On the logistics’side

The last mile

The e-logistics process is composed out of several steps including inventory management, order fulfilment, order shipments, customer enquiries and returns (i.e. reverse logistics). The final part of the supply chain, in which goods reach their delivery destination, is figuratively called the “last mile”.

Most goods end up in cities, as they are by definition concentrations of people and thus people’s demand for goods. Consequently, in the debate on e-commerce and urban logistics, the attention is often pointed to this last mile. The last mile is in most cases operated by logistic service providers: notably national post offices (e.g. Deutsche Post, La Poste, Royal Mail) and express providers (e.g. DHL, UPS, Fedex), summarised by Ducret (2014) as the “heirs” of the parcel supply chain, as well as other players diversifying to parcel delivery as a growth area (e.g. Geodis, Green Way, GLS) and new specialised players focused on urban areas (e.g. Colis Privé, The Green Link, Vert chez Vous). Many online retailers collaborate with at least two players.

The figure below summarises the increasingly complicated and fragmented last mile of online ordered goods in eight simplified configurations (Buldeo Rai, 2019). These configurations start at a distribution centre and end at a consumer’s home. As such, the last mile can be a direct stretch or consist of multiple parts, comprising different modes of picking and handling (i.e. at a distribution centre, in a store) and different modes of reception (i.e. in a store, at a collection point, at home). In line with the increasingly applied omnichannel retail model, retailers’ stores serve as picking locations, as well as collection points for consumers (i.e. click-and-collect). As such, the last mile combines actions by several stakeholders: i.e. logistics service providers and retailers, as well as consumers and their potential collection trips.

New businesses models

One major trend in the e-commerce last mile landscape is that lines between logistics players have become increasingly blurred, as new business models entered the market and challenged incumbent players.

More and more e-retailers and e-marketplaces are building delivery capabilities, essentially becoming logistics service providers themselves. Examples include Coolblue (in the Netherlands and Belgium) and Amazon (countries worldwide, with Amazon Logistics). Remarkably, these in-house developed logistics solutions are considered leading and exemplary and put online retailers into direct competition with more traditionally established logistics service providers.

Amazon has developed numerous last mile delivery contractors and has built up a whole network of on-demand workers. In this way, it delivers the majority of parcels in the United States, thereby surpassing both FedEx and UPS in package volume, and approximately half in its other markets (Dekonink, 2019; Statt, 2020). In Europe as well, Amazon plans to become partially independent from the leading logistics service providers to perform deliveries. It has about ten last mile delivery agencies in France (Dekonink, 2019) and is already the fourth largest logistics service provider in the United Kingdom with only Royal Mail, Hermes and Yodel competing on parcel volumes (Dawson, 2018).

An increasing number of logistics start-ups provide innovative solutions to address the so-called “last mile problem” or “last mile challenge”. Particularly relevant for B2C e-commerce, this concept entails the disproportionate share of logistics costs and negative environmental impact that is associated with the last mile when taking the entirety of the supply chain into account. This is coupled with the importance of the last mile in overall customer satisfaction and loyalty. Therefore, consumers’ preferences need to be taken into account when applying efficiency and sustainability improving changes (Buldeo Rai, 2019).

Examples of players and new entrants in the last mile landscape for the parcel, mail, courier, food and freight sector have been outlined by Roland Berger in 2016. More recently in 2018, a supply chain and logistics tech market map has been provided by CB Insights, providing an overview of start-ups that are digitalising supply chain and logistics, including e-commerce logistics (e.g. Convey, Bringg), autonomous last mile delivery (e.g. Zipline, Nuro) and last mile delivery services (e.g. Postmates, Deliv).

The French e-commerce federation FEVAD (2020) lists four start-ups to watch: the Paris-based Shipup that offers e-commerce consumers advanced parcel traceability, the Lithuanian Ziticity that enables "on-demand" delivery services for small convenience stores with individual couriers, the Dutch Bringly that created an algorithm to automatically assign same-day deliveries of stores to one of its partners using bicycles or electric vehicles and the Nantes-based Shopopop that encourages individuals to take orders for others on their travel to or passed the supermarket and delivering the orders to them.

Together, the examples provided in the figures above and by FEVAD reflect the wide variety in last mile initiatives that popped up in urban areas in particular. Possibly in part because of this diverse and accessible offer, the success of localised last mile delivery “brokers” has remained limited. Such initiatives, with Google’s Shopping Express and variations as most important examples, were an initial response to smaller stores suffering from the competition of online and large-scale retailers. Google launched Google Shopping Express in 2013 as a same-day delivery service. By 2017 it evolved into “Google Express”, an online mall allowing consumers to order goods from a range of brands available locally (e.g. Costco, Fairway, Target, Walgreens, Staples, L'Occitane). It covered nearly all US states.

Yet Google has been unable to establish itself as dedicated shopping destination, nor had it innovated in key logistics areas like its competitors (Perez, 2019). Webretailer (2020) found that 49% of Americans start at Amazon when shopping for a product online, compared to 22% at Google. In response, Google announced to wave their sales commissions ranging from a five to fifteen percent cut in July 2020, in an effort to bring more sellers and products onto its shopping site (Wakabayashi, 2020). In April 2020, TV network NBCUniversal introduced an e-commerce platform as well, in which retailers small and large can create content with links to featured items to ease the shift from physical stores to delivery and e-commerce (Walk-Morris, 2020).

Other companies such as Streetify and eBay have created financial and technological resources to facilitate traditional retailers in their online transition, but it remains unclear to which extent these efforts gain traction. On a local level, similar initiatives to unite local commerce on an online platform have been proposed but ceased to exist, such as Beedrop in Belgium.

The success of e-commerce has spurred new stakeholders and structures in the last mile logistics landscape. Innovations touch upon a variety of aspects associated with the last mile: i.e. pricing, timing, information, flexibility, vehicles, logistics service providers and sustainability. The next two sections focus on two areas of innovation that are of particular interest to the last mile in urban areas (Buldeo Rai, 2019). The first relates to locations of order delivery and the practice of click-and-collect in particular, the second relates to the speed of order delivery and instant deliveries in particular.