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The Impact of COVID-19 on Last-Mile Delivery
The impact of COVID-19 on last-mile delivery has been HUGE, and here we share actionable market insights that will make it easier to overcome it.
The impact of COVID-19 on last-mile delivery has been HUGE.
After all, the coronavirus is the great disruptor of our time.
So if you’re looking to learn about:
The challenges businesses face during the outbreak.
The outlook for last-mile delivery after the pandemic ends.
The trends that emerged as an effect of the coronavirus.
The future of last-mile logistics once the dust settles.
Then you’ll enjoy the actionable insights we’ve gathered in this article.
Let’s dive in.
Last-Mile Delivery Challenges During COVID-19
Every person in the world was affected by COVID-19. And when customers suffer, so does business.
The pandemic forced many businesses to close down for good. Those that remained had to adapt to the disruption.
To survive, a lot of businesses turned to delivery. This put last-mile delivery companies under immense pressure.
Consumer behavior also changed, as more and more people started depending on delivery to source essentials.
More people than ever before are shopping online. And a lot of companies have used this opportunity to set up web stores and offer home delivery.
But this high demand, rise in competition, and the need for faster fulfillment only put extra pressure on the last mile.
At the same time, companies had to balance their books. So managing usual challenges such as operational costs continued to be a big concern.
As the last-mile delivery challenges for 2020 persist, it’s worth taking a look at what exactly they are:
#1 Addressing Safety
Safety is THE top priority during the COVID-19 pandemic.
Despite vaccinations, customers and delivery agents are still at risk of getting infected by the virus.
As many countries still enforce lockdowns, the highest risk to their health comes from the final step in the supply chain.
So, companies must follow the health and safety guidelines issued by their national health organizations.
It’s also worth staying up to date with the latest advice from the World Health Organization (WHO).
At the same time, businesses have to think about business.
One way to go about this is to adopt new forms of delivery like curbside and doorstep delivery.
But respecting social distancing and successfully fulfilling orders isn’t a simple task.
For example, curbside and doorstep delivery don’t guarantee the security of the package once it’s delivered.
In the US, leaving deliveries unattended exposes them to porch pirates. Which is on the rise since the start of the pandemic.
But innovation is still the key to health and safety.
Many companies are combining contactless delivery with delivery management software.
For example, software solutions allow companies to provide tracking links.
Customers can track the order to their doorstep in real time, avoid contact with the delivery agent, and secure the parcel before it’s stolen.
#2 Keeping Up With High Demand
A spike in demand during the holiday season has a huge impact on the last mile.
For example, it’s one of the biggest challenges of last-mile delivery logistics behind Black Friday.
Now, imagine the pressure created by the coronavirus.
The pandemic is forcing people that have never bought an item online to suddenly shop almost exclusively online.
As companies try to keep up with demand when it exceeds capacity, there’s a lot of pressure on drivers to perform.
In some places, drivers have to work seven days a week to keep up with high demand.
And with no shortage of drivers due to layoffs caused by the pandemic, cheap labor is partly responsible for the expansion of the last-mile delivery market.
#3 Shifting Consumer Behavior
Before the pandemic, online shopping was responsible for just 10% of the sales in the United States.
Not only have order volumes spiked over the past year, but priorities have shifted from convenience to safety.
As last-mile delivery trends change, they also challenge distributors in terms of quality and shipping prices.
Rising consumer expectations aren’t proportionate to their willingness to pay more for delivery.
This is most apparent with low-cost goods, such as groceries.
As this type of consumer behavior becomes the Next Normal, businesses will continue to struggle to turn a profit.
And that’s a major challenge for the last mile, especially when one of the main goals of home delivery is to meet customer expectations.
#4 Maintaining Quality of Service
Even though the pandemic isn’t here to stay, for now, maintaining the quality of service is a HUGE challenge.
People are accustomed to the convenience of online shopping.
In fact, a survey about the future of customer experience places convenience high on the list of things consumers value.
Yet, expectations are running high. As more companies offer home delivery, people still want to receive a quality service with every drop-off.
And the quality of last-mile delivery after COVID can potentially separate the strong from the weak.
The best-optimized operations that can meet these consumer demands while providing convenience and safety are the ones that will thrive.
#5 Following Lasting Trends
Covid is pushing businesses to innovate and come up with new ideas.
At the moment, these innovations work.
But businesses that will succeed will be those that follow lasting trends.
Contactless delivery is a thing of the future as well as the present.
Customers prefer doorstep delivery to shopping at brick-and-mortar stores.
But it’s safe to assume not all types of contactless delivery will remain popular.
So last-mile delivery businesses will have to continuously keep one eye fixed on long-term goals, as they overcome the disruption of the pandemic.
Last-Mile Delivery Post COVID-19
Last-mile delivery post COVID-19 is quite different from what it was before the pandemic.
To overcome it, companies had to embrace the change.
Adapt to survive.
And many did.
So in this part of the article, we take a look at the outcome.
You’ll see the effects of COVID-19 on last-mile delivery.
And how it has changed the market beyond the pandemic.
Let’s take a look.
Focus Is On Home Delivery
As lockdowns enforced social distancing in 2020, home delivery became the only way for people to buy essential goods.
If businesses wanted to sell something, they had to deliver it.
If customers wanted to buy something, they had to order it online.
And overnight, home delivery became a core business service.
As the pandemic continued, people became used to e-commerce and the convenience of last-mile delivery.
So much, in fact, that more customers are shopping online now than at the height of the pandemic.
What does this mean for your business?
It means that, from now on, the focus is on home delivery.
To generate success, you need to achieve last-mile e-commerce delivery success.
People no longer want to have the option to order something. They demand it.
And this has opened up the entire last-mile delivery market to a new and untapped audience.
The best part: the audience is growing.
So as the world slowly moves beyond the pandemic, home delivery is here to stay.
And if you want your business to grow in size and profit, your focus will have to shift.
Building a business strategy around last-mile delivery is no longer optional.
It’s a long-term opportunity you can’t afford to miss.
Raising Capacity to Meet New Demand
When a crisis occurs, people panic.
We all witnessed this in 2020, as consumers rushed the supermarkets to stock up on essential goods
Suddenly, consumers that had never ordered anything online in their lives had no other option.
Supply chains struggled to meet this high demand. Deliveries reached breaking points.
The big problems with last-mile delivery all had to do with: How do you raise capacity to meet this high demand?
More orders means more of everything. Including more fuel, vehicles, drivers, and overhead.
All of this raises the cost of delivery.
One way businesses solve this problem is to expand existing capacities.
Instead of focusing on raising capital expenditure (Capex), SMBs became more aware of operational expenditure (Opex).
Companies started making their last miles more efficient.
Many turned to technology, like scheduling and route optimization software.
This allowed them to use every last bit of their operation to increase capacity and meet the high demand for fulfillment.
For example, instead of buying new vehicles, businesses are using software to map routes with multiple stops.
They can also increase route density. Which means more stops per route and more orders their operations can handle.
To be clear:
Quality is bound by quantity, in this one. And the larger the fleet, the easier it is to deliver goods.
But if you can raise capacity until you can afford to increase the size of the fleet, the quicker you’ll reach that goal. And this will surely persist after COVID.
Aligning Operations with Consumer Trends
COVID-19 has changed consumer preferences.
To meet their expectations, businesses are aligning operations with consumer trends.
Customer satisfaction remains the key to a good delivery.
In this sense, companies are turning to technology for the answer.
To feel the pulse of the consumer, companies are collecting data.
They are using big data to align what they offer and how they offer it with the kind of service customers actually want to receive.
And as competition grows, more and more businesses will rely on data to shape their strategies and last-mile delivery.
This will make fulfillment even more convenient for customers. And make them much more likely to use it once the pandemic ends.
Businesses have been innovative when it came to tackling social distancing.
A clear example of this is contactless delivery:
- Doorstep delivery
- Curbside delivery
- Trunk delivery
- Click & collect
- Delivery lockers
- Drone delivery
Safety is a big concern here. But once the dust settles, it’s safe to assume that this type of delivery will remain.
The simple answer: Convenience.
Many contactless delivery options make it more convenient for customers to receive orders because it doesn’t require their presence during drop-off.
Customers can order items online and go about their business.
Once they return home the order is waiting for them on the porch or in their delivery locker.
But it’s also convenient for logistics planners and delivery drivers.
Planners don’t have to worry about missed or failed deliveries. While drivers don’t have to waste time waiting for customers to receive the order at their doorstep.
Instead, they can use electronic proof of delivery (ePOD) to photograph an item, for example, and automatically confirm a successful drop-off to the operations manager and customer.
As the demand for last-mile delivery continues to rise, contactless fulfillment will remain key in the future.
Automating the Last Mile of Delivery
Technology has played a HUGE role during the COVID-19 pandemic.
Every industry has sought out digital solutions to deal with the challenges of the outbreak.
It’s no different in the last mile.
What’s interesting is the effect it had on business.
In fact, the coronavirus has accelerated the digital transformation.
According to McKinsey, 58% of companies have started automating operations since the start of the pandemic.
By comparison, the rate of tech adoption in 2017 and 2018 was just 20%.
First, technology doesn’t require direct human contact.
Companies can afford to send non-essential staff home and operate remotely.
This enables them to abide by health and safety measures like social distancing.
And they can keep output levels the same, as before the lockdown.
The rapid implementation of technology also aligns with key business priorities:
Here, the most important ones include:
- Digital transformation
- Operational optimization
In fact, Gartner suggests that these priorities account for almost 50% of business development. And technology allows you to achieve both.
And as companies reduce Opex and Capex while raising efficiency through optimization, it will be hard to go back.
That’s why automation will remain relevant beyond COVID.
Last-Mile Delivery Trends After COVID-19
COVID-19 has certainly introduced some last-mile delivery trends.
But what excites us is how these new trends will shape last-mile delivery after covid.
Let’s see what they are:
#1 Insourcing Deliveries
As COVID swept the land, many businesses had to cut overhead.
One way many achieved this was to turn away from third-party logistics providers (3PLs) and start insourcing their deliveries.
This turned out to be a significant cost-saver for small businesses that offer local delivery.
SMBs were able to pool their resources and use last-mile delivery trends like crowdsourcing to start offering fulfillment in-house.
While there are big differences between internal vs external delivery fleets, outsourcing deliveries is expensive. Keeping it in-house made it a lot more sustainable and cost-efficient in the long-term.
With an in-house delivery, you have complete control over operations. In turn, you have a tighter grip overspending.
So instead of paying service fees to 3PLs, you would have clear visibility over the budget. And use that money to cover the actual cost of delivery.
Technically, by insourcing deliveries, you only have to cover fuel costs and driver payroll.
That significantly cuts the cost per delivery and improves other key metrics in delivery logistics. But it also enables you to set the price of fulfillment yourself.
And during COVID-19, when every company relies on its delivery, this allows you to offer lower prices and remain competitive on the last-mile delivery market.
#2 Urban Inventory and Warehouses
The rise of companies that offer delivery services is reshaping how businesses store inventory in cities.
There are two reasons for this:
First, using urban warehouses is more efficient.
Having supply depots closer to consumers means it’s faster to deliver goods to them. While also shaving off countless dollars from the cost of fulfillment.
This is why companies like IKEA, Amazon, Apple, Target, and Walmart are investing in urban warehouses.
On the other hand, this is causing real estate prices to skyrocket.
It’s becoming almost unbearable to rent a property in the city and use it as a supply depot if you’re a small business.
One way companies are reducing their overhead is by transforming their physical stores into warehouses.
Technically, a company uses the front of the store the same way as it did before - a bricks-and-mortar point of sale.
But at the back of the store, it turns the inventory of the store into a loading dock.
This makes it quite possible for SMBs to plan multiple supply depots and offer last-mile delivery in an urban setting.
At the same time, it also gives companies the option to introduce in-store pickup.
Customers who already know what they want to purchase can use Click & Collect to shop online and pick-up the item at the store.
On the one hand, this maximizes the profitability of physical retail. On the other, it allows you to add a contactless service and protect both customers and staff.
#3 Gig Economy and Crowdsourcing
The gig economy and crowdsourcing aren’t new inventions in last-mile delivery.
You probably know about companies like Uber, Lyft, Airbnb, and Postmates. And how their business models rely on these formats to source service providers.
As the coronavirus raises demand, crowdsourcing and the gig economy may become one of the main ways businesses hire drivers in the coming years.
In fact, companies like Amazon and Walmart are already using crowdsourcing to offer same-day delivery.
But this may especially favor smaller businesses.
SMBs can find and hire more affordable freelance drivers and build a delivery fleet without breaking the bank. Or too much capital expenditure.
With more people out of work because of the pandemic, the pool of skilled workers is abundant.
That is a solid opportunity for SMBs that haven’t previously owned a fleet to quickly build up a workforce and start offering last-mile delivery.
#4 Merging Forward and Reverse Logistics
Returns are a big problem for last-mile logistics.
As more people shop online, a lot of them return their purchases for many reasons.
On average, almost 90% of consumers have returned at least one item that they’ve bought online in the past two years. While 42% of people return a purchase every six months.
These kinds of return volumes harm the delivery of goods to the customer (or forward logistics).
One trend that’s emerging and may help you overcome this problem is to merge forward and reverse logistics.
What does this mean?
Merging forward and reverse logistics means handling returns using the same structures, processes, people, and technologies that you use to manage last-mile delivery.
For example, using the same vehicle route optimization software, you can plan return pick-ups in the same way you do order drop-offs.
You use the same route planners and dispatchers to organize the returns. But also the same vehicles and drivers in the fleet to complete both tasks.
This reduces a lot of the pressure from the last mile. And it makes it more cost-effective and efficient to handle reverse logistics and e-commerce returns.
Which you can now do in real-time as well, thanks to the software and shared resources.
#5 Robot and Drone Delivery
It’s still too early to say when, but robots and drones will surely be taking over repetitive tasks such as delivery in the future.
Like everything else, the COVID-19 outbreak had accelerated this.
And the date when robots and drones start delivering goods may come sooner than you think.
Amazon drone delivery is already in the final stages of development.
In fact, the company already offers Amazon air delivery for its Prime members.
It uses small drones to deliver less-than-five-pound packages to local customers in specific areas.
On the other hand, the advancements in AI and robotics technology are slowly pushing the development of delivery robots forward.
One way where we might see this is with driverless trucks.
For example, Mercedes-Benz is developing self-driving trucks for transporting goods over long distances.
Here the vehicle isn’t fully autonomous. The driver is still on board, but he isn’t driving the vehicle.
Instead, his role is to monitor the systems and ensure maximum efficiency while the vehicle drives itself on the road.
And while there’s still a lot of innovation ahead, the future of delivery looks exciting.
The Future of Last-Mile Logistics
There is no doubt that the pandemic had pushed last-mile delivery to its limits.
A lot of things have changed. And the future of last-mile logistics looks exciting.
But it’s also unknown. That’s what makes it frightening.
As COVID-19 continues to harass the world, a lot more things may yet change.
But you’ll have to embrace change to overcome it.
That’s what this part of the article is about.
Here’s are three things you can always do to overcome any last-mile delivery challenges that may happen in the future:
The COVID-19 virus has been the great disruptor of 2020. Like in any other crisis, change becomes inevitable.
But this time, a lot of things have changed. Few can recall so many radical social and economic shifts in day-to-day life, and in such a short time.
From remote work and consumer behavior to how companies do business, it seems a lot has changed overnight.
And the state of delivery in time of the coronavirus is just another item on this list.
So as we move towards this strange new world, maintaining stability will be critical to overcome these challenges.
If your company can find an anchor point, neither the rise and fall in demand nor any new disruptions that might happen will prevent you from reaching your business goals.
Acquiring New Customers
COVID-19 has already done its part here.
The disruption caused by the coronavirus had introduced millions of new customers to online shopping.
And as we enter the New Normal, the convenience of e-commerce is what will keep consumers shopping online.
Technology is crucial for this.
As new solutions like route optimization software become available, they’ll drive even more efficiency.
This will make it easier for people to order online. Which will lead even more people to do their shopping on the Internet.
All of this will raise the pool of last-mile delivery customers and make it easier for you to acquire new ones.
Maintaining and Driving Growth
Maintaining the growth of your delivery will have everything to do with the precision of your operation.
As you raise delivery efficiency, it will be easier to keep customers satisfied. Which will allow you to build trust with your customers through delivery.
That’s what can help you to attract even more new customers. But it also ensures that you develop new relationships with customers that will last.
This is what makes it easier to gradually introduce small innovations that scale your delivery. And use advanced tactics to grow your delivery operations as you do so.
The goal is to find a delicate balance between operational efficiency and meeting customer expectations.
That’s what will perpetuate growth and the use of last-mile delivery services among customers old and new.
If you want to find out more, we can help.
We have everything you need to start improving your last-mile delivery.