Setting up a responsive network to offer relevant last-mile services

In our last-mile blog series, we explore the trends and developments and explain the crucial elements that retailers encounter in shaping their last mile. This third blog of the series focuses on last-mile services – the services offered to optimize the consumer’s delivery experience in terms of convenience, speed, and cost. We evaluate consumers’ wishes when it comes to last-mile services and describe how to deal with the challenges of meeting customer demands while keeping costs under control.

What do consumers want?

The COVID-19 crisis period heralded a major shift in online buying behavior among consumers. Not only do we see historical peaks in online demand in online groceries, fashion, beauty, electronics, and meal delivery, but there is also a strong demand shift visible within product categories. In the aftermath of the lockdown, these changes are considered to be lasting, and in combination with increasing consumer expectations, they will put pressure on strategic last-mile decisions. As the last mile is increasingly regarded as an integral part of the value proposition, it is important that delivery services are tailored to specific consumer wishes.

Use data, know your consumer

The first step towards achieving last-mile excellence is to thoroughly understand the characteristics of the target audience. Using data-driven insights, we can differentiate between consumer groups and create a deeper and more well-rounded understanding of their segmented service needs. For example, the Capgemini Research Institute found that consumers of e-grocery retailers often are between 26 and 45 years old and prefer parcel lockers over collecting deliveries. Such insights enable extensive consumer centricity that contributes towards identifying concrete consumer expectations, which serve as a guiding principle in developing the full last-mile experience.

Options, options, options

Last-mile service options are endless, varying from instant delivery within 1–2 hours and same-day deliveries to delivering in a narrow timeslot, but also delivering to a consumer’s fridge or pick-up point. The huge diversity of consumer preferences, in combination with the distinctive shipping requirements for certain product groups (such as conditioned shipping for food items), signals that there are numerous ways of offering last-mile services. Therein lies the challenge – what to offer, and what not to offer. The fact that consumers, regardless of their service expectations, generally prefer their deliveries free of charge, complicates the situation. The last mile is often the costliest[2] part of the supply chain, and offering a diversified service portfolio does not benefit that equation.

Additionally, as consumers’ service expectations tend to move along with the rapid innovations in the market, a delivery service quickly becomes the new standard as soon as a player starts offering a more convenient, cheaper, or faster delivery option. This sets out the need for retailers to set up their last-mile services to be responsive towards change.

So, how do you keep up?

As it is nearly impossible to predict where the market will go next, retailers are starting to think differently about how they organize and financially support their last-mile logistics. As it generally takes years to establish last-mile efficiencies when building supply chain models from scratch, dynamic collaborations and partnerships play an important strategic role in keeping costs low.[3] Partnering with the countless innovative service providers that already have the desired infrastructure, systems, and processes in place is a viable way to offer relevant services, without incurring the cost of developing these in-house or getting distracted from core business activities.

Although “winning the consumer” is a rewarding prize that drives most retailers, it is a demanding responsibility. Relentless innovation efforts in last-mile services have revolutionized the way products find their way to the consumer, causing a continuous upward shift in consumer expectations that reflects on all retailers and consumer products players in the market. In such a dynamic market environment, it is important to keep the big picture in view and take the collaboration option seriously – tapping into what’s already out there could be the best way to deliver visible results in the shortest timeframe.

In the next episode of our last-mile series, we will look at dealing with returns. In the meanwhile, we would love to hear your views on last-mile services and how to deliver them. Contact us at:

maurice.uiterweerd@capgemini.com

This blog is written in collaboration with Tom Snijders, Chloë Smid, Anna Sotiriadis, Door van der Wiel, Elisa Vlaanderen and Maurice Smulders.

Below you find the previous episodes of the Last Mile series

Episode 1: Rethinking the last-mile strategy

Episode 2: Optimizing the last-mile transportation trade-off

[1] UPS’s 2015 Pulse of the Online Shopper study in the US found that 45% of online shoppers have abandoned their cart on finding they don’t qualify for free shipping.

[2] In their survey among 500 online retailers, Capgemini’s 2018 last-mile Delivery Challenge report found that last-mile costs generally account for 41% of the total supply chain costs.

[3] Capgemini research has found that companies that are set up to be more responsive, flexible and collaborative, can reconfigure themselves repeatedly without incurring high costs and delays each time.