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There is no doubt that the pandemic has hugely accelerated consumers' desire for eCommerce options. In the US, eCommerce increased by 32% in 2020 and 39% in Q1 2021. But this rapid growth poses challenges for retailers in providing efficient and cost-effective transport of goods to the customer's doorstep.
What do consumers want from online shopping, and how can retailers meet their needs?
Research by HERE and Atos on last-mile delivery — the final stop in the delivery chain before parcels land at customers' doorsteps — has found that consumers increasingly want eco-friendly delivery. However, they still demand efficient and cost-effective last-mile delivery and are likely to switch suppliers if companies can't meet their needs.
Half of all respondents in the survey, which asked 2,500 US and European consumers about their online purchasing habits, delivery preferences, pain points and experiences, said that eco-friendly delivery was important to them. 41% said they are concerned about the impact of online delivery on the environment, and 31% said they would pay a premium to ensure more environmentally sustainable delivery.
Eco-friendly delivery was important to half of those that responded
Students and Gen Z shoppers are especially concerned about the impact on the environment of their online shopping habits, with 36% listing it among their top three priorities compared to 27% of those over 46.
However, while it is good news that the environment is a factor for consumers, costs and poor delivery service are still at the forefront of customer concerns. Customers expect high-quality, on-time delivery experiences and low shipping costs. 57% of all respondents said they would consider shopping elsewhere following a poor delivery experience, rising to 58% for students/Gen Z shoppers and 61% for infrequent shoppers. 61% of customers said they would switch eCommerce providers to avoid paying high delivery costs.
Customers are increasingly showing a preference for a subscription model of online shopping compared to free shipping with a minimum order, with two-thirds saying they are willing to pay a subscription. US$5-10 a month is the 'sweet spot'.
These findings are a challenge for retailers. Last-mile delivery costs account for 53% of the total costs of shipping. Research by Capgemini showed that retailers subsidize last-mile delivery by around 20% and that customers are unwilling to pay the actual cost of delivery. This reluctance threatens profitability, particularly for smaller retailers.
"The reasons to get last-mile delivery right are urgent and growing." — Bas Stroeken, Global Head of Supply Chain Solutions, Atos
Deepak Patnaik, Global Head of Marketing at HERE Technologies, said: "The last mile is the most complex leg of the logistics journey because drivers must contend with limited or difficult parking options, irregular street addresses, traffic and unexpected road incidents and increasingly busy and growing cities and traffic volumes. There is an urgent need to minimize the impact of these external factors to provide the quality of experience that customers are looking for."
Last-mile delivery is a challenge for retailers and logistics firms
The last-mile delivery market is “still quite young and subject to intense dynamics", said Bas Stroeken, Global Head of Supply Chain Solutions at Atos. The costs of last-mile delivery for retailers, combined with high expectations from consumers for efficient, cheap and eco-friendly delivery options means, said Stroeken, that “the reasons to get last-mile delivery right are urgent and growing."
So how can companies square the circle? HERE and Atos say that retailers will need to make data-driven decisions about how to invest in, and deploy, fleet operations to improve customer loyalty, lower costs and enhance sustainability. Atos, for example, offers time sensor and telematics data, real-time tracking and logic from operational planning systems. These provide granular insights into a company's supply chain, showing where efficiencies are possible.
These insights can be transformed into real-world actions through technology like HERE Last Mile. HERE Last Mile is a SaaS end-to-end platform that allows delivery fleets to plan smarter routes, react to sudden changes and feedback status updates in real-time using multi-vehicle routing algorithms and turn-by-turn navigation.
The growth of eCommerce can transform our consumer habits, but only if companies get it right. Using tech to address the problems of last-mile delivery logistics is a win-win for customers and retailers.
Help fleet managers take control of delivery operations with our end-to-end planning application.