst companies can currently track a package’s condition using items such as transit monitors, these items do not provide detailed information, only evidence of an incident having occurred. This can therefore lead to issues between providers, couriers, and customers to track the point in the delivery chain at which the package received the damage. These monitors can also add a small cost to the packaging process, therefore potentially leading to increased delivery prices for customers. As previously discussed, whilst most customers are happy to accept an additional charge for a faster delivery, it is unknown whether they would accept a similar charge for the addition of a parcel monitor.
Whilst is it clear that the delivery sector is currently experiencing a massive boom, it is inevitable that a tipping point is on the horizon. Tech companies have already begun road testing autonomous vans, robotic delivery dogs, and droids, and, whilst these products should coincide with customer expectations, many of these innovations are being driven by a growing requirement for low emissions vehicle and smaller corporate carbon footprints. Examples of this includes recent environmental policies such as London’s ultra-low emissions zone, and proposed bans of diesel vehicles. These vehicles would also be said to increase productivity and enable for better service quality in lower density areas.
Whilst advanced tech is likely to help customers in more rural areas, those in key cities that have already begun to experience these innovations seem to suggest that further advances are mostly pointless. With tech such as Amazon Key already being deemed unnecessary by a large number of users, there is likely to come a time at which emerging tech and customer expectations begin to clash. This has already become evident with the launch of the Google Wing in Australia. Alphabet, Google’s parent company, had been testing out their drones since 2014, however many of the residents in Canberra had made complaints of the noise and claimed that the drone deliveries were ‘intrusive’. These residents have even gone as far as launching the Bonython Against Drones campaign. The value of customer privacy has also been shown in the Amazon Key reviews, and it is likely that this will become more of a priority as the technology advances.