The journey from manufacturer to consumer covers anything from several thousand to just a few miles. The final part of the journey has special significance, involving the greatest complexity, attracting the highest costs, having the greatest environmental impact and involving the interface between the supplier and the consumer.
This blog explains the challenges of the last mile, the costs, complexities and the changing shape of the market. It considers the trends around consumer deliveries, the impact of the COVID pandemic and the huge increase in demand for sustainable solutions. It considers the options that are currently available for creating sustainability in the final mile and those being considered by retailers, e-tailers, and courier service providers.
It brings together market research, statistics, and projections from multiple organisations, along with the perspectives of Urb-It and Bringg, two business that are at the forefront of delivering sustainable last mile delivery solutions.
The last mile has special significance because it’s the most complex. Whilst most of the journey is shipping in bulk from major hub to hub, the last mile is concerned with multiple small, and often low value, deliveries to individual addresses.
According to the World Economic Forum, last-mile delivery accounts for 53% of the total cost of shipping, and 41% of total supply chain costs. Furthermore, today’s delivery models are not proving to be that profitable, with retailers bearing a large part of the cost of last-mile delivery.
Why is that? Because unlike with large-scale shipping and distribution, retailers aren’t delivering large quantities to a single location. Instead, their couriers are dealing with multiple small and often low value deliveries to individual addresses.
Within cities and large urban environments, the costs are increased by congestion charges and the requirement for specialist vehicles in Low and Ultra Low Emission Zones. Traffic, roadworks, restricted access, and the need to arrive for timed delivery slots add further to the cost.
The trend from retail towards e-commerce has increased delivery volumes for many years and for traditional courier services, the sheer volume of deliveries is a massive challenge.
Lockdowns have amplified this issue with a surge in B2C deliveries now being mirrored in B2B, with so many working from home.
eCommerceDB’s report into the e-commerce market in the UK says that the channel has seen growth during the past 12 months of 27%. Whilst this is partly due to the pandemic, Statista anticipates that compound growth will continue at 6-7% between now and 2024.
The delivery ecosystem, which was initially challenged by the pandemic, has quickly adapted as the peak passed, with more and different products being purchased online.
Now consumers and retailers have very quickly begun focussing on how to optimise that, to reduce the associated carbon footprint and make deliveries more sustainable.
Sébastien Potts, UK Country
Manager of Urb-it explains,
“With more stops comes more complex routes, and more time out on the road. Retailers must maintain large vehicle fleets and drivers to ship a small amount of goods and that is not economically viable.”
“Meeting high consumer demands and service-level expectations for many retailers is also a difficult task, and any failed deliveries on the last mile will also incur a cost. It’s now up to retailers to master their last mile delivery capability, and to do that we believe they must take advantage of delivery partners that can remove some of the ‘last mile burden’.”
SVP of Marketing at Bringg adds,
“Traditionally, companies delivering to businesses would use a set ‘milk route’, with a predefined number of stops. B2C deliveries cannot be planned as far in advance, are often lower in value, and require delivery of a small number of orders on a single delivery run. That reduces drop density (the number of stops per route) and hikes up the cost per delivery, which too often falls on the consumer. When retailers do not have delivery scheduling in place for customers to pick convenient delivery times, then the rate of failed delivery attempts increases, which also raises the cost to deliver.”
“Retailers have to be wary because at a certain price point, delivery will no longer be attractive to customers. Reducing consumer delivery costs is critical to its profitability.”
A further factor impacting costs is that of return logistics. “Amazon’s retail revolution has meant that customers’ expectations have risen as the majority in major urban areas now expect same-day delivery and free returns as a standard. This new normal has resulted in almost 30% of all products ordered online being returned, creating a negative impact on retailers’ profits and more importantly the environment.
”So what is the true cost of last mile delivery? The latest research by Capgemini estimates it to be around $10. Generally, around 80% of this cost is charged to the customer with the balance absorbed in the product margin.
Sébastien Potts says, “Here at Urb-it, we are on a mission to transform logistics sustainably and offer green convenience in cities and urban areas. With our strategic partners we want to make the last mile more efficient and eco-friendly for everyone.
”Delivering in cities brings challenges. “Traditional long-haul trucks used to ship to distribution centres won’t always work for urban deliveries, due to traffic congestion and small parking spaces” explains Daniela Perlmutter.
“If a van cannot park in a crowded area, it will waste time and fuel looking for a parking space, potentially causing delays in subsequent deliveries. This both raises delivery costs and can harm the customer experience.”
“If retailers offer same-day delivery, they need to look to fleets with smaller vehicles, or fleets that can provide a variety of vehicles that cater to different urban locations and avoid traffic congestion. For example, using on-foot carriers, bikes or e-cargo bikes as Urb-it does, will reduce emissions and the cost to deliver, and will open up on-demand delivery to retailers.”
The demand for last mile delivery solutions is projected to grow to around £44bn by 2025, with opportunity for further growth potential.
Sébastien Potts says that Urb-it customers have a clear expectation.
“Our customers expect us to be efficient, focused on providing great value, optimal service, and an enhanced eco-friendly delivery service on the last mile. The end consumer also expects their chosen retailer to deliver with speed, convenience, and due to the pandemic, they have placed an increased demand on long-term sustainable and environmentally conscious solutions that enhance the health of the cities in which they live. In this new era of eco-conscious consumerism, retailers are crying out for sustainable delivery solutions.”
“This has been further exacerbated as governments and local authorities impose environmental targets and restrictions in response to the impact of climate change, as they too are challenged by new operational demands.”
The UK has followed in Europe’s footsteps by committing many of its cities to a net zero pledge, resulting in a range of urban delivery methods emerging. This represents a significant opportunity for Urb-it and our clients that are striving to improve the health of our cities through more sustainable, efficient delivery options.
“At Urb-it our vision has always been to bring convenience and sustainability to cities worldwide, therefore we are very much aligned with the governments’ plans. As a certified B Corp, sustainability runs throughout our entire ecosystem. We have also partnered with Clean Air Villages and, using our green operations, we’re working to reduce emissions in 10 hotspots of poor air quality in Greater London.”
Bringg provides the technology that supports Urb-it’s initiatives. Daniela Perlmutter believes in leveraging technology to reduce the carbon emission estimated to grow by 30% as a result of delivery-related CE by 2030.
“As a last mile delivery and fulfilment platform, Bringg has a corporate responsibility to cut carbon emissions. We do that by providing retailers and logistics providers like Urb-it with the technology and solutions they need to help meet their net-zero goals. This can be through smarter dispatching and routing that reduces mileage, or tools to highlight green fulfilment options at checkout and incentivize the consumer to choose greener delivery.”
“Our BringgGreen tech practice provides customers and ecosystem partners with education, functionality, and data in order to manage and track their last mile sustainability efforts so they can be more eco-efficient and, in turn, have a positive impact on the environment.”
The demand for sustainability is increasing like never before. According to Sébastien Potts,
“The pandemic has seen a shift in consumer buying behaviour, and with more and more people working from home,
e-commerce sales have skyrocketed. This increase in last mile deliveries has heightened concerns over the increasingly negative impact on the environment.”
“Eco-conscious consumers are now holding organisations responsible for their environmental impact and are even willing to pay for sustainability. Large Retailers especially have responded and have put initiatives in place to bolster sustainability practices across the supply chains and are winning the hearts of ethical consumers.”
In the final part of this 2-part blog series, we will look at the impact of conscious consumerism on the demand for sustainability, the options for last mile sustainability from drones to tunnels, and at how collaboration is delivering environmental benefit to retailers, e-tailers and consumers.