A recent World Economic Forum report discovered 25% growth in business-to-consumer parcel deliveries during 2020. With the same report suggesting growth of 10-20% in the near-term, how is the last mile delivery landscape shifting to address concerns around carbon emissions and sustainability?
How the Pandemic has Fuelled Demand for Last Mile Delivery
With consumers confined to their homes during major lockdown periods, alongside messaging discouraging non-essential travel and face-to-face interaction during more lax periods of the 2020 coronavirus pandemic, the result was a surge in home delivery. This extended across industries, to cover goods such as groceries, toys, gardening materials, DIY equipment, and even new cars. Faced with the closure of shops, as well as a restriction on face-to-face engagement; retailers utilised last mile delivery to hand-off purchases to consumers from a safe distance.
A report released by the World Economic Forum in May 2021 quantified the global uptick in last mile delivery finding:
“The pandemic has caused an increase in last-mile deliveries that are likely to persist. In 2020, business-to-consumer parcel deliveries have risen by about 25%. The report suggests that part of this increased demand will be durable, with at least 10%-20% of the growth remaining post-pandemic”[i] – World Economic Forum
A Longer-term Behaviour Change?
Many believed that the pandemic and its resulting impact on consumer behaviour would be little more than temporary. However, as most nations emerge from their pandemic restrictions, and move towards something more akin to ‘normality’, it is becoming clear that the pandemic is having a lasting effect on consumer behaviour in many ways. Particularly in the UK, we see that customers have become far more accepting of contact free delivery; whilst this was a necessity at the height of the coronavirus pandemic, it is a feature that appears set to continue.
In May 2021, Business Reporter referenced a McKinsey Company research piece which found that of the UK consumers surveyed, 96% were making purchases online. Further, “92% were intending to continue purchasing online post-COVID-19. Consumers intend to maintain their level of online purchasing in one of every two categories, with the strongest UK intent reported in vitamins, OTC (Over the Counter) medicines, published content, and apparel.”[ii] There are similar findings from the US. A recent study of 2,000 Americans by HomeValet, found that 56% percent expect to use home delivery more in the future – and of those, 83% think there will come a time when home delivery is their primary method of shopping.[iii] Further “Seven in 10 respondents are using home delivery more now than ever before due to the Covid-19 pandemic, and the same number (70 percent) have been using it more frequently, specifically for necessities.”
Potential Solutions & Disruptive Players
Whilst the switch to online delivery arguably has some environmental benefits, for example a reduction in customers driving to stores to collect goods themselves, plus less wastage from stock with short shelf-life sitting in store (as well as the benefits advanced online orders bring in terms of ordering stock), there is a considerable concern over the fleets of vans (often diesel vehicles) making hundreds of last-mile deliveries each day. In 2020 at the height of the pandemic, Amazon reported that it’s carbon footprint had grown 15% over the previous year: “activities tied to its businesses emitted 51.17 million metric tons of carbon dioxide, the equivalent of 13 coal burning power plants running for a year.”[iv]
We have seen several potential solutions emerge to turn the last mile of delivery ‘green’. Amongst these has been a rise in interest and investment in start-up technology firms offering autonomous delivery solutions. Amazon have been undertaking trials of autonomous delivery robots for a several years, with these devices able to ferry parcels from urban distribution points to Amazon Prime customers, removing the need for vans and cars in last-mile delivery.
Source: Amazon & Co-op
In the UK, grocer Co-op has also confirmed the extension of its partnership with Starship Technologies, a provider that allows the autonomous delivery of groceries in as little as 20 minutes. Co-op will increase the number of autonomous vehicles operating and delivering groceries from 200 to 500 by the end of this year, as they are battery powered they help reduce both pollution and traffic congestion levels. This follows a positive 2020 for the robots, where a press release by Co-op last November noted: “Demand for Starship’s robot service has continued to soar during the COVID-19 pandemic, with delivery numbers for Co-op products tripling in Milton Keynes alone in recent months - the robots provide contactless deliveries, which allow people, including the elderly and more vulnerable that may be spending more time at home, to get their groceries delivered straight to their door.”[v]
Other providers are looking at ways in which they can advance their existing delivery methods. Retailer Ocado is investing £10 million ($13.6 million) in self-driving technology start-up ‘Wayve’, forming a partnership to develop autonomous grocery deliveries. Ocado is planning a 12-month trial of Wayve’s autonomous technology using several Ocado delivery vans on busy London routes.[vi]
Other, more traditional B2B and B2C parcel delivery giants, such as UPS, are considering ways to make their vehicles more environmentally friendly. At the recent Dubai Expo in October 2021, UPS demonstrated its electric delivery vehicles- vans which utilise solar power. Solar panels are used to charge an off-grid battery energy storage system (BESS) unit which powers the charging station for the vans. Earlier at the Expo, UPS had displayed its e-bikes and tricycles as a means for delivery. These new vehicles offer solutions to improve air quality, reduce congestion, and reduce carbon emissions.
A switch to electric is not an entirely new concept, prior to the pandemic, in 2019, Amazon announced a plan to buy 100,000 electric delivery vans created by start-up Rivian, UPS ordered 950 electric vans from Workhorse, and FedEx was planning to add 1,000 electric delivery vehicles from Chanje[vii]. With the surge in eCommerce demand caused by Covid-19, it’s likely we will see further orders of EVs (electric vehicles). At scale, autonomous vehicles and electric delivery vehicles will have cost savings for business, through lower wage bills and fuel costs; it is hoped this will be passed onto consumers through a reduction in delivery fees.
Ultra-fast Delivery: Coming to a Supermarket Near You
As we move out of the pandemic, and with the demand for home delivery set to continue, a trend to be aware of over the coming months and years is the rise of ‘Ultra-fast delivery services’. Where previously ‘sharing economy’ food delivery start-ups, such as Deliveroo or Uber Eats, have offered partnerships with supermarkets to deliver a small range of basic goods almost instantly, we are now seeing Supermarkets expand their own, far broader offerings. With Asda rolling out it’s ‘Express Delivery' service, which allows customers to order up to 70 products for delivery within one hour (delivery within a 3-mile radius of a store), we can expect even more frequent last mile deliveries, coupled with a reduction of in-store visits.
Given Asda is not alone, (Tesco’s are operating their ‘Woosh’ service in 60 shops, and Sainsbury’s ‘Chop Chop’ in 50 stores[viii]) questions will be raised as to how the supermarket giants plan to address concerns over congestion, emissions, and efficiency, given the struggles we have already seen from more standard last-mile delivery practices.
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