Racing the Last Mile: How Big Box Retailers are Meeting Ecommerce Demand

Last Updated: May 25, 2021

Fast is the new slow. Amazon continues to dominate the ecommerce industry with faster and faster delivery speeds. But there are other contenders, namely big box retailers (Target, Walmart, and others) who are taking big strides to stay competitive. What’s the one aspect of fulfillment where they are all racing to get ahead? The last mile delivery. 

Historically USPS is the go-to carrier to handle the last mile. As a centuries-old federal organization, the United States Postal Service can literally hand-deliver a package to any address in the US. Because of its well-established infrastructure (vehicles, labor, facilities, etc), USPS is the most consistent when it comes to sorting and delivering parcels to doorsteps. But it’s not the fastest anymore. In recent years Amazon has become the top competitor in speed  (2-day, 1-day, and same-day delivery) by building a robust network of distribution hubs around the US. Amazon plans to open 1,000 micro shipping hubs across the US to compete with Walmart and Target for same-day deliveries.

Now, big box retailers are taking steps toward improving their own last mile strategy to circumvent using USPS, and keep up with Amazon’s need for speed. Some strategies we’ve seen to improve their last mile delivery include:

• Leveraging brick-and-mortar spaces for same-day pickup 
• Turning stores into sorting facilities or distribution hubs
• Partnering with regional carriers and white labeling their services 
• Pursuing acquisitions to build a proprietary last mile infrastructure 
• Stitching together regional companies to move their products faster 
• Turning to transportation technology companies, like Uber and Postmates, to tap into their network of drivers

Same Day Pickup

What retailers have over Amazon is space—dedicated land and facilities. A few years ago Target began testing out stores as regional fulfillment hubs, even though in-person shopping still made up the majority of its business. Last year when pandemic lockdown life changed everything about ecommerce, about 95% of Target’s sales were fulfilled at stores. The majority fulfillment method within that 95% was same-day pickup for orders made online. 

The benefits abound for Target’s method of same-day pickup. First, it gives customers the luxury of shopping from home (online), but still getting the instant gratification they would get from in-store or Amazon’s same-day delivery. Second, it’s far cheaper for Target to fulfill these orders rather than ship them from a fulfillment center. It seems like the best trifecta of service: speed, low cost, and ultimate customer satisfaction.

Distribution Gets Closer

COVID disrupted a lot, and one thing it impacted was transit delivery times. All carriers and all delivery companies were overloaded with volumes higher than the previous holiday season. Because of the surge, packages took much longer to get to customers. One way retailers made adjustments was getting products closer to customers before distribution. They started using their brick-and-mortar stores to ship products from. 

Early on in the pandemic, retail stores were quickly turning into abandoned buildings. Turns out having that dedicated space, across the US was a huge asset. By turning stores into new distribution hubs retailers could store products closer to end-customers, which drastically reduces the shipping time. This helped close the gap for the last mile delivery for many brands. 

Plenty of Last Mile Partners

If the USPS isn’t running your package for the last mile, there are so many companies, both large and small who may be doing it instead. The larger carrier companies have invested in last mile infrastructure, small startups are emerging with a laser focus on improving the speed and efficiency of last mile delivery, and don’t forget there are many regional carriers who have done last mile in restricted areas for decades. 

Big box retailers have taken many various approaches to leverage the plethora of last mile options. Some are using services and white labeling them as their own. There are now an innumerable number of delivery companies to choose from, some specializing in groceries, some delivering with autonomous vehicles or drones. Alternatively there are some retailers who have begun to acquire some of these smaller brands and delivery technology companies in an effort to build out a proprietary network for their brand.

There are also many asset based regional carriers (i.e. they own their own trucks, distribution centers, etc) who already have the infrastructure to get boxes to the end destination. OnTrac and Speedway are two examples that service a particular area within the US. Large retailers with a national presence may have to stitch together service from multiple regional carriers to get coverage across the US. While this may be a big project operationally, a retailer without the resources to do the last mile delivery themselves truly needs the help. Outsourcing to a provider who has been in business for decades is worth the customer satisfaction and reliability those carriers can offer.

The Future of Last Mile 

Companies large and small are disrupting the space with very new ways of approaching delivery. Three major trends in 2021 include crowdsourcing, autonomous vehicles, and real-time updates. 

• Crowdsourcing—We can’t talk about last mile trends without mentioning the hottest topic that’s disrupting the field: crowdsourced delivery. Amazon Flex, PiggyBee, and Postmates are the top companies using the gig economy as the last mile labor force. 
• Vehicle upgrades—Autonomous vehicles and drones have been talked about in delivery for some years now. It appears that 2021 will be the year these technologies come to fruition. Matternet is the premier drone delivery startup, and Starship Technologies and Nuro are both making big moves with autonomous vehicles. 
• Real-time updates—There’s no excuse these days to not allow customers to see the exact tracking coordinates of their packages. Companies like Onfleet have seriously robust tools to help sellers and customers get exactly what they want, instantly. 

We’re right around the corner from big retail brands flying our packages to us via drone or realizing that our neighbor is ushering late night take out to our door. One thing is for sure, our culture’s need for instant gratification is going to be met no matter what. 

 

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Tags: Last Mile Delivery