Want to achieve last-mile e-commerce delivery success? Here's how to their relationship, impact, challenges, and the solutions that get you there.
In this article, we take a look at how you can achieve last-mile e-commerce delivery success.
We’ll discuss the relationship between online shopping and delivery. And the impact last-mile delivery can have on e-commerce results.
Plus, you’ll see what challenges you need to overcome. And the solutions that can help you get there.
So, if you want to reduce costs, fulfil more orders, and improve efficiency, you’ll love the tips and insights in this article. And how they benefit your e-commerce business.
Let’s start.
The rise of online shopping has put pressure on logistics companies as more traffic channels to e-commerce websites.
That has led many B2C and B2B companies to invest in additional last-mile delivery services to meet these new customer demands.
As its name suggests, last-mile delivery is the last leg of the delivery process.
It’s responsible for transporting goods or services from a warehouse or distribution centre to the customer’s front door (B2C) or warehouse, office, or store (B2B).
Due to the growing demand for fully integrated omnichannel sales, last-mile logistics also became an essential service for manufacturers to penetrate the e-commerce world.
The rapid growth of the e-commerce industry led to a sharp increase in the use of last-mile delivery technology such as route optimization software or delivery management software.
Without last-mile delivery, there wouldn’t be any e-commerce. Making the last leg of the supply chain more important than it ever was.
Over the past decade, market research is consistently highlighting the growing popularity of e-commerce.
The digital market phenomenon (also known as the Amazon effect) has changed the customers’ buying habits and expectations.
Customers now expect fast delivery at competitive prices. Or free shipping with every online purchase.
But neither fast fulfilment nor free delivery comes at a low cost for your company. And this demand has forced online retailers to step up their activities and rethink their supply chains.
While Amazon and other giants can afford the high operating costs of last-mile delivery, you cannot.
But learning how to compete with Amazon delivery isn’t about beating them at their own game. It’s about using their market insight and creating ways to co-exist.
While that means you’ll have to offer free or faster delivery, you’ll also have to tackle the cost of the last-mile.
(Since it accounts for 53% of all delivery expenditure)
In fact, shipping and delivery can account for up to 25% of your total business costs. And if you offer free delivery on top of that, shipping costs can gut your margins.
But there are ways you can offer same-day delivery or free delivery without breaking the bank. And we’ll come to that later in the article.
Customers don’t understand what causes a package to arrive at their doorstep in 2-3 days. Nor do they care about the consequences behind fast delivery.
What customers do care about are convenience and price.
Convenience is the reason why e-commerce is so successful. It’s also the reason why people want fast fulfilment. And why same-day delivery is popular.
As a report by experts at McKinsey states the benefits of same-day delivery:
“It integrates the convenience of online retail with the immediacy of brick and mortar stores.”
And while consumers want you to deliver their purchase as soon as possible, they don’t want to pay for it.
People see delivery as a non-essential service. The state of delivery in time of the coronavirus has somewhat changed that mindset. But still, a lot of people don’t want to pay for delivery.
In fact, delivery statistics say that consumers are willing to add more items in their shopping cart to qualify for free shipping.
Which means there are ways for you and other small businesses to offer free delivery without losing money. Or passing last-mile delivery service costs onto your customers.
But at the same time, 95% of customers prefer free one-day delivery as their ideal way to receive e-commerce goods.
So, if you offer free delivery, you’ll attract more customers. If you offer free same-day delivery, you’ll attract even more. But at what cost to your business?
There are three areas of online fulfillment where the last mile has a HUGE impact on e-commerce business models:
Delivery isn’t always easy. Fulfilling orders in residential areas is particularly hard.
It’s also where many deliveries can fail on the first attempt. Often, customers may be absent. Or the package may not fit into their mailbox.
Thanks to new technology, such as order management systems and last-mile delivery software, you can solve these problems.
By integrating these innovative solutions with your operations, you can offer on-demand delivery to customers.
On the one hand, it means you can collect more information at checkout.
For example, you can allow customers to choose the date and time when they want the order to arrive. Or create multiple delivery options that suit various types of customers.
That ensures total satisfaction. Not to mention, it gives complete control to customers when choosing how you handle their orders.
On the other hand, this makes your e-commerce delivery more flexible. Which makes it much more convenient for customers to buy online from your store.
For example, you can notify customers about ETAs before drivers arrive at their door. If their plans have changed, they can reschedule the delivery to a more convenient time.
While routing software helps you to adjust your own schedule so that it doesn’t affect your timeline. Or the expectations of other customers.
When customers remain in the loop about their deliveries, they become much more involved. Which can ease their anxieties and improve the delivery experience for them.
And if you do that, then customers become much more loyal and likely to choose your e-commerce store over your competitors.
As we’ve mentioned, delivery has become an essential part of the checkout experience.
Your customers want to choose how you deliver their goods. And they want to have other options besides standard delivery.
It’s typical to see multiple delivery options with varying prices, delivery times, and delivery locations. Here are just a few examples:
But the demand for a personalized delivery experience doesn’t stop there.
Consumers also want to choose the date and time when you deliver their purchase. And in some cases even who delivers their order.
On the other hand, people want to remain involved beyond checkout.
Consumers want to receive tracking links to follow their orders in real-time. And they want to receive notifications when the order is on its way to the destination.
New customer expectations affect how you’ll deliver orders to them. But that has an impact on your e-commerce business across the board.
Let’s take a look at the most common delivery options customers choose at checkout: free shipping and same-day delivery.
Both of these types of delivery have a significant impact on the cost of your last-mile operations.
On the one hand, free delivery isn’t actually free. Someone has to cover the cost of shipping, and usually, there are two ways to go about this.
Typically, the first way is to consolidate the cost of delivery into the prices of the products you sell.
Customers may not notice this. But if your competitors sell the same product at a lower price, people will tend to choose the seemingly cheaper option four times out of five.
The second way is to absorb the price of delivery.
That may significantly raise your operating expenditure. But no shipping fees and the lower cost of goods make your offer more attractive.
This means you can generate more business, while the extra profit makes up for the losses.
That’s a risky approach, especially with the state of delivery in time of the coronavirus. But it also means that you’ll have a loyal customer base that will always pick you ahead of other e-commerce websites.
On the other hand, customers want speed. And they don’t mind paying for it. That’s where same-day delivery comes into play.
According to statistics, 88% of customers don’t have a problem paying for shipping if it means they’ll receive their order the same day they purchase it.
But same-day delivery doesn’t come cheap. It can raise operating costs, as much as free shipping, yet it requires a much more advanced logistical network to handle it.
And that requires your e-commerce business to invest heavily in delivery logistics. From automation to delivery vehicles and staff, it’s the only way you can build an agile delivery operation that can have a grip over same-day delivery.
Urban areas are home to the majority of online shoppers. In fact, consumers in metropolitan (46%) and suburban areas (38%) have a much greater affinity for online shopping than their rural counterparts (36%), according to this report.
In emerging markets, the share of online shoppers living in cities is even higher. For example, 70% of consumers in Egypt live in urban centers. And for Malaysia, that number is 68.2%.
Since most companies conduct e-commerce in urban centers, that means that the majority of the last-delivery also happens in cities.
And that comes with its own unique problems:
Doing business in densely populated urban areas is a mixed blessing for e-commerce retailers.
On the one hand, offering goods to more people means more sales. In turn, you can generate more profit and income.
But on the other hand, more people also means more vehicles. And with more cars, vans, busses, and trucks, there’s more traffic congestion on city roads.
So, while you can raise order volumes if you centre fulfilment around cities and suburbs, you can also lose more money by increasing expenditure on last-mile delivery operations.
Providing delivery in densely populated areas requires an infrastructure and supply chain that can support it. Without those two things, you can’t establish a robust delivery network in a city.
If you’re delivering goods using a third-party service, then you have to make sure that the provider has:
If you use an in-house delivery, then you need to ensure that you can source, pack, store and deliver goods in that particular city. Which means setting up a network of warehouses (delivery hubs), so you can plan single or multi-depot operations.
It’s why Amazon is investing heavily in its urban infrastructure. And recently, the company plans to put 1,000 new warehouses in suburban areas across the United States.
But unlike Amazon, you don’t have to invest a whole lot of capital to achieve the same goals.
For example, if you have both a physical and online store, you can use brick-and-mortar stores as supply depots and warehouses.
Unlike suburban and rural communities, locating customers in densely populated metropolitan areas is much more difficult.
On the one hand, the urban landscape is always evolving and expanding. New buildings rise up. Urban planners grow and revise road networks. Officials change the names of city streets and districts.
On the other hand, cities also tend to grow vertically. In most metropolitan areas, one tenant building can house hundreds of residents. While in business districts, a single address can accommodate hundreds of offices of different companies.
All of this means that finding customers in cities (both in the field and the planning room) takes a lot more time, effort and resources. Which can also increase the risk of failed orders and missed delivery times.
Narrow city roads, one-way streets, rush hours, and dense traffic make it difficult to plan delivery routes in urban areas.
The lack of parking space and inaccessible entries for vehicles are some of the other factors urban route planners have to consider.
Add to that the dynamics of city life, and planning a delivery route in urban centers becomes a herculean task.
Which planners can’t overcome by planning manually routes using paper maps.
All of the above-mentioned challenges of last-mile delivery means that fulfilling orders in cities takes a lot more time to do, both in the planning room and in the street.
If you’re not careful, the accuracy can suffer. And the volume of orders that you don’t complete on time can increase exponentially. Which can seriously affect the reputation of your business.
Last-mile delivery is expensive. Hands down, it’s the single biggest cost an e-commerce company has to cover.
In fact, according to McKinsey, the high operating costs of delivery can consume over 50% of total e-commerce revenue.
If you don’t want last-mile delivery to eat away at your profits or gut your revenue streams, the only way to reduce the cost is to make your operations more efficient. To do that, you’ll have to optimize it using software.
(But more on that later)
Right now, we want you to keep in mind that overcoming the high costs of delivery is a big step towards achieving e-commerce success.
Transparency is a big issue for modern consumers. In fact, almost nine in ten people (or 85%) are more likely to stick with a business if it has been transparent in its dealings with them.
If you lack transparency, it’s safe to say that your brand reputation will suffer. Without clear and open information, customers will distrust your brand, from your advertising to how you use their data.
The lack of transparency also has serious consequences for the last mile of delivery, as well.
For example, if you plan to offer free delivery, you should let customers know that it will take you more time (usually 5-7 business days) to deliver their order.
Or if you offer same-day or next-day delivery, make sure to explain to your customers that the price of the product includes the cost of delivery. (If you plan to transfer it onto customers)
Otherwise, you risk breaching the trust of your customers and losing their loyalty. Which causes them to take their business elsewhere.
At the same time, consumers’ innate distrust runs deep. And modern e-commerce customers want you to involve them in the delivery process.
As more and more customers receive damaged goods upon arrival, or they don’t receive them at all, people want to know the location of their orders.
It’s a good idea to use route optimization software and provide tracking links to customers so they can follow its progress across the last-mile.
Likewise, you should also focus on streamlining communication with your customers. And if their orders may arrive late, let them know about it.
It’s a much better practice than keeping it to yourself and risking the reputation of your brand.
Allowing customers to decide how and when you should deliver their orders is one of the main points of friction for them.
But at the same time, processing your customer delivery requests is the biggest obstacle in eliminating that friction and efficiently managing their expectations.
Communication is key here. By first explaining, and then answering any follow-up questions, you can soothe the minds of your customers. And reassure them that their decision to choose your brand was the correct choice.
For example, in the case of environmental awareness, you can tell customers what packaging you use, and explain how much of it is recyclable. Or what vehicles you use, and what’s their carbon footprint.
You should also allow customers to reach you via multiple channels of communication, be it email, social media, or phone calls.
Making yourself available to customers eliminates friction since customers can easily get information and acquire status updates about their deliveries.
Returns are another essential part of e-commerce. In fact, 89% of e-commerce shoppers have returned at least one item that they have bought online in the last three years.
That makes e-commerce returns a necessity. And a potential point of friction which you’ll have to handle with great care.
To do that, you’ll have to reassess how you handle returns from the moment a return request arrives.
You’ll have to create a clear return policy that’s easy to understand and explains to customers what they get in return and how they can go about it.
For example, you’ll have to decide whether you’ll give customers their money back, ship a replacement item, or allow them to exchange their purchase for a different product.
A free return policy that has no extra cost is another thing you’ll need to consider. While it’s the most consumer-friendly policy, offering free returns also maximizes the cost of reverse logistics.
And you’ll have to ensure that your reverse logistics can handle returns, as many supply chains aren’t equipped to take care of the reverse last-mile.
To do that, you’ll have to create a dynamic and agile delivery that can quickly deal with returns, from how you pick-up them from customers, through how you source replacements, to how you deliver them back to the customer.
And you’ll need to do all of that without it interfering with your forward logistics.
Using delivery management software to automate how you organize your delivery operations is the key to achieving success in the last mile.
Instead of manually planning or using several different apps to handle specific processes, you can use one tool to control everything from one central location.
First, this type of software and others like it (route optimization software) have different systems modules. Each module is responsible for managing one aspect of the delivery process.
For example, you can use the route optimization module to plan efficient routes and create better delivery schedules. While the customer management module lets you collect, store, and manage information about your customers.
On the other hand, you can use API integration to connect the delivery management software with other tools you use. And in doing so, tap into a wider ecosystem that you can control from one dashboard.
For example, you can integrate it with inventory and supply chain management systems to gain control over depot locations and schedule supply runs just as you’d plan delivery routes.
So automation is a question of whether you want to centralize or not to centralize your delivery, as it is digitally transforming your business.
Dynamic delivery route planning is the main feature of both delivery management and route optimization software.
Technically, it enables you to plan optimal routes with multiple stops, regardless of whether you operate an internal vs external delivery fleet. While you plan each route according to different factors that affect efficiency like:
Best of all, you can do this dynamically. You can modify each route on the go. Which means you can adjust the paths, add new destinations, or rearrange stops as your drivers move across the last mile.
And that allows you to handle more deliveries quickly and efficiently since you can schedule new orders as soon as customers checkout from your web store.
Similarly to planning routes, choosing delivery management software that allows you to prioritize, batch, and schedule deliveries.
You can use the import file feature to easily upload all orders into the system using spreadsheets (.csv files). Or integrate the software with your order management system using APIs and allow it to input new orders as they arrive.
Once in the system, you can add markers that prioritize or batch orders together based on your custom presets. The software can then automatically generate the delivery schedule according to that data and other constraints like driver shifts.
Real-time delivery tracking helps you to stay on top of operations. You can easily track and monitor performance across the last mile with greater accuracy and transparency.
You can use this feature to provide tracking links to customers and allow them to track their orders until it reaches them.
As the number of orders you have to deliver increases, you’ll have to expand operations to meet the rise in demand.
Automation helps you maintain efficiency at scale.
On the one hand, you can use delivery management software to optimize performance when demand exceeds capacity. And in doing so, maximize your operational output to handle the larger order volumes.
On the other hand, you can quickly scale up your planning and optimization since these tools allow you to easily add new drivers, vehicles, routes, or delivery areas.
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