Online retailers and third-party logistics service providers are looking for more ways to provide a positive experience for shoppers.
To meet customer expectations, they have to increase delivery volume and reach more customers fast, while keeping costs low. One of the areas where companies can drive efficiency is last-mile delivery.
What is last-mile delivery?
Last-mile delivery involves the last leg of a parcel’s journey – when a product ships from a warehouse, transportation hub, or sorting facility to the back of a truck, and finally, the customer’s doorstep.
This tends to be the most expensive and time-consuming part of the fulfillment chain. Last-mile delivery accounts for 53% of the total cost of shipping.
Nevertheless, last-mile service is a crucial differentiator for retailers. To improve customer satisfaction and brand loyalty, this critical leg of the delivery should be timely and accurate.
In 2020, Bloomberg found that 56% of shoppers won’t buy again if they’re not happy with the shipping service.
What is the last-mile problem?
The “last-mile problem” is a longstanding challenge in logistics. When you track a parcel and find that it’s been “out for delivery” for a couple of days, you’d realize that the problem lies in the inefficiency of the delivery process.
Typically, the “last mile” involves multiple stops with low drop sizes, which makes it more costly and time-consuming.
In rural areas, drop-off points can be miles apart, with only a small number of packages being delivered at each stop. In urban areas, traffic and congestion can cause delays.
As a result, transportation, fuel, and labor costs increase, with last-mile delivery in dense urban areas costing $2.50 to $5 per stop and up to $30 in rural areas.
These problems in cost and inefficiency are only compounded by the increase in demand for e-commerce transactions in the US.
Since the pandemic started, e-commerce purchases have grown exponentially in the last two years. With the popularity of Amazon Prime, customers have grown accustomed to fast and reliable shipping whenever they shop online.
Challenges in last-mile delivery
Below are some of the most critical challenges in last-mile delivery:
Delivery delays. Delays in delivery can harm a business’s reputation, increase customer churn, and impact your sales. A superior last-mile experience can help you engage and retain customers. Research by Capgemini showed that 75% of consumers are willing to spend more if they are satisfied with the delivery services of the brand.
Route planning. Planning the most efficient delivery route is essential in keeping last-mile costs down. The goal is to plan a route that minimizes fuel consumption and travel time while maximizing the number of stops. This can be a daunting task considering the number of variables that should be considered, especially in urban areas.
Unpredictability. The final mile is often the most logistically difficult due to the number of unforeseen setbacks that the courier may encounter along the way. This leg of the journey often involves many other collections and deliveries, which can make it take even longer.
A good way to overcome this challenge is to use software that can streamline the shipping process, and allow for rerouting or even workforce adjustments.
Customer experience. High shipping fees can lead to cart abandonment, but when customers do check out their order from your store, they’ll expect the same level of service that they enjoy from other retailers.
This may mean same-day solutions with a small margin of error: that is, they expect that their parcel will be delivered right to their doorstep at the right time. To achieve this, you need a reliable partner to help keep last-mile delivery costs to a minimum while also guaranteeing customer satisfaction.
Lack of visibility. A major challenge in last-mile delivery is the lack of visibility into the shipping process. Once a package leaves the fulfillment center, there’s no telling when it will arrive at its destination. This can be frustrating for customers who are tracking their orders and expecting full transparency throughout the entire shipping process.
It can also be difficult for businesses to keep track of their inventory and ensure that products are delivered to the right customers. A lack of visibility can lead to delays, customer complaints, and even returns.
Why bother solving the last-mile problem?
Two words: customer satisfaction.
Satisfied customers are more likely to purchase more frequently. According to a study by Capgemini, 35% of consumers overall expect to use home delivery at least once a week. However, this figure is higher for satisfied consumers:
- In 2021, 37% of satisfied customers expect home delivery every week.
- But for the dissatisfied, this drops to 28%.
- In metropolitan areas, the difference between satisfied and dissatisfied customers is more pronounced: 51% expect to receive deliveries multiple times a week by 2021, but for dissatisfied customers, this drops to 16%.
Increasing efficiency in last-mile delivery processes will allow e-commerce brands to adapt to changing customer demands and distinguish themselves from the competition.
To improve customer satisfaction and reduce shipping costs, business owners have to take a proactive stance in optimizing their processes using technology.