The last mile delivery logistics revolution has begun. As online retailers continue to search for a competitive edge, perfecting the last mile is quickly becoming a brand differentiator.
Yet, it’s not without its challenges. Taking control of the last mile means that you need to make your delivery fast, frictionless and create a transparent order management cycle.
So, what exactly is last mile delivery and why is it so important? What challenges do online retailers face in the final mile and how do you resolve or mitigate these risks?
In this guide, we shine a spotlight on last mile delivery, including the challenges and solutions, so that you can improve your logistics and enhance the customer experience.
What is last mile delivery and why is it important?
Last mile delivery is exactly how it sounds.
It concerns itself with the last leg of the delivery, from a transportation hub to the final delivery destination, which tends to be the customer’s home address or workplace.
As such, final mile delivery has one broad goal:
To deliver the products as fast as possible.
According to a McKinsey study, the cost of global parcel delivery (excluding pick-up, line-haul and sorting) amounts to approximately €70 billion.
Thanks to the rapid increase of online shopping – along with the Amazon effect– perfecting last mile logistics has become increasingly challenging.
After all, 84% of customers won’t return to a brand that misses their delivery.
Last mile delivery is not only important for customer retention, but it also tends to be the least efficient and most expensive part of the delivery process.
In fact, the total cost of final mile delivery can amount up to half of your total logistics costs.
The challenges of last mile delivery.
Unfortunately, there are many challenges associated with last mile delivery for online retailers – not least because it can be very difficult to measure, control and improve.
Here are some of them:
Customer expectations have evolved.
eCommerce has transformed the traditional shopping experience and customer expectations have evolved accordingly. Nowadays, shoppers expect quick and efficient delivery and even opt to use same-day delivery.
Despite studies proving that customers are willing to pay more for fast delivery, the majority of online shoppers still prefer the cheapest modes of delivery.
In effect, customers want quick delivery and they don’t want to pay for it.
The problem with this is that the responsibility to tackle these changing expectations and provide fast low-cost delivery has fallen to small businesses and logistics providers.
And it’s not showing any signs of slowing down.
In fact, it’s estimated that the same-day delivery market will reach $987 million by the end of 2019 in the United States alone.
Delayed and incomplete deliveries.
There are several customer-related issues that mean repeat delivery is a necessity, such as:
- Incorrect address or name
- Urban congestion
- Remote locations
- Customers unavailable to receive or sign for packages
As such, not only does it become increasingly difficult to estimate your total last mile delivery costs, but these nuances mean that even more time, money and resources are spent trying to resolve them.
Sky high fuel costs.
Did you know more than 28% of your total delivery cost comes from final mile logistics?
Long journeys to the homes of your customers can eat away at fuel costs, especially if they live in sparsely populated areas, taking even more time to get to each destination.
A need for transparency.
In this day and age, customers want real-time visibility of their order shipping status, delivery status and last mile delivery updates. Simply sticking to a parcel tracking number isn’t enough to stand out anymore.
To resolve this, some eCommerce brands offer real-time text updates to let the customer know when they can expect their delivery, where the delivery driver is currently and how many deliveries they need to get through before arriving at the customer’s door.
In other words, it’s imperative that you implement a last mile delivery logistics solution that informs customers of the whereabouts of their parcels at all times.
Friction in the delivery process.
Aim for a frictionless delivery experience and you’ll boost efficiency and cut business costs.
However, one of the greatest sources of conflict during last mile delivery is responding to customer inquiries about their deliveries and any special requests about how it should be delivered (e.g. don’t ring doorbell or leave in recycling bin).
In order to resolve these issues, you need to have clear communication and full visibility between your customers and delivery drivers. Leveraging the right technology is key.
The solutions for last mile delivery.
Offer click and collect as a delivery service.
One way to reduce the costs associated with last mile delivery is to offer a click and collect service to your customers.
This also has the added bonus of meeting customers’ demands for convenience. All they need to do is order online and pick up their package in-store when it’s ready, in turn avoiding the potential pitfalls associated with last mile logistics.
What’s more, offering a low-cost delivery method improves the customer experience.
Although there are set-up costs to consider, your business won’t need to pay for specific delivery drivers to travel across the country as the total number of delivery locations will be reduced.
Click and collect is ideal for lightweight items, such as clothing, handheld electronics and other gadgets. If you sell bulkier products, such as furniture or kitchenware, click and collect may not be such a great option, as they’re not easy to pick up and transport home.
Another benefit to this solution is that it can help your business deal with peak selling periods, which can put extra pressure on your delivery capabilities. Click and collect reduces the workload and deliveries as multiple orders can be left at one location.
This ensures that your company operates much more efficiently, as well as saving time, labor hours and money which can then be put back into your business.
However, in order to offer click and collect services you’ll need an entire digital system that runs the following:
- Account creation and management
- Inventory tracking
This isn’t a case of simply buying one piece of software. Rather, it’s a whole suite of digital tools that you’ll need at your disposal.
Efficient inventory management software.
Although we touched on this earlier, good inventory and order management software is one of the first steps towards providing an effective last mile delivery service.
After all, your packages will need to be packed and dispatched as soon as an online order has been placed – keeping track of each order and its delivery status is key.
Provide transparent, real-time delivery updates.
Imagine that you bought something online and then were given a delivery date. No time, just a date, meaning that you’ll need to stay at home all day waiting for your parcel.
Well, this is exactly how your customers feel when they buy from your brand.
Although it can be difficult to commit to a specific delivery time slot, especially as deliveries can be delayed at any time with traffic or road accidents, these negative feelings and increased expectations aren’t showing any signs of going away.
Most customers know that mobile apps and push messaging exist.
They expect real-time updates from delivery drivers as to where they are and when they’ll be dropping their parcel off. Shoppers everywhere are pushing for better communication and transparency when it comes to shipping and delivery.
ASOS works with their carrier to provide text messages to customers with specific dates and timed hour slots of when they can expect their delivery, meaning that they don’t need to stay inside all day waiting around.
The big fashion retailer also enables their courier to be tracked in real-time, showing a map of where the delivery driver is, the current order number that they are delivering and how long it will take before they arrive at the customer’s door – much like an Uber.
Another example is DPD UK, which updates customers about their parcel delivery using an app that the carrier has developed, called YourDPD.
Providing regular notifications on the current status of a customer’s delivery helps to keep them informed and satisfied with your business. It also alleviates their anxiety and impatience as they can see the parcel’s current location and estimated time of arrival.
Whether you like it or not, the efficiency and effectiveness of last mile delivery is always associated with the brand that a customer has bought from – not their courier partners.
Consider outsourcing to third-party last mile logistics carriers.
Perfecting last mile delivery is hard.
You may find it easier to outsource your last mile logistics to local third-party carriers that have operation centers located close to the residence or workplace of your customers.
Not only does this cut business costs, but it can also improve the speed of delivery.
However, these carriers will become the face of your retail brand, so make sure you choose reputable carriers and create a behavior code so that your reputation remains intact
Make use of data analytics.
Another way to improve your final mile delivery is through using a smart tracking system so that you can track deliveries and give customers access to accurate data.
Advanced analytics (such as machine learning) can help eCommerce retailers to optimize their last mile operations in a number of ways, including the following:
- Helps inform company about customer-specific delivery constraints
- Identify the best (cost-effective and fastest) delivery routes
- Study GPS with insight into availability of local infrastructure (roads, parking spaces)
Try out parcel lockers.
As online shopping continues to increase parcel volumes exponentially, retailers everywhere are looking for new ways to improve last mile efficiency.
One such method is parcel lockers.
Sometimes referred to as automated parcel machines (APMs), parcel lockers are the most liked last mile innovation, with 39% of UK customers finding them appealing.
However, the countries that they are most popular in include Finland, Denmark and China.
In Sweden, Belgium and the Netherlands, parcel lockers are less well known but to those that are in the know have very positive feelings towards the delivery method.
So, what would convince your customers to choose parcel lockers?
For starters, delivery location is an important factor.
If a parcel locker is located in a proximate, safe and easily accessible area then they nearly always outperform home delivery and click and collect services in terms of popularity.
If you do choose to use parcel lockers, then make sure that you promote the service on your website and consider setting “out of home” delivery options as the default or free service in order to encourage customers to use it.
Improve last mile delivery to boost your profitability.
Ultimately, focusing your efforts on last mile delivery is vital in order to stand out from the competition, streamline your order management process and grow your business.
Customer expectations aren’t showing any signs of slowing down.
Your logistics operations need to meet these evolving needs to protect your reputation, foster brand loyalty and encourage repeat purchasing.
And that’s not all.
In order to achieve a profitable and sustainable online store, it’s imperative that you improve your last mile logistics as it forms a key element of the customer experience.