In today’s world, consumers can get practically anything delivered—from groceries to pet food to cars. When we order our items, we often forget about who is delivering it aside from how long it will take to be delivered. Since the outbreak of COVID-19, we have seen a massive increase in eCommerce as well as last mile delivery use.
Online sales have boomed because of the COVID-19 Pandemic. Online sales alone climbed from $41.5 billion in June 2019 to $73.2 billion in June 2020 in the US alone. This is nearly double that of the year prior. Others are predicting that eCommerce will overtake retail as early as 2024. Presently, the state of retail has been disrupted by COVID-19, and many believe that consumer behaviors shifting to online shopping is to blame. Store closures are becoming more frequent as online shopping is proving to be more safe and convenient for consumers. Online retail sales have a direct impact on last mile delivery services, who have not had it easy during the pandemic. Here are a couple of the ways in which last mile delivery has been impacted by the pandemic:
Increase in Usage & Package Volume
Package delivery has soared since the start of the pandemic. Statistics reveal that we started with 74 billion parcels in 2017, increased to 87.5 billion parcels were delivered in 2018, reached 103 billion parcels delivered in 2019, and finally 132 billion worldwide in 2020.
These numbers demonstrate the overwhelming number of packages that last mile delivery services are now responsible for. Companies like Amazon now have to provide alternative ways to deliver their products and outsource on major holidays.
Sourcing Delays & Consumer Demands
Due to social distancing guidelines and labor shortages, the pandemic has caused delays and shortages in warehouses and production centers. These delays ultimately fall on last mile delivery services to make up for lost time. In fact, sourcing delays have impacted all industries with reports of revenue loss in nearly every sector. Fifty-nine percent of customers reveal that they are returning customers to companies who offer fast, easy, and transparent delivery. Other statistics reveal that same-day delivery options have increased to 30 percent as customers select faster shipping options while also noting that 70 percent of consumers are still selecting the cheapest shipping options.
The relationship between warehouses, businesses, and consumers is tied together by last-mile delivery, which can often be the determining factor in a customer’s willingness to buy from that business again. Due to the pandemic, last-mile delivery companies have had increased pressure to meet consumer demands despite these sourcing delays.
The pandemic’s impact has not been completely negative; it has served as a catalyst for increased innovation in meeting consumer needs.
The share-economy, such as Uber Eats, is a good example of how this innovation is being used now. Delivery drivers are not employees of the restaurants they drive for, but join with them on a user-friendly app to get paid to deliver food. In short, they are simply independent contractors who choose to deliver on their own time. This idea does lift some pressure from delivery companies, although not much, because it is more focused on food and smaller deliveries.
Moreover, local fulfillment started as a problem for smaller businesses, but they have managed to work around it. It has led to the “fulfill-from-store” model as well as other approaches, including the adoption of micro-fulfillment centers. This means delivery is more “direct from store” and delivery routes are shorter. This has lowered fuel costs for last mile delivery companies as they are able to employ smaller cargo-style vans and cut back on fuel costs.
The last approach which was seen prior to the pandemic but has been better adopted is contactless delivery. While this is the safer option, it has been proven to be more difficult to manage, thus forcing companies to provide better routing and tracking options for customers.
Beyond the Pandemic: Where is Last Mile Delivery Headed?
It is clear that eCommerce is here to stay. Predictions noted a 25 percent increase in business-to-consumer parcel deliveries in 2020. This increase will continue to rise by 10-20 percent in the coming years. There are general concerns about the direction we’re headed— in reference to the impact of delivery on the environment, efficiency of delivery services, and consumer behavior trends.
Firstly, we can note what we are currently doing in regards to the environment. Large cities are already adapting to more parcel deliveries on their streets. For example, cities such as Santa Monica and Amsterdam are instilling "no emissions zones'' and encouraging the use of electric vehicles. Electric vehicles are proving to be the way of the future, with our company being one of the first to fully invest in them as an alternative option.
Furthermore, there is a concern that the increase in last mile demand could boost the number of delivery vehicles globally by 36 percent through 2030. Without the proper interventions, emissions and traffic congestion would also see an increase over 30 percent in these cities. Delivery vehicles, their emissions, and congestion all play a key role in challenging our urban environments. These are real concerns that we could face should we not invest in the proper resources to minimize emissions.
A more hopeful direction is that of innovation for last mile delivery companies. While we know trends point to increased revenue over the next few years, how will they accommodate to this influx of packages being delivered?
Companies like Amazon are already providing their own delivery services, and are exploring futuristic avenues for delivery. Mckinsey outlines the future for last mile delivery in one of their reports: it is projected that 80 percent of all deliveries will be carried out by autonomous vehicles/drones, roughly 2 percent by bicycle couriers, and the remaining ~20 percent by our traditional delivery methods (i.e. postal service, UPS, etc.).
While consumers have had to adapt to staying home because of pandemic anxiety and store closures, researchers have noted that these online purchasing behaviors are here to stay. Even more so, worldwide eCommerce sales have seen an increase from $523.64 billion in 2018 to $601.75 billion in 2019 spent online, a 14.9 percent increase in just one year. The pandemic has only expedited this purchasing behavior, and has allowed for more accessible ways to buy things online as stated previously.
After outlining the current position of last mile delivery pre-pandemic and during the pandemic, noting the problems for last mile delivery, and the effects of increased deliveries, we are able to have a clear understanding of what is likely to take place in the coming years. Delivery will continue to increase in use and will need to adapt both environmentally and innovatively speaking in order to meet the needs of consumers.