While away from home on business last week, it occurred to me that a parcel I ordered should have already arrived at home. A quick text to my wife confirmed it wasn’t there. Checking the brand’s app verified that it was signed for by my neighbour, Jo. A knock on the door from my wife and the parcel is in our hands.

Little did my neighbour know that she was playing an important role in an increasingly crucial driver of a customer experience. Last mile services: the final delivery of a product and their associated services.

The ‘Making the Last Mile Pay’ report recently released by Capgemini, highlights the value and importance of this to consumers, illustrates the key innovations that are driving this sector and shows how businesses can profit by balancing the cost of innovation with customer demands.

Why so much focus on this area?

With most businesses offering solutions around delivery, it has become much harder for organisations to differentiate themselves from competitors. Businesses are increasingly seeing last mile services not as part of their overall strategy, but in reality as a central, strategic focus for the whole organisation.

Consumer expectations are high in this area. Customers no longer tolerate a disjointed view of goods between the store and website and so demand a seamless product view across channels. The ability to offer “frictionless returns” – making returning goods a painless experience – is a critical driver to a customer’s view of an organisation and their effectiveness.

A 2015 study of consumer online shopping preferences by the UK’s industry association for online retail, IMRG, found that satisfaction with returns is diminishing – from 68% in 2014 to 61% in 2015. This is significant given that 78% of respondents deemed the quality of the returns service an important factor when deciding whom to shop with. It’s also something that gets a lot of attention in reviews of online retailers.

Charging for additional last mile services is a risky balancing act for organisations, and so services like click and collect can reduce costs to businesses and decrease the risk to the consumers of failed deliveries.

What innovations should we look out for?

The Amazon PrimeAir drone is not the only way that organisations are thinking to innovate. Growing use of external locations with the ability to pick up goods in secure locations is one way in which organisations are changing, with DHL even looking to deliver goods and services to customers’ cars. The “same hour” delivery space is opening up a new battleground which empowers consumers to choose a delivery time which suits them, giving them remote control over how they receive goods and services.

Click and collect is also providing a source of innovation for many businesses, with temperature controlled boxes for groceries and strategic partnerships between online retailers and traditional “brick and mortar” businesses becoming far more commonplace. As the cross-border e-commerce market grows, organisations are seeing partnerships as the only way to offer delivery solutions in a cost effective way.

Crowd-enabled solutions allow consumers to get goods and services faster and more efficiently and organisations are increasingly seeing the power that can be offered to local communities with the Danish postal service helping to fix potholes and tackle bicycle theft!

The key challenge for organisations

New entrants and disrupters are finding innovation easier to do but for established organisations cost is a serious consideration. What seems to be the key is for companies to operate a “plug and play” model offering flexibility to consumers, harnessing technologies where appropriate.

When assessing your organisations capabilities, it’s important to look at how integrated your supply chain is and how to tailor delivery solutions according to the product and customer need. By removing one of the final barriers to purchase, a seamless returns process, an organisation can re-invent its last mile service and keep up with an area that is increasingly important to winning and retaining customers.