Consolidation, Shake-Ups, Delays, and More: What’s in Store for Delivery in 2022
Retail is having a moment, to say the least. But an increase in sales, which are up 14.5 percent so far this year compared to 2020 in almost all categories, combined with major transportation delays that are clogging the supply chain, points to a tumultuous holiday season. And the industry is still coming off the heels of the pandemic, which accelerated consumer demand for same-day delivery.
Consumer expectations were already high due to the precedent set by Amazon.com, and 2020 brought similar demand for other segments, including grocery, pharmacy, alcohol and cannabis. Legacy retailers quickly realized they needed to offer delivery to compete with digital or delivery-first competitors — which had an immediate advantage during stay-at-home orders last summer when they were prepared for the influx of delivery orders as consumers relied on it as the primary mode to get their goods.
So now what’s ahead in the delivery space as retailers are thinking about 2022 and beyond?
Consolidation in the Delivery and Quick Commerce Spaces
There are too many players and consolidation is the only path forward for many. We’ve already seen some established leaders eating up smaller competitors, and this trend will only continue to increase. Consolidation may mean more coverage and scale for the acquirer, but less choice and price power for the retailer. Expect to see much more M&A activity in the space as it settles.
Disaggregation of Retail and Delivery
As retailers scrambled to offer delivery to their customers during the pandemic, many flocked to outsource their delivery needs to companies such as DoorDash and Instacart. Now they're thinking about a longer-term strategy and realizing that the third parties they outsourced to are owning their customers and the data — and therefore controlling the margins. This will effectively commoditize the retailer. In some cases, the aggregators are even competing directly with their retail partners, taking a playbook from Amazon. Furthermore, the emergence of new modes of delivery (e.g., sidewalk robots, drones) will also drive retailers to want more direct control over their last-mile operations, bringing deliveries in-house as warranted and working with third parties for fulfillment when it makes sense to do so.
Drones and Robots and Self-Driving Cars, Oh My!
Many retailers are eyeing new technology to see what options they have available to them in the future to optimize their delivery strategy. While robots and autonomous vehicles may sound enticing, especially as retailers are grappling with a driver shortage, there are a few shortcomings that need to be addressed to make these options more realistic at scale. It's the "final feet" that are the problem. Capabilities including stair climbing and elevator riding don’t exist yet, nor does basic problem solving like "find a safe place to leave this package near the back door." An autonomous vehicle doesn't have to park, but a parcel still needs to be unloaded and dropped off somewhere outside of the car. These are all challenges that will impact new advances in last-mile delivery technology.
Last-mile delivery is crucial to a retailer’s overall strategy, from increasing market share and reaching new customers for the first time via delivery to ensuring the best possible customer experience to retain existing ones. Retailers wanting to own this important touchpoint with their customers must take direct control over this final step — at least until the dust settles from the convergence of consolidation, driver shortages, sales peaks, and supply chain congestion currently affecting the industry.
Khaled Naim is co-founder and CEO of Onfleet, the fastest-growing provider of last-mile delivery management software.