Evolving consumer delivery behavior is positively impacting last mile logistics. Last mile delivery proficiency has become the key for a positive customer experience in today’s e-commerce world and the COVID pandemic has further accelerated its relevance across geographies and product categories.
During COVID , both mature and nascent product categories observed growth in on-demand delivery requests, with grocery being one of the key nascent categories with rapid increase in last mile support need. Observing the growing adoption, declining consumer reluctance to opt for at-home grocery delivery, and improving consistency in consumer buying patterns many last mile logistics players are now prioritizing grocery delivery.
In the long-term online grocery delivery is expected maintain an upward growth trend with an estimated CAGR of 29% during 2020-2024. However, the growth trajectory of last mile grocery industry is likely to differ across geographies depending on the maturity level of last mile change enablers such as infrastructure, technology, regulations, and scope of industry collaborations.
Factors driving profitability:
Additionally, in the current consumer landscape, ease of purchase and post-purchase experience, enhanced by advance digital solutions, is impacting the shopping journey significantly.
Many grocery retailers are thus prioritizing investment in last mile delivery to improve delivery speed and flexibility.
With last mile becoming more crucial than ever to both customers and retailers – in relation to the grocery category – changes in storage and distributions strategies of retailers, buying preferences of customers, and investment priorities of new and existing service providers are witnessing an influx
Shifting tactics – evolving channel strategies and business models
Need convenience delivered – customer’s new mantra
Future of Last Mile increasingly a story of better software and connectivity
Three key factors impacting growth of last mile in grocery include:
Transparency |
Flexibility |
Delivery price-point |
Responding to challenges and optimizing last mile delivery in grocery sector: |
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Challenges |
Solution/initiatives |
Impact/benefit |
Cost inefficiency |
Adopting an integrated network model |
Considerable drop in shipping and handling costs, resulting in delivery price-point optimization and improvement |
High logistics ecosystem complexity |
Increasing delivery-network partnerships |
Provides support in implementing agile and efficient new models and solutions Last Mile logistics, and tackle risks related to loss due to spoilage, reach, and coordination |
Ineffective customer engagement and visibility |
Partnering with technology companies and smart-solution providers or investing in technology innovation |
Improves access to access to smart solutions to manage dynamic routing, track & trace, enabling them to provide enhanced transparency and flexibility to the customer |
Urban congestion resulting in delays and poor-insight generation support |
Implementing real-time analytics solutions and launching subscription models |
Enhances order predictability and delivery map optimization to improve customer handling, provide better delivery-slot management, and streamline decision making |
According to the recent Deloitte Consumer Tracker results, delivery intentions for nascent categories like grocery are slightly higher in the Americas compared to Europe, but lower compared to Asia Pacific.
Regional insight and takeaway: A locally tuned last mile
In many geographies, dependence on local last-mile (region-specific or area-specific) networks is on a rise, particularly in relation to grocery category, which requires more individual or light-weight shipments to be delivered at a higher frequency.
For national/international last-mile service providers it is cost intensive and difficult to manage such frequent requests to fulfil such small deliveries, thus creating growth opportunities for local retailers to expand their direct-to-customer delivery services or collaborate with local last-mile firms. From the larger provider perspective, many big-box retailers and logistics-tech firms are considering increase in regional partnerships to tap into such delivery segments too.
Many last-mile service providers, start-ups, and large grocery retailers are now aggressively pursuing grocery delivery business. Some recent strategic initiatives by players include:
A large big-box retailer
A grocery-delivery and pickup service provider
A leading logistics-technology player