Over the last two years, a quick run to the store to pick up a forgotten or last-minute item has turned into a mobile shopping experience, with a multitude of companies providing delivery services for grocery stores, retailers and digital marketplaces.
Nancy Korayim, founder and CEO of last-mile delivery company Metrospeedy, said she has seen demand explode by 150% over the last year and a half, a trend that she expects to continue as digital marketplaces keep growing and consumer demands for speedy delivery increase.
“No one is going back to the office full-time, based on articles and things I’m hearing from larger companies, so that will mean just higher demand for home delivery,” Korayim said. “For us, that’s a good thing — that means our business is going to continue to grow.”
One of the biggest issues, though, is the rising cost of last-mile delivery, which Korayim told PYMNTS can account for over 50% of the total shipping cost. “It tends to get expensive for both the customer and the business,” she said. A huge obstacle, though, is customer expectations of free delivery, in large part prompted by Amazon.
“But there’s no such thing as free delivery,” Korayim said. “I mean, someone is paying for the cost, and it’s usually the businesses that are absorbing the expense.”
According to PYMNTS data, 56% of consumers consider free shipping for digital orders an important feature for merchants to offer, with 13% saying it’s the most important feature. Only 32% of merchants say free shipping is an important feature, though 60% of them offer it.
See more: More Than 40% of US Consumers Shop Through Digital Channels … and Stay There
To help keep costs low, Metrospeedy utilizes multiple micro-fulfillment centers across its coverage areas and a fleet of electric vehicles to get as close to customers as possible when providing rapid fulfillment; this also allows couriers to complete more deliveries, which further cuts costs.
But there are some issues facing last-mile delivery companies that can’t be predicted, such as the weather, vehicle issues, traffic and other factors that are out of human control, which is why Korayim said it’s imperative to have the right infrastructure in place.
“In my opinion, a good logistics company will have an excellent operational team to navigate these issues in order to optimize efficiency,” she said.
Big Competition
Last month, Walmart said it would be rolling out a new white-label last-mile delivery service in the U.S. to help other retailers secure local transport needs, building on the retail giant’s existing intelligence and infrastructure.
“Be it delivering goods from a local bakery to auto supplies from a national retailer, we’ve designed Walmart GoLocal to be customizable for merchants of all sizes and categories so they can focus on doing what they do best, leaving delivery speed and efficiency to us,” said Tom Ward, senior vice president of last mile at Walmart U.S.
See more: Walmart Bets on Delivery Network in Latest Expansion of Third-Party Services
Korayim said that Walmart’s entry into the space, as well as the increasing number of well-funded last-mile delivery companies, is validation of Metrospeedy’s business and proof that there’s room to grow.
“The space is so large, there is room for many more players — and, in my opinion, thus far, the space has not solidified itself to determine a clear winner,” Korayim said, adding that it remains to be seen how Walmart will execute on its own last-mile delivery service.
To be sure, some of the new players are coming in and cutting delivery prices “at any cost, whether they’re making a profit or not,” Korayim said, which creates a sort of price war between companies when looking for business from retailers and consumers.
“There’s going to be a lot of M&A (mergers and acquisitions) activity continuing to happen in the market, especially in this space, so we will see how this 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 right now are happening at the ports, not in the last mile. Over the last 18 months, he noted, the retailers that have been most successful have been those that leveraged their stores as fulfillment centers.
“So [that means] not thinking about distribution centers as separate from stores, but rather having an integrated supply network that leverages the stores as distribution centers,” Garf said during a webinar with the media. “Those that have been able to do that have been able to increase capacity, increase throughput and ultimately increase fulfill rate more than those that haven’t.”
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September 29, 2021 at 10:00PM
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50% of Delivery Costs Occur in Last Mile, Putting Pressure on Transport Providers - pymnts.com
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