The boom in online shopping puts pressure on retailers to deliver flawlessly from first mile to last mile. We break down why the last mile is so tricky and the solutions you can put to work.
The big jump in online shopping is putting more and more pressure on retailers to deliver flawlessly from the first mile to the last. The last mile, in particular, is a serious challenge for logistics. Traffic jams, scarce parking, vehicle bans, and more can heavily delay deliveries. Here's how to work around these problems and which factors matter for on-time delivery.
We'll walk you through why the last mile is such a challenge and the solutions you can put to work.
Online shopping is more popular than ever. Providers are bending over backwards to meet customer expectations and offer free returns, discounts, plenty of perks, and even free shipping with no minimum order. That makes customers order more often.
On one hand, that creates the challenge that orders get smaller and more numerous, which makes them harder to bundle. On the other, the more frequent delivery to private homes is tough, time-consuming, and expensive.
Reasons for that include:
All in all, the last mile is visibly the most cost-intensive and labor-intensive part of the order process. At the same time, delivery is critical because unpredictable factors make planning harder. When things don't run smoothly, unhappy buyers quickly turn to other providers and share their experiences on review platforms and social media.
New approaches are urgently needed to make distribution simpler
Customer expectations are varied and sometimes demanding. For the last mile, that can mean a balancing act, because optimization processes that should simplify delivery often run counter to ideal customer experience.
For example, according to the PwC study "Aufbruch auf der letzten Meile," online retailers are considering bundling all orders at one station rather than delivering each parcel to a private address.
That would simplify the delivery process and save a lot of CO₂. But the chart below clearly shows that buyers prefer doorstep delivery.
What customers expect on the last mile.
The following goals are at the forefront of successful delivery:
As you can see, perfecting the last leg of the order and delivery process isn't easy. Even so, there are ideas and approaches that make the fulfillment process — and the last mile especially — more efficient and more cost-effective.
Not all of the approaches listed here line up 100% with customer wishes. They still make sense, though, because the savings potential is huge. What's needed are pragmatic, futuristic, and practical solutions that tackle the last-mile problem.
Delivering to private homes is getting harder, since parcels (as mentioned above) are getting smaller and orders more frequent. Carriers also have to think about when customers can be reached and how to optimize costs and resources for staff, routes, and time. So it's high time new distribution concepts for last-mile logistics are developed — ones that put as little strain as possible on the deliverer.
Until now, repeated delivery attempts — each adding distance, cost, and driving time — have been avoided thanks to helpful neighbors or pickup points used when customers aren't home. Some carriers even offer this as a default option and outsource delivery on request to nearby service points, shops, or parcel lockers.
A lower-effort alternative is delivery at a chosen time. That way carriers know when customers can be reached and repeat deliveries usually become unnecessary. Plus, this solution — according to the PwC study — is still considerably more popular (around 40% prefer this option) than picking up at a parcel locker or pickup point.
A combination of the pickup point method and a chosen time slot is Click & Collect. Customers order online as usual and pick the store and time they want to collect the delivery. Pioneers include Rewe, Ikea, Media Markt, Saturn, Deichmann, and many others. Retailers like Lidl have shut their Click & Collect down again, but it could come back given the current situation.
With Click & Collect, customers order goods from a retailer and then pick them up at one of its stores.
France is going one step further — with over 80% of all deliveries, it has established Click & Drive, where online orders (mostly groceries) are picked up by car at a drive-through, loaded by service staff, and in some cases even paid for on the spot. Providers include Auchan Drive, E. Leclerc Drive, and Courses U.
Express delivery by drone has a futuristic feel. Already well established in everyday life in China, this model hasn't quite caught on here yet. The reason: EU drone regulations only allow drone flights within line of sight of the operator and at a maximum altitude of 120 meters. Drone pilots must keep visual contact with the aircraft at all times, which prevents wide-area parcel delivery.
For now, drone delivery looks like a long shot, but some companies are already working on solutions. Pioneers include:
Then there's last-mile logistics via delivery robot: Starship Technologies, for example, has built robots that already handle 4 million deliveries a day on university campuses in Kentucky, Nevada, Wayne State University, Fairfield, Las Vegas, and many more. Hermes and Ford are heading the same way. It may take a while before drones and robots become standard here — and who knows what other options will pop up by then.
Note: Our E-Commerce Logistics guide has more on the different shipping methods.
It's not just the channels of communication that matter, but also who talks to whom and whose interests they're looking out for. Sender, freight forwarder, courier, and recipient aren't directly connected and often have different interests:
The communication and payment paths are visibly complicated, and the individual steps from first mile to last mile usually aren't directly connected. To solve this and optimize last-mile logistics, the relationships have to be reset and all parts of the chain need to be connected.
A parcel carrier handles delivery of parcels to customers' homes.
For many people, transport pricing feels extremely opaque and detail-heavy. For starters, delivery processes can be priced in three different ways:
On top of that, delivery rates differ depending on cargo and load. The following factors can change pricing:
The last point especially makes last-mile costs hard to read, and sometimes complicated, long delivery routes turn out to be the cheapest option. Even so, this last step makes up about 50% of all costs. All in all, the last mile is unfortunately one of the most expensive stages in fulfillment.
Given all these complications in delivery, the question is: what can retailers actually do to make these processes cheaper, simpler, and more reliable?
1. Redesign processes
The whole process needs an overhaul, because courier services and freight forwarders sometimes benefit from the complications and aren't pushed to change anything.
2. Good things take time
Pushing for the fastest possible delivery causes stress and complications. And that push doesn't always come from customer demand — it often comes from retailers wanting to offer the fastest delivery and have one more USP in their lineup.
3. Selective service
Delivery services have to be picked carefully. Crowdsourcing services like the city of Vienna's "Öffi-Packerl" or DHL's "MyWays" pose a risk because the parties involved have no contractual responsibility under the service-level agreement.
4. Use apps & algorithms
Algorithms massively simplify the delivery process. They calculate the optimal route and parcel volume and factor in the delivery times customers entered. They also help avoid traffic jams, saving time.
5. Digitize processes and communication
Automated delivery notifications and apps have long been well-tested through track-and-trace. Customers stay informed about every step in the delivery and get a notification with an explanation if there's a delay.
6. Service providers for fulfillment processes
Many modern providers offer reliable order fulfillment from the first mile to the last. They also help retailers optimize these processes and offer package tracking and returns management, ensuring high customer satisfaction.
Learn more about Alaiko as a fulfillment provider!
In the end, one universal approach clearly emerges — namely more flexibility on the customer side, but also on the provider side — and on the other hand, concrete goals have to start small.
Progressive ideas can't be defined for an entire city; they have to be tested first in individual areas before they can take hold.
It also has to be considered that, for example, commercial zones need different solutions than residential areas. Innovative approaches will only really work once regional specifics are factored in.
The last mile begins when the ordered goods are loaded into the delivery vehicle and on their way to end customers.
As parcels keep getting smaller and more numerous, bundling parcels gets harder. Plus, customers are reached less and less often, and repeat deliveries become necessary. So the last mile causes about 50% of total costs in the fulfillment process.
The deliverer is responsible for the last mile — courier and parcel services, freight forwarders, and so on. They have to deliver parcels to end consumers and can run into considerable complications, including missed deliveries, traffic jams, vehicle bans, and scarce parking.
Because deliveries don't always run smoothly (e.g. due to vehicle bans, lack of parking, and frequent city traffic jams), the last mile is often still a problem that logistics is trying to solve. Solutions for the often complex processes and high costs still need to be found.
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