Customer satisfaction with shopping experience is impacted by numerous factors, including comfort at shipment delivery. This final element has recently become one of the biggest challenges for the e-commerce industry.
Although it is the last stage of the entire online shopping process, it affects not only the image of the logistics company, but above all the image of the store itself, and often determines whether the customer returns to that store in the future.
The last mile and associated problems
Last mile logistics is the final step in the process of delivering an order to the addressee. The step is the most expensive one for the shipper (it can account for 53% of the total process) and, in addition, the most critical one, affecting customer satisfaction.
Within the process referred to as the last mile, 5 main steps can be distinguished:
- Packing the shipments and entering them into the logistics system.
- Handing over the shipments to the delivery company employee, e.g. a courier.
- Transporting the shipments to the delivery company’s warehouse and distributing them among couriers.
- Packing the shipments into the courier’s vehicle and transporting them to the end customer.
- Handing the shipments over to the end customer.
And it is in this process that one may find several important elements that can be troublesome, both for the e-store and for the carrier.
Customer expectations
The first problem is customer expectations, which are very diverse. Moreover, they are getting higher every year. So let us take a closer look at those expectations.
According to the report entitled ‘E-commerce w Polsce 2022’ (E-commerce in Poland 2022; Gemius, Polskie Badania Internetu and IAB Polska), what matters to customers is not only fast order delivery, but also offering various forms of delivery, from which the customer can choose the one that is most convenient for him or her at a specific moment. Also the aspect of collecting the parcel is of importance, and the preferences in that area tend to vary according to individual preferences.
For several years now, customers have been most likely to choose delivery to an Inpost parcel machine (81%), outstripping couriers by as much as 38 percentage points in 2022. These preferences do not differ significantly between age groups or sexes. This is certainly influenced by the intense expansion of the Inpost company and the increasing number of Parcel Lockers throughout Poland.
The type and size of the product also has a significant impact on the selection of delivery forms (and possible additional services). Furniture or home appliances are unlikely to fit into a parcel machine, and customers expect not only the product to be carried into an apartment or house, but also to have it assembled or installed. In many courier companies it is an extra chargeable service and this raises the question: who should cover the associated costs, the store or the customer?
Large stores with a reputation in the market often offer free delivery, but all services beyond the delivery of the product to the house are extra charged. For example, in the euro.com.pl store, the delivery of a dishwasher is free of charge, but its carrying inside, leveling and installation involve extra charges, the amount of which depends on the scope of services.
What is also important for customers is on-time delivery of the parcel, according to the date and time specified at the purchase transaction, and being informed in real time about the stage of order processing and delivery.
It is often the case that couriers are blamed for delays in delivery. However, customers tend to neglect such problems as:
- wrong address provided or a new building that is not yet located by GPS,
- absence of the addressee at home,
- lack of parking space.
Meeting the above-mentioned expectations is of great importance in customer satisfaction with the transaction, as well as in encouraging the customers to do further purchases in the store or recommending it to others.
High costs
The final stages of order fulfillment are often also the most expensive ones. This is due to a number of factors, including those related to customer expectations and delays, namely:
- difficulty in finding the recipient’s address and circulating around,
- searching for a parking space,
- additional delivery attempts when the addressee is not at home.
In large cities, additional problem are traffic jams, especially during rush hour, or road accidents. The fact that fuel prices have risen sharply is also of importance.
Free delivery, which in many cases is already becoming the standard, also generates high costs. E-consumers are now used to not having to pay for delivery. However, free delivery does not mean that nobody pays for it. It is not the customer who pays, and the cost is usually borne by the seller. According to Digital Commerce 360, as many as 68% of US consumers surveyed are able to give up purchases from a particular store if that store does not offer free delivery.
Damaged packages and returns
It also happens that due to the pressure of time and large number of parcels in the delivery vehicle the packaging becomes damaged. Of course, sometimes these are the couriers who do not take care properly of the transported goods. Usually it is not because of their ill will, but time pressure or ordinary human needs – it is rather obvious that they do not want to work from morning to night or without any breaks.
In addition, the possibility of returning the purchased goods makes logistical issues more complicated and also increases the cost of the whole process. In many countries, offering the possibility to return products is required by the law, which is often abused by customers. In Poland, customers have a minimum of 14 days to return a product, but many stores extend this period up to 100 days to encourage purchases. What is more, the seller is obliged to reimburse the shipping costs previously incurred by the customer – fortunately, only up to the amount corresponding to the cheapest shipping option offered by the store.
Extending the last mile
Consumers are increasingly more open to online shopping across borders.
According to ‘Cross Border eCommerce – szansa czy zagrożenie’ (Cross Border eCommerce – Opportunity or Threat), 63% of online shoppers shop abroad at least once a month.
It has a huge impact on the extension of the delivery route and thus its time and cost. The phenomenon is also supported by the geographical expansion of holidays (e.g. Single Day) or local campaigns organized by specific brands (e.g. Amazon’s Prime Day).
For retailers, one of the barriers to international expansion is logistics. This problem is reported by as many as 59% of companies that have launched cross-border. These difficulties include the high costs of handling returns and shipments and storing products.
Environmental impact
The growth of online shopping during and after the pandemic has made the challenges of the environmental impact of last-mile delivery even more apparent. It is not only the carbon dioxide released to the atmosphere, but also the packaging of parcels thrown into the garbage that negatively impact the environment. In addition, the growing popularity of e-grocery is increasing refrigerated emissions, as perishable products simply require transport in refrigerated conditions. This involves the consumption of more energy and the depletion of the ozone layer as a result of chemicals used in the refrigeration industry.
The solution to this problem is not as simple as one may expect, since on the one hand customers want the fastest possible delivery, and on the other hand they expect the green approach from the brands and online stores they become customers of. It is difficult to find the golden mean here and still keep the budget in check, because a store can invest in environmentally friendly parcel packaging, but meeting customers’ expectations of instant delivery means that delivery trucks are often not fully loaded.
Transport of non-typical items
Consumers also buy online bulky goods, with unusual shapes or requiring special precautions. This can include, for example, furniture, glass and large chandeliers or training equipment.
As mentioned before, such products are another problem of last-mile logistics, especially since for many customers (88% of respondents, E-commerce w Polsce 2022) bringing these products into the apartment or house is a required standard. In addition to bringing in, customers also expect product assembly or installation.
Therefore, e-tailers should consider whether and how they can provide customers with such services. It will not only contribute to customer satisfaction and increased sales, but also to customer loyalty.
For online stores with their own courier fleet, meeting such expectations will not be a big challenge, but it is worse in the case of external carriers. Logistics service providers charge more for the transport and bringing in non-standard goods, and free assembly or installation is unlikely to be an option in this case.
Depending on the company, non-standard shipments differ in specific parameters, such as size, weight, or shape.
For example, DHL considers non-standard shipments to be:
– irregularly shaped goods in other packaging than a rectangular cardboard box or a box/container with maximum dimensions of 120x60x60 cm, e.g. a tube,
– fragile and delicate goods,
– goods requiring constant vertical position.
Some groups of products may qualify for standard or non-standard shipments only, depending on the product itself.
Goods of non-standard shapes or particularly fragile ones require special packaging. On the one hand, many of them cannot be put in standard boxes, and on the other hand, there is the previously mentioned issue of goods being damaged or completely destroyed that needs to be considered.
Express deliveries, where couriers travel by bicycles or scooters, pose an additional problem. Hence, products with non-standard shapes, or large and heavy ones, should be excluded from the express delivery option if it is not certain whether it is possible to transport them by a delivery truck.
How to solve the last mile problem?
The last mile problem has been discussed in e-commerce for a long time. As you may have guessed, some ideas and solutions have already been developed to reduce the impact of this issue on both the customer and the vendor.
DHL has developed the FAD model to reduce the costs on the retailer’s side, as well as to meet the customer needs thus increasing customer satisfaction.
The model includes:
- Flexible Networks – i.e., increasing the number of warehousing and logistics areas often concentrated around large cities. For example, Amazon plans to open 1,000 small delivery hubs in cities and in the suburbs across the USA. They will be dedicated to the Prime Now service, for customers choosing delivery on the same day.
Smaller organizations purchase additional warehouse space or outsource deliveries to third-party logistics centers.
Another solution is to deliver parcels to pick-up points and parcel machines, such as Inpost Parcel Lockers in Poland. This solution offers benefits for both parties. On the one hand, the courier can leave a number of parcels in one place, saving time and money, and on the other hand, customers gain flexibility regarding the time of parcel collection (around the clock in the case of parcel machines, or during the opening hours of pick-up points), and they can also choose a pick-up point located on their route to work or school.
Many carriers sign agreements with chains of brick and mortar stores or newsagents, thus increasing the number of pick-up points and at the same time attracting potential customers these outlets.
Flexible networks not only shorten and streamline the last mile service, but also facilitate express delivery preferred by a growing number of customers.
- Automation and virtual reality, which reduce operational costs, as well as the costs of returns.
Automation shifts some of the repetitive tasks to machines. Moreover, in the future, the order delivery process will probably be taken over by autonomous vehicles – drones or unmanned vehicles – which have already been tested by Walmart or Amazon, among others.
Virtual reality reduces the risk of goods returns, which IKEA has used. With its app, customers can scan any area in their house or apartment and select a piece of furniture that fits best from the IKEA store’s product range.
- Real-time data management and processing allows for more optimal route planning for couriers, who can distribute as many parcels as possible without circulating between remote spots.
DHL may be an example here, using real-time geographic map readings. This allows the company to monitor road traffic in real time and reroute journeys in the event of e.g. traffic jams or accidents. In addition to real-time data management, artificial intelligence and cloud computing are also used in this case. The implementation of this technology has helped DHL to increase efficiency by 20-40%.
It is worth mentioning that information about the location of the courier and shipments reduces the chance of parcels getting lost, and makes it easier to find them if they do get lost. It will also increase the likelihood of the customers being present at home if they can track the parcel as it is being delivered. Thus the risk of having to try again to deliver the parcel decreases.
Photo: FAD proposed by DHL
As far as green issues are concerned, stores could consider discounts for customers who agree to wait longer for delivery. Alternatively, they may simply ask the customers about their preferences.
In summary, the last-mile problem applies to a number of areas, in which the approach of companies to implementing modern technology and automating processes plays a significant role.
Investing in technologies that enable real-time data management, intelligent route planning and shipment tracking will not only save time, but also the costs incurred, resulting in the quick return of the invested funds. What is more, there is no need to come up with these solutions independently, as there are solutions already developed for this very purpose available in the market, such as Onfleet, Stuart or Deligoo.
