For retailers and restaurants, cracking the code to last-mile delivery is one of today’s biggest opportunities—and most complex challenges. Nearly three years after the pandemic accelerated delivery demands, all data points to ongoing and significant growth in this area. By 2025, the global online food delivery market alone is expected to be $192.16B.
In the retail world, the same-day delivery market in the US is expected to grow by USD $9.82B from 2020 to 2025. Same-day delivery is the new two-day delivery, and over 50% of shoppers aged 18-34 expect it. While this puts the pressure on retailers to jump through ever-higher hoops, the good news is that more than 60% of consumers say they’re willing to pay extra for added convenience.
For all these reasons and many more, the power of last-mile delivery to boost brands and bottom lines will define winners and losers in the years ahead. When done right, it’s a huge strategic asset with the power to improve conversion rates, increase new and return customers, and fuel innovations that increase competitive advantage.
But getting it right requires lots of moving parts, along with fundamental organizing and operating decisions. So how can your company make the most of the fast-growing value of the last mile?
At a Glance:
- 60% of American consumers order takeout or delivery at least once a week.
- 50% of consumers abandon online shopping carts due to delivery times that just aren’t fast enough.
- 31% use third-party delivery services at least twice a week
- 300% online ordering is growing 300% faster then in-house dining.
Make the last mile part of a holistic customer experience
Every last-mile success begins with knowing your customers. What matters to them most? How are you staying in touch with them as their needs and expectations evolve?
While speed is the primary driver in last-mile delivery, customers also want a seamless experience that meets their expectations. For example, consumers are increasingly looking to buy from companies that build sustainability into their products, packaging, shipping and delivery.
Think holistically about how you’ll deliver a customer experience that reinforces your brand from the moment a product leaves your hands to the moment it arrives in the hands of your customers. Tastes and priorities change fast. Keep listening—and ensure you stay nimble enough to adapt quickly based on what you learn.
One size does not fit all
While there’s no one right way to crack the last-mile challenge, we see that as more of an opportunity than a barrier. Think about what you are trying to accomplish, then tailor your approach to fit your strategic goals. Consider:
What are your strengths and weaknesses? How can you address any gaps between where you are now and where you want to be?
Answers to questions like these will help you design the best last-mile delivery system for your company.
It’s also worth considering whether you want to handle it all in-house (“first-party delivery”) or partner with a company that specializes in this increasingly important channel (“third-party delivery”).
Most companies that excel at full first-party delivery have always had delivery in their wheelhouse. As delivery becomes increasingly demanding and complex, more companies are putting it in the hands of a third party. Partnering with a dedicated pro saves you from operational and staffing complexities while giving you the ability to quickly leverage proven delivery systems, expertise and talent.
And third-party companies can do much more than deliver. Testing is essential in this channel. The right third party can offer quick and innovative ways to experiment, from trying out new menu items to exclusive retail products and promotions. It’s a good way to get feedback straight from your customers before scaling up. Joining a third-party marketplace can also expose you to new customers, who may become repeat customers. According to DoorDash, 75% of users say they’ve tried a restaurant for the first time by ordering on a third-party app.
New technology fuels new innovations—and expectations
The last-mile delivery system you choose will affect the technology you need, from in-house solutions to an array of connected, off-the-shelf options that require minimal investment. Think across the entire customer experience and leverage your technology investments accordingly.
For example, many companies in retail and restaurants are now in the process of choosing new POS systems. A system with the right third-party integration can funnel everything—in-store operations, first-party off-premise operations for ordering, and third-party delivery– all through the same system. This makes it easy for employees to use without it easy for employees to use with little disruption or change to their current roles.
The near future is filled with a wide array of new technologies that can help you meet customers where they are—from ghost and virtual kitchens in the restaurant world to drone technology, immediate parcel delivery, AI, and robotics in retail. And as new technologies are developed, they fuel new consumer expectations for speed, reliability and transparency, all of which require nimble adaptation.
Another note on testing: You can have all the best technology, but you have to know what you’re testing for in order to gain useful information. While this may seem obvious, it’s often overlooked. Define what you want to learn and ensure that your mechanisms actually let you learn it. Keep in mind that test design and feedback mechanisms can often require more work than the output itself.
Structure operations to deliver for your people, too
Companies are increasingly organizing to structure their teams for effective last-mile delivery. Younger, smaller companies tend to start with lean, highly matrixed teams. As enterprises grow, we see more cross-functional teams with more dedicated resources. At the far end of the spectrum, some large companies go as far as to have dedicated business units resourcing this as a distinct channel focused on ongoing testing and innovation.
For the sake of efficiency and impact, align your last-mile organization with the way you allocate resources. Do you have resources set aside, or do you need to seek funding for each initiative? Would it make sense to have a dedicated business unit with greater decision-making ability? Are your goals aligned with other channels in the customer journey?
As you look outward and forward, look inward, too. Stay in touch with the needs of your internal teams. Pay attention to employee sentiment toward changes in your order and fulfillment processes. Are your in-store teams taking time away from commission-based sales to pick and pack online orders for shipping? Are you aligning incentives for your salesforce so they see the value of taking on these new responsibilities?
Go the distance to deliver on your brand
In the days ahead, companies can win or lose in the last mile. It’s an ever-more critical step in a shopper’s buying journey. We recommend getting started by clarifying your goals, focusing on what matters to your customers, then selecting the right delivery system—one that delivers on your brand every step of the way.
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