Last mile and further beyond

Michele Caprini
In brief
With the explosion of digital commerce, last mile delivery has become a major competitive discriminator for the retail industry. Countless is the number of blows exchanged in terms of price dumping, reform of the operating structures, acquisitions of logistics operators and incursions by retailers in the transporters field. The consequences of the close and often losing confrontation do not only affect the market but the life of cities, the orientation of administrations and common daily life. Income statement, responsibilities, market pressures, political and corporate wills must find a sustainable mediation, which is by no means easy.

Last mile deliveries have characterized and intensified the competition between retailers well before the pandemic. A trade war often fought on other markets, also by ways of acquisition of logistics operators. Then the surge in online commerce made the service become a discriminatory factor for retailers to stay competitive in the market, causing increasingly serious difficulties to most traditional carriers, which frequently reach their capacity limit, struggle to meet delivery deadlines, and raise prices. Last year, a giant such as UPS (nearly half a million employees, sixty billion dollars in revenues) had to impose shipping restrictions for big retailers like Gap and Nike as a means of keeping up with delivery.

Last mile

Last mile delivery is critical to sales volumes and for maintaining the position in the online market, as well as for the relationship with the customer. Though not everyone has the tools for managing it, nor an adequate bargaining power with transport service providers.

Those who have these capabilities may however decide to enter into the game themselves with a direct field invasion even on long distances (in January Amazon decided to purchase eleven planes in order to deliver more of its packages itself). On last mile deliveries, it is the world’s largest retailer, Walmart, who leads the way. In fact, on 24 August it announced the launch of a new line of business called GoLocal delivery service for customers from any size business.

John Furner, Walmart U.S. President and CEO, left no doubt about the objectives of the initiative:

 “In an era where customers have come to expect speed and reliability, it’s more important than ever for businesses to work with a service provider that understands a merchant’s needs. Walmart has spent years building and scaling commerce capabilities that support our network of more than 4,700 stores and we look forward to helping other businesses have access to the same reliable, quality and low-cost services”.

Walmart thus responds to rising transportation costs and the lack of capacity of carriers by creating a new revenue stream, building on its logistics technology and its Spark delivery network. The giant retailer will no longer use third-party drivers and other modes of proprietary transportation. Walmart GoLocal aims to serve as a white label delivery offering, giving priority to the customer’s branding.


The central importance of deliveries is destined to rewrite, in a significant part, the entire distribution ecosystem by renewing and giving a new role  even to small-sized traders – apparently (and allegedly) left behind by the development of e-commerce – serving the typical users of last mile delivery.

A few days ago, at the Cernobbio Forum, Mariangela Marseglia, Country Manager at Amazon Italy, expressed herself as follows:

“No company more than Amazon takes care of small businesses or has done more to support them in the last two decades. The growth of third-party companies that sell on our store is far greater than that of our business”.

This is a statement that is useful in introducing the new, different transversality for which, as in the case of Walmart, proximity trade can try to maintain its independence by using the advanced services of the large competitor and becoming, within certain limits, its partner.

Easy Ship, a delivery service launched last year by Amazon in India, is destined to set new standards and, in any case, effectively represent transversality and omnichannel driven not only by commerce itself, but by connected services. It is an integrated system for the movement of goods intended for metropolitan areas, which uses a network of small and large transport vehicles, not only to distribute parcels ordered online, but for picking up and delivering the most disparate products.

As part of this program, traders from smaller cities can sell beyond the last mile of their business, relying on Multi-Seller Flex, namely sites spanning 600 square meters for storing their inventory, enabling faster fulfilment of orders in and out of the city. Operations are of course coordinated by advanced technology, offered at competitive prices to retailers and citizens.

Field invasion

Also the giant Alibaba is taking steps towards opening up to local trade, supporting it with the group’s services and by intensifying its commitment to robots designed to fulfil last mile delivery requests. According to Alibaba’s Chief Technology Officer, Cheng Li, “autonomous driving technology is becoming a core technology in the digital era”. What’s more, in the first five months of 2021 alone, parcel deliveries in mainland China exceeded 40 billion units.

For Walmart, Amazon and all retailers proposing to directly manage the same day or day after delivery, it is to a greater or lesser extent a matter of putting their hands on the transporters and postal core business, offering the same advanced service built on their typical users.

Whether the demand is for greater flexibility for consumers or competitiveness of the service for companies, it is clear to everyone that both needs are tied to the reduction of inventories, based on logistics in line with the times. Not just on the last mile, of course. For traditional operators, protection can only be through a technological effort proportionate to the threat posed by their strongest customers.

The cities

Of this trade and transport evolution there will however be the need to assess the possible consequences (which involve a number of different parties) on everyday life and urban planning. If administrations are today struggling to find solutions or palliative measures for traffic, pollution and safety, the near future certainly does not look any easier.

The supposed and often imaginary balance point between the tremendous growth of online commerce and urban planning is moving farther and with ever greater urgency. The simplest of examples is that there are not enough curbside spaces and loading areas for delivery trucks in cities, which were impossible to foresee in a road system designed and built decades earlier.

Neither the increase in returns or the need for spaces dedicated to click an collect orders could have been predicted at the time. According to Business Insider, in the U.S. alone this business practice was worth $73 billion in 2020, up 107% over 2019; by 2024, sales will exceed $140 billion and users of this purchasing method will increase from the current 143 million to 160 million.

What is going to happen with the spreading of small self-driving vehicles it will then be a matter for gamblers rather than urban planners. The number of robots required for deliveries and the frequency of trips will be very high due to their reduced loading capacities, and the speed of operations will inevitably be limited by the unloading of goods at the customer’s premises, with the typical curbside mobility challenges. Therefore multiple trips will have to be scheduled, with different time intervals, within the same day or the day after.

Then again, what about the transport necessary for the increasing volumes of returns? And what to expect, or imagine, from the diffusion of drones?

The possible answers

According to a 2020 report by the World Economic Forum, last mile urban deliveries will increase by 78% by 2030. The impacts on sustainability are evident, making necessary to combine the interest of transporters with fewer disruptions, that of retailers and consumers with faster deliveries, and that of cities with fewer emissions and less traffic congestion.

This scenario would envisage a disincentive for retailers to offer immediate delivery, and the promotion of scheduled deliveries, the consolidation of orders, the significant increase in night deliveries, and multi-brand collection points. Other measures, relating to the reorganization of the road network, would of course be the responsibility of the urban authorities. These interventions could theoretically reduce emissions by 35%, unit costs by 15% and traffic congestion by 25%.

Income statement, responsibilities, market pressures, political and corporate wills must all find a far from easy mediation. In the backdrop of this scenario there a decisive aspect: the awareness of those who buy and what they are willing to accept in terms of spending and give up in convenience.