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Getting Past the Last Mile: Delivery Challenges For E-Commerce Businesses
E-commerce businesses have changed the relationship between consumers and retailers through the advent of expedited and low-cost home delivery services. Now, many consumers anticipate both free shipping with their purchase, and to receive their items in a short one to two day window. While there is significant growth in the online shopping market, high shipping cost creates a problem for businesses struggling to keep up with the expectation of modern consumers.
The final leg between a retailer’s distribution center and the consumer’s doorstep is known as the “last mile,” and it is generally the most expensive part of the shipping journey. Research shows that 28% of this total delivery cost comes from the e-commerce last mile delivery implementation. The main characteristic of the last mile that distinguishes it from other transportation legs is the home delivery aspect, which is often the sole contact between the supplier and consumer. While every aspect of the delivery chain encounters varied obstacles, the last mile proves particularly difficult. In many markets, especially urban centers, getting packages to a customer’s doorstep is challenging. The rise in home-delivery demand has strained residential city streets that aren’t designed to handle increased trucking traffic. And most multi-unit buildings and housing complexes are not able to process such high-volume deliveries.
Many major retailers, wanting to maintain their product-flow and reduce shipping costs, are searching for a solution to the last-mile dilemma. One such solution is the creation of “fulfillment centers.” A fulfillment center allows customers, who place online orders, the ability to pick up their items at a nearby physical location. Along with decreasing the shipping costs, the benefits include faster delivery of merchandise and the leveraging of existing store personnel. According to Macy’s CEO Karen Hoguet, “We’re finding that customers don’t really care from where we pull the goods, as long as we fill the order accurately and the delivery is timely…We expect these fulfillment locations will be key to offering faster and even same-day delivery, and also will enable the customer to buy online and pick up in-store.” For businesses, like Macy’s, with an existing brick-and-mortar presence, this solution may be a viable alternative. However, many shopping center landlords refuse to allow fulfillment centers at their developments, in preference of more active, vibrant retail uses.
E-commerce businesses can also address their delivery issues by constructing brick-and-mortar buildings, where customers familiar with their products and service can both shop and receive their deliveries. In 2015, Amazon, previously only operating online, launched Amazon Books in Seattle. The new Amazon retail space mirrors the feel of a book store, while creating a location for delivery pick-up. But not every e-commerce business can afford to have a brick-and-mortar presence. As an alternative, e-commerce businesses can implement automated locker systems or customer service centers to address customer deliveries. Amazon has even considered using drones to deliver packages via parachute, though the method presents issues of both safety and efficiency. While there is no current “one size fits all” solution to the dilemma of the “last mile”, successful e-commerce businesses will need to meet this challenge head on and think creatively to provide an effective and lasting strategy.
Melicia Morris is an Associate in the Firm's Real Estate Group. She focuses her practice on real estate financing and joint ventures.
Prior to joining Goulston & Storrs, Melicia interned for Hirsch Roberts Weinstein LLP and the City of Boston Law Department as part of The Boston Lawyers Group split summer program. She also served as a Judicial Intern to The Honorable Judge Gerald Bruce Lee in the US District Court for the Eastern District of Virginia. Melicia was the President of the Black Law Students Association while at Cornell Law School.