Future of Last-Mile Delivery: Preparing cities for eCommerce growth

From 2014 to 2019, global eCommerce sales nearly tripled globally. The future of last-mile delivery will be impacted by the continuation of this trend, with a predicted 36% increase in the number of delivery vehicles on our roads by 2030. This will, in turn, cause the emissions from this delivery traffic to increase by 32%, and associated congestion rising by over 21%.

This growth in last-mile delivery is going to put a considerable strain on our urban areas, with a responsibility to manage this growth sustainably in both the private and public sectors. The World Economic Forum has joined forces with McKinsey & Company, the World Business Council for Sustainable Development (WBCSD), Leaseplan, and more than 20 public- and private-sector partners to create the Future of the Last-Mile Ecosystem report.

The report aims to highlight both the drivers behind the predicted increases, whilst also making recommendations for the potential solutions. These solutions provide online retailers with a guide for how last-mile delivery will evolve in the coming years, and potentially provide a guide for the delivery schemes eCommerce retailers should be investing in now.

The growth in e-commerce offers tremendous economic benefits for the private sector. On a macro level, this growth will profoundly affect cities across several dimensions if no action is taken by either public- or private-sector players.

Increases in Last-Mile Delivery

Demand for last-mile delivery is soaring and is expected to grow by 78% globally by 2030. We see five primary drivers of this development:

1. Urbanization- The global population is expected to reach 8.5 billion by 2030, with 60% of people living in cities, accounting for 70% of global emissions. This increase in urban populations will cause exponential increases in congestion, with last-mile delivery vehicles adding disproportionately to congestion compared to passenger cars.
2. eCommerce Customers- A total of 2.1 billion people are expected to buy goods online by 2021. e-Commerce will grow by 17% annually, representing about 20% of global retail share in 2023. This will cause significant increases in the number of parcels being shipped globally, with massive increases in high growth regions like China.
3. Products- The majority of eCommerce growth has been in the expected online categories such as books, clothing and electronics. This will continue to grow in coming years; however, the overall increase in the sector will be driven by new categories including groceries, health products, car parts, pet supplies, furniture, baby care and gardening.
4. Delivery- Same-day and 3-hour delivery are the fastest-growing segments in the last-mile delivery sector. While standard delivery (consolidated consignments) will continue to be the largest delivery segment, the demand for speed from consumers will result in more online orders shipped individually, drive significant increases in the overall number of deliveries.
5. Technology- Developments in last-mile technology, including drones, droids, and automated fulfilment centres, will increase both the speed and processing capacity for logistic providers. Alibaba alone is investing an estimated $15 billion in logistics automation and driverless technology over the next five years, 

Future of Last-Mile Delivery: Solutions

As the demand for last-mile delivery increases, combined with increased populations in urban areas, the eCommerce industry must plan how it can continue to fulfil orders in a sustainable and cost-efficient way.

The growth in eCommerce is fuelled by increased consumer expectations for speed and convenience. The continued growth of eCommerce is therefore reliant on either being able to sustain and improve this or re-educate consumers with new expectations.

The Future of the Last-Mile Ecosystem report analyses 24 interventions that can reduce emissions, congestion, and delivery costs for last-mile deliveries. If these changes are widely implemented across the eCommerce sector, emissions and traffic congestion could be reduced by 30%, and delivery cost by 25%, compared to the “do-nothing” scenario.

Out of these 24 individual initiatives, the report analyses each under a variety of scenarios. This creates a quantified opinion on which last-mile delivery options will have the biggest potential impact for eCommerce retailers on CO2 emissions, delivery cost, and congestion.

The lists below summarises the top three initiaves (for ‘mandated adoption’ scenario):

CO2 Emissions

1. Electric Vehicles: CO2 -60% / Cost -2% / Congestion 0%
2. H2 FCEV: CO2 -40% / Cost +5% / Congestion 0%
3. Efficient gasoline/ diesel ICE: CO2 -28% / Cost +2% / Congestion 0%

Delivery Costs

1. Night-time delivery: CO2 -4% / Cost -28% / Congestion -15%
2. Droid (on pavement): CO2 -6% / Cost -20% / Congestion -25%
3. Multi-brand parcel shop: CO2 -2% / Cost -17% / Congestion -20%

Congestion

1. Delivery parking zone: CO2 0% / Cost +6% / Congestion -29%
2. Double-parking enforcement: CO2 +2% / Cost +9% / Congestion -29%
3. Droid (on pavement): CO2 -6% / Cost -20% / Congestion -25%

The real challenge for the future of last-mile deliveries, however, is to understand how these interventions can be combined in the most effective way. This provides the ability to compound the CO2, cost and congestions improvements, but requires collaborations to produce a balanced, positive outcome for both private- and public-sector players.

Whilst not a conclusive last-mile delivery strategy for online retailers, these 24 initiatives begin to provide a starting point for a potential strategy and investment.

The full The Future of the Last-Mile Ecosystem can be downloaded from The World Economic Forum.

Further Reading: Sustainable Last-Mile Delivery: Flipkart India. Read More