The pandemic has created a massive shift in consumer buying behaviour. Stores were closed, and people were restricted in their movements and confined in their homes. This caused many to switch to buying things online. Online retailers saw new customers that had never shopped before. Like many people found out how nice working from home can be, many also found out that shopping online and having it delivered is very convenient.
The upswing in e-commerce activities has had an enormous impact on logistics. Postal and parcel delivery companies saw volumes rise fast, and many have been struggling to keep up. The switch to buying online also increased the demand for warehousing space, which is increasingly hard to find and soaring rent prices. And let’s not forget about people. Before the pandemic, there already was a shortage of logistics workers. With demand increasing, this shortage has only grown.
In light of these developments, I think the following trends will shape last-mile delivery in 2022
The delivery of a product to the end customer is a critical touchpoint in the customer journey, if not the most important one. We’ve seen a change in consumer demands when it comes to delivery.
FASTER! – On the one hand, there is the consumer that is in QUEEN mode: I want it all, and I want it now! For some products, super fast delivery makes sense, but not many products are that urgent. Do you remember the time when goods were delivered within 3-4 days? Those days are long gone. For years next day delivery has been the norm. Then the demand for same-day delivery started to grow. Companies like Amazon have played a significant role in this development. And now even same-day delivery isn’t fast enough. Instant delivery is the new buzzword. Especially in the grocery delivery space, there are startups like Gorilla, Getir, Jiffy, and Zapp promising near-instant delivery of groceries.
Customers have become spoiled by companies trying to gain market share by offering super short delivery times. Also, most webshops guarantee free delivery. The only thing is, there is no such thing as free delivery. Delivery costs money, but for most consumers, this is a hidden cost.
GREENER! – On the other hand, there is the consumer that is in GREEN mode. A growing number of consumers are getting more conscious about their ordering habits and choose slower/greener forms of delivery. Instead of as soon as possible, they have things delivered when they actually need them. Not everything you order today needs to be there tomorrow. The more time there is to deliver something, the more efficient a delivery company can be. The fastest options usually aren’t the most sustainable ones.
An increasing number of companies are offering options to offset the carbon footprint of a delivery. There even are delivery companies that provide a carbon-negative last-mile option like Gofor, which they call renewable delivery. Gofor uses a combination of EVs and carbon removal offsets to remove the equivalent of ten miles of carbon for every mile they deliver with a non-electric vehicle. They also use smart reusable packaging and data drive decision-making, which brings us to Technology and Innovation.
Technology and Innovation
Whether you are serving the FASTER!, the GREENER! or the regular customer, many new technologies enable faster or greener, and in some cases, even faster AND greener delivery.
Data-Driven Decision-making – Big Data, Artificial Intelligence, Machine Learning. New and intelligent ways of looking at data and calculating different options and scenarios can make logistics processes much more efficient. Algorithms can optimise how goods are packaged, minimising the average size of deliveries with less air shipped. They can optimise how trucks and vans are loaded, minimising empty space, meaning less air is shipped. They can optimise delivery routes, minimising the total number of miles driven. These are just a few examples on the delivery side. Looking at the entire supply chain, there are many more options to increase efficiency and decrease the carbon footprint.
Electric Vehicles – Road transportation is responsible for almost ten per cent of the total greenhouse gas emissions worldwide. Many delivery companies are starting to use electric vehicles for the last mile. Usually, these last-mile electric vehicles are vans or smaller electric delivery vehicles. The problem with battery-electric trucks is twofold. The first issue is the range. The capacity of the current battery sets puts limits on the range, and the more batteries you put on a truck, the less you can transport. Companies like Hyundai are trying to solve this by developing hydrogen-powered vehicles. You need 27 times the amount of lithium-ion to produce the same amount of energy as that same amount in diesel. With hydrogen, this has been reduced to around four times the amount of diesel. Also, keep in mind that the current infrastructure is still built for diesel, not for charging batteries or filling up a tank with hydrogen. The second issue is the cost. Buying and operating an electric vehicle is more expensive than diesel-powered alternatives. This higher cost needs to come from somebody’s margin, so either the seller or the buyer of the delivered products needs to be willing to pay a little more.
Drones and Robots – Other new technologies that are primarily electric, which are going to change delivery are drones and robots. There are pilot projects worldwide with autonomous delivery through the air and over the ground. It’s usually relatively small items over relatively short distances, but I see possibilities. There are many different concepts. Google is testing drones that drop your delivery in your backyard from up in the air. Matternet is testing a drone docking station where deliveries can be made in Switzerland. I do wonder what will happen if drone delivery takes flight (pun intended). Will the constant buzzing of drones become a nuisance? The same goes for small robots operating on the sidewalk like Amazon’s Scout robot or Fedex’s Rovio, or the delivery robots developed by Starship. Will we see robot traffic jams on our sidewalks? There is another problem with delivery robots: the current bots can’t deliver if nobody is home. They can’t drop a package in the backyard or on a balcony like Google’s drones. A solution for this could be self-driving parcel lockers that can drive through neighbourhoods and stop in every street so people can walk over and pick up their goods.
Signed, Sealed, Delivered, I’m Yours
Whatever companies do to please their customers, if the delivery fails, all the other efforts are for nothing. Delivery will remain a key point of focus for retailers and e-tailers. The most important technologies that will impact delivery in 2022 are data-driven decision-making and sustainable transportation.
We do have to realise the limits of data-driven improvements. Smarter packaging, loading and routing alone are not enough. Online retailers will need to offer more options for consumers to offset carbon emissions. This offset can be achieved through paying extra to plant trees, or choosing a later delivery date, so the delivery company has more time to plan and can increase efficiency. This means a change in the mindset of us as consumers is needed as well. Do you really need what you are buying today or tomorrow?
Fleets of electric vehicles will keep growing, and the infrastructure to support these vehicles will also grow. While the efficiency of batteries is still increasing, for now, it looks like hydrogen may be the most efficient and clean way to get your goods delivered. The number of battery-powered vehicles will keep growing, but we will also see more hydrogen-powered vehicles delivering the goods.