What percentage of your total shopping is online? This past holiday season, almost 40% of seasonal shopping was through online channels. Late order cutoffs, and the ensuing last minute rush resulted in logistical nightmares for online retailers and logistics providers, who were overwhelmed with demand and paralyzed when bad weather struck.
Expedient delivery is growing in importance as consumers expect orders to show up in less than 48 hours from when they placed their order. The delays many consumers experienced last holiday season resonated into the New Year, and cost Amazon, FedEx, and UPS money and brand loyalty.
Likely due in part to the shipping misses, Amazon is investing in its own last-mile delivery network, circumventing the carriers who couldn’t deliver for them last year. USPS, UPS, and FedEx own last-mile delivery to the consumer, and have built out the necessary infrastructure to reach homes across the nation. So far, Amazon has only piloted in dense areas, similar to what online grocers Fresh Direct and Peapod have done.
Dense areas are the easiest part. The real challenge lies in more sparsely populated areas, where deliveries are spread out over a larger area, and volume is slower. More parties getting involved at the last-mile increases costs for all involved, as the number of deliveries drops and miles traveled increases. Furthermore, the recent announcement from FedEx on higher charges for bulkier packages will likely decrease the consistency of delivery for many areas as Subscribe and Save programs become less cost-effective, as high-cube items like paper towels and diapers become more expensive to ship.
As online shopping continues to grow relative to total shopping, the challenge of faster delivery still remains. Companies still struggle to find the right solution, and no good solution has yet emerged. Words from Strategy& (formerly Booz & Co.) in 2000, still ring true today “Companies may need to be more explicit that delivery has a cost—and a value—to the consumer.”