High streets haven’t been the same since Covid. From New York to Manila, storefronts rapidly shuttered their doors in the face of successive lockdowns, and in-person shopping transitioned to something of a novelty.
New retail dynamics have veered strongly in favour of ecommerce, leaving many traditional brick-and-mortar businesses struggling to recapture the pre-pandemic footfall they once enjoyed. Studies indicate that while Europeans are still inclined to buy essentials like groceries from physical stores, consumers are channelling their spending power into online shopping. Just like that, domestic brands are up against a fresh cohort of foreign competitors.
As borders represent less of a barrier for overseas shoppers, perfecting last-mile logistics at a distance is a priority for retailers.
A fast-moving sector needs modern logistics strategies
By and large, though, businesses are adapting to keep pace with this bump in international orders. A recent PwC study finds that companies will likely retool their last-mile strategies for the current ecommerce paradigm. Responses include scaling up their delivery volumes, expanding available time slots, and adjusting pickup locations to align with a societal push for convenience and sustainability - all the while giving businesses a good run at profitability.
Ben Holmes, director of international relations at Royal Mail, believes that customers are the catalyst behind the bulk of these emerging last-mile trends. People want the confidence and security that domestic deliveries provide, so companies are predominantly focusing on enhancing the post-purchase experiences through what he terms “value features”. For instance, safe place deliveries, enhanced tracking with GPS technology for better visibility, photographic proof of delivery, and locker banks for parcel collection are now standard offerings for ecommerce brands at the top of their customer service game.
“One thing we’re seeing, particularly in the international space, is a move away from signature on delivery because that relies on somebody being able to physically sign, which can curb success rates for first-time deliveries,” Holmes observes. “Locker banks will increasingly become a preference for consumers, and the roll-out is set to accelerate, especially in Eastern Europe, the Nordics and the UK as well.”
Ecommerce’s supply chain reality check
While businesses recognise the importance of getting the last mile right every time, improving this process does not come cheap. A 2023 Deloitte survey reveals that the global average cost of last-mile logistics delivery accounts for 41% of the total delivery cost, eclipsing the relatively modest costs associated with sorting, packaging and warehousing.
There is a spate of challenges that make the home stretch especially complicated and this year the spectre of rising fuel prices has loomed large. So much so that a 2023 DispatchTrack survey finds that energy costs have earned the title of the “number one logistics hurdle” for businesses. This pressure is not set to ease as it remains the most critical concern for the next six months.
Inflation has become another worrying piece of the puzzle, with 46% reporting it as a fundamental challenge, expected to only slightly decrease to 44% in the next six months. And optimism is low. Nearly a third cite the loss of business due to economic downturn as a worry – a figure that is anticipated to rise to 48% in 2024.
Meanwhile, delivery timeliness is still grappling with a shortfall in airline capacity since the pandemic. This capacity gap, hovering at “approximately 90% of pre-Covid levels”, according to Holmes, has led to cost escalations along the entire supply chain against compared to previous levels.
These airline-related delays continue to render international shipments operationally intricate, with knock-on effects on the last-mile delivery segment. But there are ways to work with a complex landscape, Holmes reassures.
Squaring up to last mile challenges from the start
When picturing successful last-mile delivery, there’s a tendency to focus largely on factors at the end of the chain, such as the cost of fuel for delivery vehicles or macroeconomic factors that can generally only be managed and mitigated.
While solutions for end-of-the-line problems are important – eco-friendly innovations like the adoption of electric delivery vehicles, for example, will always be a win in the age of climate despair – the subtler, more enigmatic answer to businesses’ last-mile questions lies in databases and patterns of customer behaviour, says Holmes. Before making a final purchasing decision, customers are already weighing up their delivery options carefully.
In a recent survey, Sendcloud examined the main causes of cart abandonment among online shoppers. Nearly half of customers named limited shipping and delivery options as the primary reason for not completing their transaction, ahead of limited payment options (40%) and confusing checkouts (33%).
The bureaucracy of paying duties and taxes is a further challenge for international deliveries, Holmes adds, particularly when customers are being asked to pay to receive their goods. Such requirements not only have the potential to cause delays in deliveries but also deter customers from placing orders overseas, potentially impacting low-value goods markets. Holmes acknowledges that this challenge has been further exacerbated by Brexit, which curtailed the free movement of goods between the UK and the EU.
Rather than including the payment of duties and taxes in the last-mile phase, he proposes a different approach: transferring this transaction to the point of purchase. “Cross-border movement should be no different to the delivery experience of a domestic purchase, so replicating that look and feel is key to establishing a rapport between an in-country consumer and an international shipper.”
The power of polished data management
Holmes underscores the significance of data in this context, labelling it as the “key enabler for speed of transit and visibility”. Effective data management, combined with the provision of duties and tax payments at the point of sale, creates opportunities for cultivating repeat business which can be compromised by negative delivery experiences. Despite customers’ willingness to explore cross-border purchases here and there, Holmes remarks that they often do not return for subsequent transactions if the experience is overly fiddly.
“Senders should be aware that they need to be able to supply good descriptions and codes to facilitate the movement of a parcel,” he says. “UK retailers in the cross-border space need to take the complexity out of international shipments – then you’re onto a very good proposition, which will give more confidence in people and businesses sending the traffic.”
According to a 2023 study by PwC, 60% of retailers now categorise accuracy as their foremost last-mile objective, surpassing considerations like speed (19%), profitability (13%), and convenience (8%) when dealing with non-urgent purchases. And with good reason. Shoppers seemingly have less and less time for hard-to-track deliveries, unreliable couriers, and inaccurate shipping predictions.
“What we’re seeing is the movement into a different type of delivery space with reliability at the centre,” Holmes notes. “People still want to purchase things with an expectation as to when they will get it … but reliability will be more important for the majority of traffic that we ship.”
He continues: “Products exist that can service an express need, but the market is migrating away from services purely based on speed and reliable deferred delivery experiences are gaining popularity.”
Traceability and technology are expected
Almost a quarter of consumers worldwide assert their preference for brands that provide tracking services, meaning transparency has become a determining factor for loyalty.
The US leads the pack, with 31% of consumers stating they wouldn’t consider repurchasing from a brand that couldn’t provide tracking options. France, Germany, the Netherlands, Belgium and Italy closely follow at 26% to 23%, respectively.
Although Brits are slightly less demanding – a more modest 17% refusing to order from online stores that don’t provide visibility – the consensus is clear: businesses that export can’t afford to leave international buyers in the dark.
When it comes to providing clear and accurate delivery times, data and improved technology are crucial. Holmes explains: “These mechanisms are based on logarithms, so the more data you put into it, the more reliable it becomes and the more accurate the logarithms become.”
He adds that the commercialisation of artificial intelligence (AI) could yield significant dividends. “One of the key uses of AI in supply chain transparency is to visualise data in real time,” he explains. “Customers will continue to see the benefits of more accurate delivery times and, ultimately, that facilitates a seamless last-mile experience.”
Although human involvement remains essential in understanding shipment specifics, the race to perfect the last mile has only just begun. As the margins for error continue to shrink and expectations rise, ecommerce businesses find their mettle tested. Those who can successfully navigate this critical stage stand to win and retain business worldwide.
For more information on how Royal Mail can help you export with ease, visit royalmail.com/exportingmatters
