How Companies Are Rethinking Last Mile Strategies

Today’s consumers expect that they can have almost everything from groceries to lipstick to fully prepared meals, delivered to their doorstep, sometimes in an hour. Global e-commerce giants, such as Amazon and Alibaba, helped heighten these expectations. In fact, the most popular complaint from connected consumers globally is that delivery took longer than expected, according to Euromonitor’s Digital Consumer Survey, which began fielding in late March 2020. The pandemic fuelled the e-commerce boom and is magnifying this challenge. In 2020, the sale of goods bought online expanded by 26% in real terms. Logistics networks were stretched beyond capacity, calling attention to the need to tackle this challenge now. As a result of the crisis-inspired e-commerce surge, last-mile strategies, including both home delivery and consumer collection options, have been in the spotlight during the crisis.

In response, many retailers and foodservice operators pivoted to serve these digital consumers. This ranged from ramping up last-mile delivery and collection options to infusing the experience with more technology to reimagining how physical assets are deployed. As part of these efforts, many retailers and foodservice operators added or expanded click-and-collect services.

Best Buy, a US electronics retailer, decided to close its stores in late March 2020, limiting purchases to kerbside pick-up or delivery. That decision meant it went from offering kerbside at 100 stores in late 2019 to about 1,200, enabling it to retain 70% of its sales during the first month of lockdowns. In another example, Australian shopping centre brand Westfield launched a service last year called Westfield Direct through its operator Scentre Group. This service allows consumers to place an order from any retailer with a storefront at any of its 35 malls in Australia.

In the long term, such a shift to in-store pick up could offset rising fulfilment and delivery costs associated with transporting items to consumers’ doorsteps. Despite the industry’s increased attention on click-and-collect services during the pandemic, only 24% of global connected consumers viewed it as a key delivery feature, according to Euromonitor’s Digital Consumer Survey.

Other retailers acquired or turned to new partners to expand shipping capabilities. For example, Walmart, the largest US retailer, acquired JoyRun in November to add a peer-to-peer product delivery capability and partnered with FedEx in December to launch an at-home return service. Walmart and others also made technological investments to speed up fulfilment and delivery options or reduce rising related e-commerce costs.

The potential for micro-fulfilment centres, dark stores and ghost kitchens also speaks to how retailers and foodservice operators are trying to solve this dilemma. For example, Ohi is a start-up that operates micro-fulfilment centres in a few US cities, enabling brands to offer sustainable, same-day or two-hour delivery. Its tech positions products closer to end-consumers before an order is placed to reduce the time and cost of delivery. By using micro-fulfilment centres closer to where consumers live or work, companies can deliver products more efficiently and effectively, reducing the impact on the bottom line as well as the environment.

The double-digit e-commerce growth in 2020 has brought these challenges into greater focus. The pandemic magnified this disconnect as retailers and foodservice operators have seen profits further eroded by the dramatic channel shift towards digital. Rising last-mile costs, as well as environmental pressures, are leading retailers and foodservice operators to rethink delivery and collection operations, as they seek cheaper and faster options. These players will struggle to meet consumer expectations of yesteryear unless they reimagine their physical assets and make significant upgrades to logistics networks.

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