50% of delivery costs occur in the last mile

Over the past two years, a quick run to the store to retrieve a forgotten or last minute item has evolved into a mobile shopping experience, with a multitude of companies providing delivery services for grocery stores, retailers and digital markets.

Nancy Korayim, founder and CEO of last-mile delivery company Metrospeedy, said she has seen demand skyrocket 150% over the past year and a half, a trend she plans to continue as the markets digital technologies continue to grow and consumer demands for prompt delivery increase. .

“No one is going back to the office full time, based on articles and things I hear from big business, which will just mean a higher demand for home delivery,” Korayim said. “For us this is a good thing, it means that our business will continue to grow.

One of the biggest issues, however, is the increased cost of last mile delivery, which Korayim says can account for over 50% of the total shipping cost. “It tends to be costly for both the customer and the business,” she said. A huge hurdle, however, is customer expectations for free shipping, largely driven by Amazon.

“But there is no such thing as free shipping,” Korayim said. “I mean, somebody’s paying for the cost, and it’s usually the businesses that absorb the expense.”

According to data from PYMNTS, 56% of consumers see free shipping for digital orders as an important feature for merchants to offer, with 13% saying it is the most important feature. Only 32% of merchants say free shipping is an important feature, although 60% of them offer it.

See more : Over 40% of US consumers buy through digital channels … and stay there

To help keep costs low, Metrospeedy utilizes multiple micro-fulfillment centers in its coverage areas and a fleet of electric vehicles to get as close to customers as possible during fast turnaround; it also allows couriers to make more deliveries, further reducing costs.

But there are issues facing last mile delivery companies that cannot be predicted, such as weather, vehicle issues, traffic, and other factors beyond human control, which is why Korayim said it is imperative to have the right infrastructure in place.

“In my opinion, a good logistics company will have a great operational team to handle these issues to maximize efficiency,” she said.

Great competition

Last month, Walmart announced it would roll out a new white-label last mile delivery service in the United States to help other retailers meet local transportation needs, leveraging intelligence and l ‘existing infrastructure of the retail giant.

“From delivering products from a local bakery to automotive supplies from a national retailer, we’ve designed Walmart GoLocal to be customizable for merchants of all sizes and categories so they can fit. focus on what they do best, leaving the speed and efficiency of delivery to us, ”said Tom ward, senior vice president of the last mile at Walmart US

See more : Walmart bets on delivery network in latest third-party service expansion

Korayim said that Walmart’s entry into the space, along with the growing number of well-funded last mile delivery companies, is validation of Metrospeedy’s business and proof that there is room for it. develop.

“The space is so big, there is room for a lot more players – and, in my opinion, so far the space has not solidified to determine a clear winner,” Korayim said. , adding that it remains to be seen how Walmart will run its own last mile delivery service.

Certainly some of the new players are coming in and cutting delivery prices “at all costs whether they make a profit or not,” Korayim said, which creates a kind of price war between companies when looking for business. from retailers. and consumers.

“There is going to be a lot of M&A activity (M&A) that will continue to occur in the market, especially in this space, so we’ll see how that plays out,” she added.

Rob Garf, vice president and general manager of retail for Salesforce, said earlier this week that the biggest supply chain bottlenecks are happening in ports right now, not in the last mile. . Over the past 18 months, he noted, the most successful retailers have been those who have used their stores as distribution centers.

“So [that means] don’t think of distribution centers as separate from stores, but rather have an integrated supply network that operates stores as distribution centers, ”Garf said in a media webinar. “Those who were able to do this were able to increase capacity, increase throughput, and ultimately increase execution rate more than those who didn’t. “

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NEW PYMNTS DATA: TODAY’S SELF-SERVICE PURCHASE JOURNEY – SEPTEMBER 2021

On: Eighty percent of consumers want to use non-traditional payment options like self-service, but only 35 percent were able to use them for their most recent purchases. Today’s Self-Service Shopping Journey, a PYMNTS and Toshiba Collaboration, analyzes more than 2,500 responses to find out how merchants can address availability and perception issues to meet demand for self-service kiosks.

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