Myth vs. Reality of Last-Mile Delivery

Retailers have long held that the customer experience is based on enhanced in-store experience, as well as an equivalent online experience that offers seamless shopping. The study of customer experience has rightfully included strategies that include hiring knowledgeable and highly trained customer service agents and retail salespeople, placing online retail on an equal status to brick-and-mortar, and using data analytics to gain a deeper understanding of customers’ wants and needs.

The rise of e-commerce, along with an expectation of free or discounted shipping and fast delivery, has changed the equation. Now what is core to the customer experience is less about products, return policies or friendly clerks, and more about how retailers are able to get those products to the customer’s front door quickly and inexpensively. As a result, alongside those proven customer experience strategies is a hidden imperative that's no less important to the customer experience mission, and that is efficient last-mile delivery.

Retail Last-Mile Myths

Perhaps the most dangerous action a retailer can take is to underestimate the importance of last-mile delivery. Tom Fiorita, founder and CEO of Point Pickup, says that “the retail world has changed, and retailers must adapt quickly to survive. The e-commerce experience must be placed on an equal footing with in-store sales, and to accommodate that, partnering with the right last-mile network is key to providing an outstanding customer experience. In fact, it's key to a retailer’s very survival.”

Myth No. 1: Last-Mile, Same-Day Delivery is Easy

Far from it, the logistics involved in delivering parcels to customers — whether it’s a book from Amazon.com or five bags of groceries from Walmart — is complex and many retailers are still figuring it out. “Companies like Walmart, Target and Amazon want to be within 20 miles of 80 percent of the U.S. population,” says Fiorita. “This requires warehouses and distribution centers, as well as predictive analytics. And if they build those warehouses efficiently and stock them correctly, with predictive analytics they can keep SKUs in those buildings which are more precisely associated with where you live. Therefore, SKUs at a warehouse in Indiana would be very different from the SKUs kept in a warehouse in Connecticut.

Myth No. 2: The One-Size-Fits-All Solution

“There’s an inherent problem in last-mile delivery, and that is much of the existing delivery ecosystem is disorganized and fragmented,” Fiorita notes. “Systems like Uber work, but only for driving people short distances. If you’re an Uber driver, your cargo is the same, but in parcel delivery, the needs are incredibly complicated, and the packages don’t walk and talk. At Point Pickup, we developed a precision matching system which allows retailers to precisely match their packages to the most appropriate driver and vehicle.”

Myth No. 3: Most Retailers Already Have a Defined Strategy for Last-Mile Delivery

Because existing delivery ecosystems are so disorganized, even the largest retailers have been challenged to put together a defined strategy to get parcels to customers quickly, efficiently and inexpensively. On the back end, it requires larger retailers to rethink their entire warehousing and fulfillment network, and often leverage their stores as de facto fulfillment centers. “The biggest challenge for retailers is that while there's enough delivery capacity, the majority of couriers are independent and not scalable, with most of them running less than six vehicles," says Fiorita. "These factors make it impossible for a major retailer to create and manage their own delivery system.”

What’s Real in Retail

Retailers are realizing that they must take their brands back, control the entire process, and use fewer drivers who are more familiar to themselves and their customers. More importantly, they're realizing that a one-size-fits-all delivery system like Uber works well when moving people from one place to another. Transporting humans, or basic commodities like fast food, requires very little predictability. The same driver or same vehicle isn't necessary, special licensing or certification isn't required, and the primary deciding factor is proximity. When you enter your pickup address in the Uber app, the driver who is closest to you will simply show up.

Uber's system works well for catching a ride to your favorite restaurant, but it falls short for parcel delivery. The market has dictated that not all delivery is equal. In the Uber world, shipping (people) is highly predictable. Products like groceries, liquor, pharmaceuticals and merchandise require a variety of different courier capabilities, certifications, operating procedures and capacity, and therefore require a more predictable delivery model and more precision in the underlying platform’s matching algorithm that goes beyond the basics of whichever courier is closest.

“To accommodate same-day parcel delivery, you have to combine proximity and best performance against the best criteria of all needs, whether it’s small parcel or large items, requires a two-person delivery team, HIPAA licensing, TSA licensing for airport pickups, and endless variations,” notes Fiorita.

Two Choices for Retail

To maintain control over the customer delivery experience, retailers have two choices: own their own fleets and manage their own delivery network, or outsource delivery. While Amazon does accomplish the first option — and does it well — doing so is simply too cost prohibitive for almost everybody else.

For the vast majority of retailers that outsource parcel delivery, there are several considerations: achieving a satisfactory level of customer experience, accommodating more diverse requests, and maintaining their own brand. Retailers must strike a balance between the convenience of an outsourced solution and the control of running their own fleet.

“Point Pickup’s MicroDriverNetworks™ model is built to utilize fewer drivers while increasing customer satisfaction by basing our algorithm on a correct, specific and repeatable driver model where delivery service is granular, defined and very specific, as opposed to a macro crowdsourced network like Uber, which just assigns the closest driver without other qualifiers,” Fiorita says.

The retail industry is undergoing a major transformation, and in recent years store closings and bankruptcies have captured headlines. While the more simplistic response is to make villains of Amazon and other e-tailers, plenty of retailers are not only surviving, they're thriving in the current environment. The key to that survival is constant re-evaluation of business models, a willingness to change, and the ability to put in place new processes and technologies to serve new customer expectations. Chief among those expectations today is fast and inexpensive home delivery. An efficient last-mile delivery network which is capable of shipping quickly based on a wide variety of criteria and requirements will ensure their survival.

Dan Blacharski is founder and editor-in-chief at Ugly Dog Media, an international public relations and marketing company.