Last-mile delivery services are undergoing significant disruption in light of the explosion of e-commerce around the world. This trend has dramatically shifted market share from the B2B to the B2C segment, the latter making up more than 50% of the market in many countries. Considering the last mile’s large share in the total cost of parcel delivery (often reaching or even exceeding 50%) makes it a key process for those seeking to gain a competitive advantage. Furthermore, with the rise of same-day or instant delivery, that is expected to grow to 20 to 25% of X2C (some form of goods delivered to consumers) volume, the need to find innovative and effective delivery solutions are more pressing than ever. According to a McKinsey & Company report, three consumer delivery models are likely to dominate the last mile in the future: autonomous ground vehicles with parcel lockers, drones, and bike couriers. AVs and drones will be characterized by a high degree of automation and asset intensity, while bike couriers are expected to take on a smaller market share through its reliance on human bicyclists.
Another problem that last-mile delivery is facing however is the ever increasing issue of road congestion that has increased exponentially in parallel to the massive urbanization trend we have witnessed around the world. With 99% of last-mile delivery currently done by trucks, congestion costs of truck traffic in American cities (in terms of hours and gas wasted) has been estimated to be as high as $28 billion each year. Finding a more effective, sustainable and environmentally friendly solution is thus absolutely key to service a booming e-commerce industry and the billions of packages delivered each day in cities around the world.
This thought piece has been put together by the URBAN-X team; with research support from Felix Keser and Adrian Dahlin.