Inside the Last-Mile Delivery Crunch
High shipping costs, late deliveries, and lost or stolen packages aren’t uncommon during the busy holiday period, but this year feels different. The so-called shippageddon that retailers are bracing for is creating new worries and new opportunities for creative brands to rise to the top.
Early forecasts from the National Retail Federation point to an especially busy holiday period this year, with more adults planning to celebrate the upcoming holidays in 2021 than 2020, and consumers prioritizing gifts for family and friends. Nearly half of holiday shoppers (49%) say they plan to start browsing and buying before November, up from 42% in 2020. Among those shopping in October, 47% say they want to avoid the stress of last-minute shopping.
That stress is being pushed onto retailers, as the challenges that typically come with last-mile delivery are multiplied. More demand is being pushed into a shorter delivery window in 2021, stacking additional last-mile delivery costs on top of the extra cost for bringing goods into the country.
“Unlike with back to school, there is a hard deadline to holiday sales. No one wants something to arrive on December 26 — versus, if that binder isn’t needed on Day 1 of school, it could wait if needed,” says Nikki Baird, vice president of retail innovation at the retail technology provider Aptos. “So, while there will be a lot of online demand, there is a hard, upper limit to that demand. And the same capacity constraints on shipping still exist for consumer packages, too.”
For retailers offering free delivery or flat delivery, higher demand could negatively impact margins or force an increase in prices through reduced promotions or higher purchases to achieve those promotions, explains Dan Neiweem, co-founder and principal at Avionos, a firm that designs digital commerce solutions for clients like Kellogg’s, JLL, and Brunswick.
How can retailers pivot their last-mile delivery strategies in light of these evolving demands?
Easing the Burden
One option is to crowdsource last-mile delivery. Crowdsourced delivery leverages networks of local, non-professional couriers to deliver packages to customers’ doors. Neiweem says that option, coupled with real-time updates, provides transparency to consumers by letting them know what is happening to their orders from the moment their orders are placed to when they are delivered at their doorsteps.
“Throughout the pandemic, it’s been more difficult than ever for consumers to get what they want when they want it all while at a reasonable price,” Neiweem says. “This holiday season, retailers will be put to the test to deliver items on time and at a reasonable price.”
Larger retailers have stepped up with their own delivery options. Walmart, for example, created a delivery service called Walmart GoLocal, which dispatches workers from Walmart’s Spark delivery network to merchants’ stores to pick up items and deliver them to shoppers. Walmart is also one of a number of retail chains to invest heavily in same-day delivery, BOPIS, and curbside pickup.
Neiweem says nearly two-thirds of retailers are now offering BOPIS or curbside pickup, and plans are in place to continue offering these services through the holidays.
“Retailers who offer options such as BOPIS, curbside pickup, expedited delivery, and same-day delivery throughout the last-mile delivery journey to offer more convenient options for last-minute shoppers will be the real winners this holiday,” Neiweem says.
To make their BOPIS or curbside pickup programs even more successful, Baird suggests retailers move more inventory into their physical stores for the holidays. This could help retailers save on some expedited shipping by placing inventory closer to consumers, and then later shift consumer demand from online to store pickup as they hit those delivery cutoff days.
“It’s not about what a consumer wants to buy, it’s about who the consumer buys it from,” Baird says. “If a retailer can convince you to buy one thing, odds are you’ll buy a second thing from that retailer before you buy it from a different retailer, so there is still plenty of incentive to offer promotions to get consumers in the door, whether physically or virtually.”
Stephanie Miles is a senior editor at Street Fight.