Last Mile Delivery Trends
As we get into 2023, the world seems to be steadily moving towards normalcy as consumers eagerly continue to make purchases, largely from the comfort of their homes.
The recent predictions state that the retail e-commerce sales worldwide will reach a mammoth 6.3 trillion dollars in 2023, compared to 5.7 trillion dollars in 2022 and 4.2 trillion dollars in 2020. Also, consumer spending is still resilient against all the inflationary pressures. The growth in retail e-commerce sales and resilient consumer spending are stronger signals that last-mile delivery is right on its path towards normalcy.
Amazon, Walmart, BigBasket, or name anyone. The best brands in the world made it through their growth in last-mile delivery. The future growth of every successful brand depends on how it shapes its last-mile delivery based on the key trends. Let us find the most important last-mile delivery trends that will contribute to the growth of businesses in 2023.
The number of parcels that households require to be delivered continue to be on the rise. According to Parcel Shipping Index 2022, on average, 41 packages were shipped for each member of the population within 13 countries in the Index that include India, United States of America, United Kingdom, and Japan, equating to around 137 per household. This has created immense pressure on drivers across the world due to diverse reasons.
For example, a drivers survey in North America stated that finding qualified drivers is the biggest challenge in the last-mile delivery for businesses. The shortage of drivers puts added pressure on the existing drivers to deliver additional loads. The additional loads increase the time spent on the road and disturbs the work-life balance of drivers.
For the South East Asia (SEA) markets like Indonesia and the Middle East region, the problem isn’t driver shortage. In these regions, poor roads, unclear addresses, traffic jams and lack of detailed maps are the primary problems. A report states that Jakarta has been one of the worst cities in the world for traffic congestion, and an average driver starts and stops there 33,000 times a year. Issues like these make it difficult for drivers to find the right customer location, and deliver the orders on time.
When it comes to India, the same set of problems exists. A Boston Consulting Group survey mentioned that road congestion in just four Indian cities Delhi, Mumbai, Kolkata and Bengaluru added up to a colossal $22 billion dollars in congestion costs. Another survey by a UK-based company stated that Indians on an average spend 2.02 days per year in traffic jams. A combination of these challenges result in increasing turnaround time for drivers. Together, the slow pace of infrastructural advancements, crowded streets, traffic jams, and unclear addresses, make drivers' lives tougher.
One thing that is common for drivers across all these geographies is they are unhappy or dissatisfied from the immense pressure of making on-time deliveries daily. In a survey, delivery service drivers in the US rated their career happiness 2.6 out of 5, which puts them in the bottom 9% of careers.
In India, delivery personnel are majorly part of the gig economy. They struggle with extended working hours, job insecurity, dismal pay, and inadequate facilities. Especially, in metros like Delhi, Mumbai, or Bengaluru, delivery drivers are under a constant pressure to deliver orders on time. During time-crunched situations, they work for more than 12 hours at a stretch. This situation gets worse when there is massive traffic, and when customers, who are used to on-time deliveries, feel frustrated and constantly call and ask the status of orders.
The same situation persists for Indonesia. In the first half of 2021, gig delivery workers from various courier enterprises protested for a reduced workload and decent pay. Today, businesses are actively investing in a delivery route planning software to reduce the workload of drivers. With its cost-effective routes, drivers get enough time to complete their deliveries and take sufficient breaks.
When drivers are dissatisfied and underproductive, they fail to provide a delightful delivery experience for customers. This leads to loss of customer trust and cuts down business growth. Hence, the focus on 2023, will be to make drivers happy and empower them.
We often heard sustainability as a buzzword and a differentiator for brands. This is not the same today. Now, sustainability is no more a differentiator, but a necessary feature for modern businesses. In general, sustainability is the societal responsibility to save natural resources so that economic activity does not disturb the ecological balance.
Earlier, sustainability was a focus term for making manufacturing greener and efficient. But today, the change in consumer mindset has changed the perception of brands towards sustainability. A study in 2021 mentioned that 44% of consumers are likely to buy from a brand with a clear commitment to sustainability.
Sustainability in last-mile delivery is cutting or minimizing the ecological footprint in deliveries like carbon or greenhouse gas emissions. Overall, it means building a greener, economical and quicker delivery system.
In order to make last-mile delivery sustainable and quicker, businesses are bringing their fulfillment centers nearer to consumers. Big brands like Amazon, Walmart, Walgreens and Instacart are investing in micro-fulfillment centers to speed up deliveries and make it greener. An Accenture report mentioned that micro-fulfillment centers will minimize the last-mile carbon emissions between 17 and 26% by 2025.
Today, the responsibility of brands to minimize carbon emissions has multiplied. A research study from Technavio reveals that last-mile delivery in North America will experience a growth rate of 16% from 2021 to 2025. With growth estimates in the North American region being positive, there will be higher chances of increase in fuel vehicles and higher carbon emissions.
A Stand.earth research of 2022 mentions that North America has the highest number of parcels delivered annually that is 21.6 billion. With 4.1 million tonnes of CO2 emitted every year from last-mile delivery, it is the second highest emitter of carbon dioxide after India (5 million tonnes of CO2).
In the SouthEast Asia climate change report of 2020, businesses stated that making supply chains green could reduce the carbon emissions. The World Economic Forum report predicted that without any interventions in last-mile delivery globally, there will be a 32% increase in carbon emissions by 2030. To reduce carbon emissions, businesses in ASEAN regions will look to invest in technologies that make last-mile delivery more sustainable.
In India, last-mile emissions are increasing every passing year. A Stand.earth Research group report of 2022 mentioned that the last-mile emissions per delivery is 285 gCO2, and this is significantly higher than the global weighted average of 204 gCO2. This report also states that Indian cities like Delhi, Mumbai, Bengaluru, Kolkata, Chennai emit more CO2 from last-mile delivery than the last-mile emissions from France or Canada. In 2023, there will be a rising need for businesses to automate and digitalise the last-mile logistics operations in India.
Not just this, businesses will incorporate parcel lockers in the last mile to reduce the carbon emissions in the coming years. A survey states that parcel lockers can save carbon emissions by 13,845 kgs each year. Also,it can minimize 70% of vehicle emissions per parcel in developed and dense cities.
Parcel lockers are automated parcel devices that serve as alternate delivery locations for dense delivery zones. Rather than making multiple delivery attempts to the customer's home, deliveries can be kept in parcel lockers until the customers pick it up. This option saves multiple delivery attempts, and minimizes the fuel consumption of delivery fleets by reducing the number of delivery vehicles.
Electric Vehicles (EV) is also an active contributor towards minimizing the carbon emissions in the last-mile delivery. An article mentions that 15-20% of last-mile e-commerce cargo fleets have been electrified globally. Another report states that with mandated vehicle adoption EV can reduce carbon emissions in the last mile by 60% and in the choice scenario, it can minimize carbon emissions by 24%. As EVs minimize fuel consumption and carbon emissions, it is the perfect urban delivery vehicle for a cost-efficient and sustainable last mile.
Investing in a multi-stop route planner is another way to minimize the last-mile carbon emissions. It helps businesses plan optimal routes based on customer-preferred time slots and delivery zones. Also, it ensures drivers delivery and pickup parcels in the same route. This helps reduce the number of delivery vehicles in a route, thereby minimizing carbon emissions.
The Gartner study predicts that environmental sustainability will be a competitive differentiator for CEO’s in 2023 to attract more investments. So, in 2023 sustainability will not be a luxury to showcase for businesses globally. It will be a mandatory need to win customers, and they will take incremental steps to achieve it.
For a long while, fulfillment in retail was largely binary. Either the customer had to order their items online or buy them from physical stores. But today things have changed drastically, thanks to omnichannel retailing.
Omnichannel retailing is a process where businesses integrate all the channels to provide seamless shopping experiences to their consumers. For instance, a customer can buy his/her preferred item online and pick that up from the store (BOPIS). In this, both offline and online channels are closely integrated.
As we will see, this is a global trend. In the past few years, North American retail markets like the US and Canada have seen a steady increase in the adoption of omnichannel retail. A NielsenIQ survey in 2022 stated that 86% of US consumers are now purchasing goods both in-store and online. The lines between online and offline shopping have blurred, and consumers are demanding a unified shopping experience.
In SouthEast Asia markets like Indonesia, the preference of consumers for omnichannel shopping has been increasing. A McKinsey survey states that 64% of Indonesian consumers are using omnichannel for making purchases and this figure has been higher than March 2022. A Credit Suisse report states that 78% of Asia-Pacific consumers were already omnichannel shoppers in May 2020.
The Middle East region is now witnessing growth mushrooming among omnichannel retail businesses. The increased internet adoption, smartphone usage, coupled with broader online product selection has increased customer preferences towards omnichannel shopping. Also, 56% of consumers in the United Arab Emirates (UAE), Kingdom of Saudi Arabia (KSA), and Egypt start their shopping journeys using search engines rather than retailer websites, another phenomenon related to omnichannel retail.
Businesses in India are also keen to capitalize on the shopping boom of omnichannel. An India Phygital Index survey in 2022 revealed that retailers derive 13% of their sales or US$11.2 billion from omnichannel retail and it has potential to grow five times to US$ 55 billion by 2027.
The biggest concern for businesses looking to make a mark in omnichannel retailing is logistics. A statista study in 2021 mentioned that five of the top nine factors driving customer value in U.S. omnichannel retail were logistics-related. Increasing logistics costs are making it difficult for businesses to minimize their turnaround times.
By investing in omnichannel capabilities, businesses can improve delivery control, speed, flexibility and cost. It cuts unnecessary time for the product to move across intermediaries like brand mother warehouse, and makes last-mile logistics more efficient.
As one in two e-commerce decision-makers considered omnichannel strategy to be a priority in 2021, the number is going to rapidly increase in 2023. In 2023 and coming years, we will witness a completely connected physical and digital, or phygital world in retail. Retail shopping will be hyper-personalized such that sales associates know more about their customers like personal stylists. Hence in 2023, we will witness the sweeping wave of omnichannel retailing across the world.
Consumers today prize convenience and customization alongside price and wide product selection. This is offered in heaps by a D2C E-commerce model. Apart from manufacturing, brands through this model manage and control multiple aspects like distribution, marketing, retail, sales, and customer experience. Businesses are adopting this model to get a holistic picture of customer preference through data insights, and leverage them to gain a strong customer base by creating personalized, end-to-end experiences.
The appeal of these businesses from consumers is on a global scale. A study stated that the US D2C online market will grow to $213 million by 2023, up from $128 billion in 2021.
Digitally native and established D2C brands are competing in the US and North American market to build a strong customer base. The digitally native brands are those that have been established and evolved online.
The case for D2C e-commerce in SEA markets like Indonesia is quite different. Ken research of 2022 mentions that the D2C market in Indonesia is less than1% of the total e-commerce market.
However, there is ample opportunity for growth. In a Bain & Co Consumer survey of 2020, 54% of consumers in the SEA region mentioned that they switched brands for every three months. It shows that the consumers in SEA are price-conscious and receptive to new brands. Adding to this fact is that increasing number of online shoppers, smartphone penetration, online payment methods, and large target audience has attracted more venture capitalists for D2C startups in Indonesia.
The D2C market in the Middle East region has been making significant leaps in the past few years, thanks to a large number of young, savvy, digital native consumers. This region has more than 28% of the population between 15 to 29 and are open to experiment with newer brands.
D2C e-commerce is an untapped market in India and many popular D2C brands are vying to make it big in 2023. In 2021, there were a total of 105 deals invested in D2C brands in India. During the same year, India had more than 800 D2C startups operating in the country. By 2025, the D2C market in India will reach 100 billion US dollars and this is threefold compared to 2020.
Across any geography, it becomes important for both types of D2C businesses to strengthen their last-mile capabilities, or risk losing out to the competition. The large-format suburban warehouses and poor delivery infrastructure are not suited to the hyperelastic last-mile delivery needs for D2C e-commerce.
To close the gaps between regional warehouses and consumer doorsteps, D2C brands are looking to invest in last-mile delivery solutions. A survey mentioned that better price, free delivery, and free returns are the three most important factors that drive D2C purchases worldwide. It is last-mile delivery that determines two out of these three factors. Hence, D2C brands are making the last-mile their first priority.
SaaS (Software as a Service) products have become a boon for businesses willing to get their D2C presence with higher levels of convenience, flexibility and sustainability. It helps D2C businesses handle, monitor, manage and optimize varying economies of scale that last-mile logistics demands. So, 2023 will be a year of D2C brands strengthening their last-mile delivery and expanding their D2C presence.
Logistics and supply chain experts predicted that after 2022, businesses will start focusing on exploiting future growth opportunities. They will move from the “survive” mindset to “growth” mindset, and this helps them solve problems in a crucial component of their supply chains - last-mile delivery.
The number of packages that consumers order continue to be on the rise, and also investments in logistics technology that will give businesses the ability to make quick and informed decisions and differentiate their last-mile fulfillment experience. A Gartner study mentioned that by 2024, 50% of supply chain organizations will invest in applications that support advanced analytics and AI capabilities.
An interesting global trend is the investments made in last-mile logistics solution providers. A survey from CB Insights mentioned that from 2010 to 2021 on-demand last-mile delivery platforms attracted $ 22.6 billion dollars worldwide, which was the highest during the period.
More recently, a pitchbook report said that last-mile delivery attracted the largest inflows of supply chain technology globally, with $3.8 billion of $8.6 billion in Q2 2022.
Another survey states that 9 billion US dollars were invested in North America in last-mile solutions for 2020. This investment was higher in this region compared to Asia-Pacific, Europe, Latin America and the Middle East.
The last-mile delivery startups in the Asia-Pacific region attracted the second highest investments of 8.3 billion US dollars after the North American region in 2020. Looking closer in the region, SouthEast Asian logistics and delivery companies attracted nearly 5.2 billion US dollars in 2021 and sealed 31 deals between 2014-2021. So, it is obvious that in 2023 there will be more VC deals signed for last-mile delivery tech startups.
India’s last-mile delivery market is moving in a similar direction to the US and China’s markets. The penetration of last-mile delivery in India is more than 10%. Also, it states that India’s last-mile delivery’s market size will touch $6-7 billion by 2024. The overall e-commerce shipments will grow to 5 billion by 2025 from 1.36 billion shipments in 2020.
With India’s private equity and venture capital investments in logistics technology worth over 1.45 billion U.S. dollars with 34 deals in 2021, the last-mile delivery is expected to receive more push in 2023.
More than half of the businesses mention that delivery cost is their primary challenge in providing last-mile delivery services. To make last-mile cost-efficient and generate more revenues from it, businesses are looking to increase their investments in AI technologies.
As businesses continue to rethink and redefine their last-mile tech capabilities to improve their competitiveness, we expect to continue to witness a flurry of investments in last-mile logistics solutions.
In 2023, the pace of recovery for the last-mile delivery will increase compared to 2022. The Logistics Managers Index in September 2022 stated that the businesses will return to usual in 2023. So, in 2023 businesses will start taking dedicated and incremental steps towards making their last mile, intelligent, less reliant on human labor, responsible, and fair.
As last-mile delivery will go through transformative changes in 2023, businesses should focus on getting it right. The best tool to optimize your final-mile delivery is Locus’ dispatch management software.
Locus is a real-world-ready end-to-end dispatch management platform that helps businesses plan and manage their last-mile delivery. It specializes in providing cutting-edge solutions for solving complex problems and constraints in the final mile. By learning from previous deliveries, its Machine Learning (ML) algorithms makes the upcoming deliveries better than the previous one.
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