In today’s ultra-competitive retail marketplace, no retailer can afford to sidestep the challenge of last-mile, same-day delivery. Even minor improvements in arrival time can delight hard-to-please customers. For years, the U.S.’ $700 billion freight transportation market was dominated by a few big companies—but new competitors are rapidly growing. Survival in the fight for the last mile will be determined by each solution’s performance against time, service, and capital.
Reducing delivery time and cost is critical for its impact on service, amidst rising customer expectations and dropping loyalty. Finally, capital—the infrastructure of vehicle fleets and the real estate required for rapid deliveries—can be a ‘make it or break it’ factor. However, more than one provider can win this battle.
With new disruptors and old players, retailers have more partnership options than ever to get goods to their customers.
Meet the disruptors
New players are disrupting traditional delivery models. Walgreens, for example, is working with on-demand startup Postmates to make popular items available for fast delivery. Another disruptor is Deliv, which partners with shopping malls and on-demand drivers to provide same-day delivery for retailers that lack their own logistics infrastructure.
UberRush is providing some major retailers with a very large, nimble, on-demand urban delivery fleet that would be very costly to build from scratch—yet Uber does not actually own any cars. Similarly, newcomer Instacart deploys a fleet of personal grocery shoppers using their own cars and smartphones. Shoprunner, meanwhile, is moving in on Amazon Prime by providing two-day shipping for its online retail brand partners.
Traditional players are still in the fight
With their enormous infrastructure advantage, traditional providers like FedEx, United Parcel Service (UPS), and the U.S. Postal Service (USPS) are the ones to beat in the battle for the last mile. Both Fedex and UPS have been leveraging their existing infrastructure to offer same-day shipping, and UPS has acquired a stake in Deliv, adding a new approach to its traditional infrastructure. While these providers enjoy significant advantage for overnight shipping, they are at a disadvantage when it comes to cost of service.
Regional third-party logistics companies (3PLs), a familiar part of the distribution picture, also are playing an increasing role in last-mile delivery. With significant local or hyper-local presence in a particular region, they already have the built-in scale needed to compete. Many are already growing as contractors to Amazon and other retailers.
Different delivery end-games, different real estate needs
While the mega-distribution centers are well established, the last-mile, same-day infrastructure is a work in progress. Consumers in Europe have the “click-and-collect” option, in which online purchases are picked up at a convenient multi-retailer drive-through center—but such models are still rare in the United States.
Retailers are quickly learning whether consumers are best served by delivery from the store or from elsewhere. From small urban warehouses to dark stores and showroom-pickup centers, new types of fulfillment centers are taking shape, as retailers and their distribution partners test new approaches to improve their product flow, such as pre-sort and post-sort, aggregation, conveyable versus non-conveyable, returns, and more.
Ultimately, a retailer’s fulfillment strategy is going to depend on the type of products being shipped, the customer service promise, the physical landscape and the logistics partners available.