Since the beginning of the coronavirus outbreak, logistics companies worldwide have been on the front line, keeping warehouses stocked and trade ongoing. However, supply chain disruptions and travel restrictions have further narrowed down the already below-the-mark merchandise trade growth. The global E-commerce industry registered remarkable growth in the past decade owing to the introduction of digital business models and the advent of smart logistics. There has been a rise in 'instant' and 'same-day' delivery patterns in online product purchases worldwide.
People feel safer to order things online rather than going out of their houses or in crowded places. As the pandemic is imposing long-term structural changes in almost all industry verticals, e-commerce is experiencing soaring growth in customers from different regions.
According to the U.S. Department of Commerce, U.S. e-commerce sales grew more than 30% between the first and second quarter of 2020. In Germany, DHL parcel shipments increased from 5.3 to 9.0 million parcels per day. While COVID-19 has amplified and accelerated this trend, industry participants are bound to make highly informed decisions to keep the e-commerce and time-definite delivery levels elevated.
Source: Accenture COVID-19 Consumer Analysis, April 2020
E-commerce seems to be gaining even more momentum after COVID-19 than it did earlier. Before the outbreak, online shopping was only a matter of convenience for people who actively purchased products from physical stores. But the pandemic has changed consumer attitude, and more people have shifted to online marketplaces. This is impacting the e-commerce industry, presenting it with both challenges as well as opportunities. Lockdowns and physical movement bans have temporarily kept some of the essential items off-limits but increased the sale of medical supplies and other necessary goods. While some countries can respond to the scenario, others are lagging.
Industry experts estimated before the outbreak that the e-commerce market in the emerging economies in South Asia would reach over USD 200 billion by 2026. But so far, the figures are unfavorable. In a survey conducted by Digital Commerce in March 2020, 36% of e-commerce retailers predicted a significant business downfall, while others are hopeful of the shift in consumer behaviors. Local providers are unable to meet order deliveries at increased frequencies due to the shortage of staff.
Giants such as Amazon have suspended deliveries of certain goods given the staff and logistical crisis. Nevertheless, many e-commerce market players are improvising to connect with more consumers, even after COVID-19. This sudden shift from in-store buying to online product purchases may seem momentary. Still, online platforms' trend and convenience will indeed have an impact on customers and their buying preferences for a long time.
Increasing Trend of E-commerce and Door to Door Delivery
Developments in the logistics industry have enabled door to door movement of goods, driving the growth of the last-mile delivery market. According to industry experts, more than 60% of the global population is expected to move to urban areas by 2025. The rise of delivery start-ups, Uber's 'city-by-city' service, and others unlock new possibilities in the e-commerce sector, making the same-day delivery system affordable. Germany's 'Tiramizoo' provides same-day delivery in Germany and Austria's metropolitan areas, so does 'Stuart' in France and companies like Walmart, Amazon, and eBay around the world.
Online Fraud of Product, Faulty Shipment and Damaged Goods Reduces Reliability
There is a growing concern among online sellers about what is known as 'buyer fraud,' describing consumers' unethical actions after purchase. The consumers have made similar allegations upon the sellers. Lack of accurate tracking of the product, less transparency, and poor stock management leads to delays in product shipment and defames the seller. On the other hand, buyers also trick sellers by falsely claiming that a product was never delivered after receiving a refund or replacement. If not corrected, such factors will immensely contribute to the slowdown of the last mile delivery market.
Consumer Reliance on Faster and Easier Modes of Shipment Delivery
Shipment delivery expectations are rapidly changing the retail market across the world. But few retailers have been able to keep up with the growing demands of delivery and fulfillment. While Amazon is the leader in global shipments with its prime standards one-day delivery of products, it has opened new doors for emerging players by making free shipping the norm. Shopify, the Canadian multinational e-commerce company, is swiftly expanding after establishing its e-commerce fulfillment network in 2019. It recently launched Verishop with free no-membership, no-minimum one-day shipping plus returns.
American retail companies Walmart and Target Corporation are also upgrading their logistics infrastructure to fulfill orders quickly. E-commerce website Etsy is encouraging sellers on its marketplace to offer free shipping on orders of USD 35 or more. Many big-box retailers are maneuvering things within their supply chains to reduce shipping costs and connect to more people with the products they love.
It is important to note that, as smart devices backed by 4G/5G networks continue to penetrate the untapped regions of the globe, there will be a storm of new customers demanding speedy and to-the-door delivery of items, boosting the last mile delivery market growth.
The B2C segment is expected to dominate the last mile delivery market during the forecast period. In the B2B market, the carriers who deliver to the last mile face challenges regarding the level of unpredictability concerning customer and transit availability, which is eliminated in B2C. Also, consumers have become mindful of their purchase more than ever. 75% of the population is now limiting food waste, and as many as 67% are shopping more health-consciously. With the consumer shift towards online shopping, there is also an increase in demand for local goods.
Users are looking for reputed brands that they can trust. Adoption has accelerated in categories such as grocery, and new uninitiated users have seeped in. The presence of services like contactless payment, virtual consultations, and product discounts has also added a new slot.
The drones’ segment is expected to lead the aerial delivery of the last mile delivery market owing to their ease of use and high maneuverability. Drones can travel long distances in a short period of time and can deliver the order in challenging locations. Highly sophisticated drones can also deliver in harsh weather conditions. The 5–10 kilograms segment of the aerial delivery drones is projected to grow at the highest CAGR compared to the long-range aerial delivery drones during the forecast period.
5–10 kilograms Ariel delivery drones are mainly used to deliver groceries and heavy parcels to customers. However, the increasing demand for the long-distance last-mile delivery of packages is fuelling the long-range drone delivery segment of the market. Public-private partnerships and government investments in the new drone developments and efficient ground delivery vehicles to carry out the cost-effective last-mile delivery of packages are expected to boost the growth of this market segment.
Europe is the second-largest in the last mile delivery market after North. Asia-Pacific remains at the third-largest geographic segment. High government investments in the logistics infrastructure in the European Union are strengthening market growth. Shifting consumer preferences and accelerated last-mile delivery demands due to the coronavirus outbreak is bolstering the market growth. There is an increased interest of customers in outsourcing a more extensive range of logistics services. Globalization or internationalization is offering substantial growth opportunities to the last mile delivery market players in Europe.
Key players in the Global Last Mile Delivery market include United Parcel Service of America, Inc., FedEx Corporation, USPS (United States Postal Service), XPO Logistics Inc., DHL International GmbH, MXD Group, Schneider National Inc., J.B. Hunt Transport Inc., ArcBest Corporation, and SEKO Worldwide LLC (SEKO Logistics), among others
Last Mile Delivery Market Segmentation
By Service Type
By Vehicle Type
By Delivery Time
Frequently Asked Questions (FAQs)