Last-mile delivery costs retailers a fortune. Is it sustainable?
Once upon a time, not long ago, we were impatiently watching out the window the UPS truck, whose driver we knew by name, hoping that today he would finally deliver the mail order or online purchase made a week earlier. Today, you can drive through any neighborhood in the United States, and for every UPS truck you might see, you’ll pass dozens of pickup trucks (Amazon, Walmart, Target, Kroger, and Lowe’s among them) as well as herds of rental trucks and unmarked cargo vans.
The next-day or same-day last-mile delivery business has become an industry within the retail industry. For starters, it’s huge. According to the US Bureau of Labor StatisticsThere were 1.7 million people working as delivery drivers last year. By 2031, this number is expected to rise to 1.9 million.
The competition is fierce.
According to some estimates, 75% of customers will spend more and be loyal to brands that provide an excellent last-mile experience. The race has cost retailers a fortune in warehouse, trucking and technology investments.
Even Amazon, which invented its own warehouse management and delivery technology, is still spending big. Last November, the company said it had 1,000 Rivian electric trucks on the road and that it had placed an order for 100,000 more by 2030, an outlay that should amount to about $5 billion (assuming a discount from the retail price of $60,000). dollars each).
This summer, Walmart said it had a “private fleet” of 13,000 drivers and ordered 4,500 electric trucks from Canoo, a startup manufacturer. Earlier this year, the company plans to invest in a “dedicated electric vehicle fast-charging network” at thousands of Walmart and Sam’s Club locations across the country.
The target finds itself in catch-up mode. In this delivery revolution, the company is still trying to figure out how to make it work, announcing a new distribution strategy in May: opening new smaller-format stores (“flow centers”) and locations in denser urban areas.
The urgent need to compete on delivery has given rise to a sub-industry of logistics vendors that combine artificial intelligence software with smaller fleets of trucks for retailers that don’t have the deep pockets of larger merchants. The more you read about these companies, the more you’ll feel like you’re in the Wild West. For example, Danish Home Dash & Delivery advertises delivery services specifically for customers of IKEA, which has its own fleet of delivery trucks.
What we don’t know is more interesting. What is the actual cost of all this infrastructure?
A little research shows that no company provides such statistics from its financial reports. Do these retailers make money from the merchandise delivered, or is it a costly branding exercise? According to one source, the total shipping cost of shipping the air fryer you purchased from Asia, across the Pacific, to a warehouse near you, and finally delivering it to your doorstep, the last mile is about 50%.
Perhaps the most challenging question to answer is where all of this is headed. Do we need dozens of delivery systems competing with each other? If everyone is doing the same thing, where is the competitive advantage? Would the customer want it even if he had to pay the entire charged cost?
As a retail and tech veteran, you believe people still love going into stores and being able to touch and compare merchandise. What happens when online shopping reaches its peak? Or worse, normalization? E-commerce growth is already slowing down. What happens when there is no room for growth?
What happens if consumer sentiment changes and fast delivery conflicts with their concerns about waste and climate change? What happens if they already have to pay the additional costs?
Worse still, what happens when the next serious recession comes, and retailers become saddled with billions in debt owed on idle assets?
I wonder who designs all of this and why stock analysts don’t ask these companies the hard questions.
paying off My website.
(tags for translation) Walmart