23 Sep The last mile
I became an early European Amazon’s customer buying English books either in their American site or UK site. It was 2002, and I was a Spaniard living in Italy and wanting to learn English by myself. I remember awaiting that the Poste Italiane brought the parcel with the book to my home. At that time, the postman should practice some jugglery in leaving the package on the top of the apartments’ mailboxes that weren’t adapt to receive more than just letters. I observed with some amusement how my neighbors looked at the parcel and me somehow surprised. Then, in Italy, to buy online was very close to a crazy thing.
Nowadays, instead, buying online is a continually increasing habit worldwide. Anyhow, the last step of delivering the parcel to the end customer is still the most problematic part. There is not a better design of mailboxes for apartment buildings, and the problems related to this are growing exponentially.
The term “last mile” indicates the handling of goods from a warehouse to their final destination. This last step in the freight is the most expensive one, accounting for about a third of the total freight cost. And it will still grow for several reasons:
- Ecommerce growth: expecting to be about 22% of the total retail sales for 2023, according to the report of com. At the same time, this increase comes together with a rising return of online sales, which complicates the logistics in a compound way.
- Higher expectations: customers want same-day delivery or even 30 minutes delivery. Route optimization technics may be insufficient to satisfy expectations.
- Urban areas: population in urban areas keep increasing, globally. More people in cities mean more traffic jams and difficulties in communications, which means more problems and costs to deliver orders to the end customer.
It’s not difficult to understand why the shipping costs of Amazon grew 43% for the Q4 of 2019 compared with the Q4 of 2019, according to their communication.
Besides the skyrocket of logistics costs, there is another problem that has become impossible to ignore. People are not always home when the parcel arrives, and that has created a new “tribe,” package-stealing thieves or “porch pirates.” Some police departments collaborate with Amazon to catch thieves, installing doorbell cameras, and putting tracking devices in fake packages. Amazon is offering inside home delivery; as far as you live in an area that is covered by the service, Amazon Key, you install their Key Smart Lock Kit, which goes in the order of a few hundred dollars. You also should feel comfortable with somebody coming inside your home.
How is the sector trying to solve these two problems? Many different strategies are in test at the moment. Let’s see some of them according to the problem they aim to address:
There are several trials with autonomous vehicles and drones to match the delivery time expected, reducing as much as possible the cost related to it. Delivery robots, both terrestrial and drones, is a sector expected to grow almost 20% a year according to Markets and Markets.
Nuro, a startup that raised $940 million, has just received a driverless exemption from the federal government for his electric vehicle R2. Nuro has collaborated with Kroger in a pilot program in Arizona for delivery service. In June of last year, they announced a partnership with Domino’s Pizza in the Houston area.
Amazon is testing its Amazon Scout delivery robot in South California. At the same time, Amazon has ordered 100,000 electrical delivery vans at Rivian, for over $4 billion. These vehicles will use technology as Alexa for helping the driver and, at the same time, will contribute to a greened last-mile delivery.
Startship, a startup launched by Skype co-founders, Ahti Heinla and Janus Friis, announced 100,000 deliveries completed by August 2019, collaborating with Co-op, a food store in the UK. Boxbot, backed by Toyota, is offering a service that includes delivery vehicles and an automated hub for last-mile deliveries. At the moment, they are experimenting with driverless vehicles and parcel delivery vans with a driver.
FedEx has also been testing its SameDay Bot and announced a collaboration with Pizza Hut last year for testing the service in some cities. And many other startups are joining this sector: Dispatch, Savioke, Marble, Piaggio Fast Forward, Kiwi Campus, Robby Technologies, or Teleretail are just some of them. You may have a more in-depth look at them here.
Amazon announced last June its first Prime Air drone design, an electric drone that “can fly up to 15 miles, and deliver packages under five pounds in less than 30 minutes”. You can watch it here. Many other startups and companies are investing in this technology, as Flirtey, in collaboration with the chain 7-Eleven. You can find more information on prnewswire.com.
Other than technology, solutions come as well in the form of collaborations with other stakeholders. UberEATS and Amazon Flex are systems based in Uber philosophy, allowing provide drivers to make some money delivering parcels. Several companies focus their core business in the last mile logistics. Being a highly sensitive price market, many will fail; others may succeed and create new business models. We will see. Just recently, Skipcart has ended its grocery agreement with Walmart just after one year of servicing 126 stores in 32 states. The reason, according to Skipcart CEO, was that his company was losing money, and he doesn’t see as a viable model the grocery last-mile delivery.
When you’re not home
Many of us are not usually at home during the day. We prefer to pick up the parcel in someplace, close to home or the office, in our way home, avoiding the inconvenience and risks of unguarded packages. The first solution came through the yellow lockers installed by Amazon since 2011. Many other companies also use this solution. You find them in gas stations, train stations, and many other public facilities. The delivery is not complete, happening from the hub to the lockers, but there is a considerable reduction of costs and times.
A variation of this solution is when these systems are in the store that made the online sale. We are talking then of the “click and collect” model that many stores are using for two main reasons: no delivery costs and the possibility to upsell the customer once she is in the store. The stores prepare the orders and stow them waiting for the customers to pick up. Once the customer arrives, he can use a curbside pickup service, where someone from the store will bring the order to them, or use automated pickup systems to retrieve their orders. These systems may be smart lockers, towers, or other systems.
Many startups and companies are working in smart lockers and similar systems. We can point one of them that covers most of the spectrum, Cleveron, an Estonian company that has different products for different needs:
Pickup Tower 401, with already 1,600 towers installed for Walmart, its most known customer for this product.
Cleveron 402 is a system used for picking up orders or leave devolutions. Inditex, with its flagship Zara is installing them in their stores.
Cleveron 501 is a grocery pickup to be installed outdoors, with two different temperature-controlled areas.
There are many more, as I could see both in the NRF show and in Euroshop show, but this example should show where the sector is pointing. The only inconvenience is that stores always need the warehouse or fulfillment center to prepare the order and the pickup system for delivering it.
The micro-fulfillment center is a valid alternative that may cover the advantages of the smart lockers, plus not having to use two different storage systems and providing the support for curbside pickup. This solution prepares orders quickly, can store them until needed, and deliver them in seconds, either to the customer or to the employee that will bring to the customer in the curbside: all the solutions in one system.