People often joke about how much Amazon has taken over our lives, and it’s safe to say that Amazon has changed the way that companies and lives across the world function. With the company hitting a $1 trillion market cap for the first time in 2018, they’re not showing any signs of slowing down – eCommerce is here to stay, and it’s truly created a shift in the lives of people across the country and the globe.
But Amazon’s success lies in its central value proposition: as a life-saving, all-around shipping service to find anything under the sun. Amazon has pushed that value proposition further and further throughout the years. Now, it has its sights set on last-mile shipping—and that could be a great thing for the industry.
The Rise of Last-Mile Delivery Service Providers
Before we jump into specifics, it’s important to understand last-mile delivery and the landscape that Amazon is reshaping.
Briefly, last-mile delivery is the final step in a product’s progress from a store’s warehouse to a customer’s front door. Specifically, it’s the point when a package arrives at a customer’s doorstep.
It’s the most expensive and time-consuming portion of the entire delivery process—and the most essential to customer satisfaction. Inefficiency plagues last-mile delivery and is one of the biggest factors in customer dissatisfaction. Because the final leg of shipment usually involves multiple stops with low drop sizes, it’s an expensive phase for companies and the last mile of delivery doesn’t always end at the door stop.
Sometimes it ends at an apartment leasing office, the front desk of a large company or into a central receiving area for on-campus housing – and when this happens, the final mile of package delivery isn’t always as transparent and clear-cut as the shipper may have intended.
The Changing Landscape of Last-Mile Delivery
The shifts in last-mile delivery are creating unprecedented hassles and headaches for everyone involved, and they’re growing about as fast the rise in e-commerce providers and shipping options.
After all, the success of services like Amazon has resulted in a major shift in consumer expectations. Customers today have been trained to expect free delivery, and they expect their free delivery to be fast and flawless.
What consumers may not realize is that there are four main entities involved in last-mile shipping that make “fast and flawless” seem more like magic than an automatic byproduct:
- Last-mile delivery providers
- Information providers
Customers have grown increasingly complex (and demanding) in terms of what they want. They want free shipping that is also fast, but given the choice, they aren’t willing to pay an extra premium for faster shipping if they can get away with it.
This creates a problem for merchants, who still have to account for shipping rates and dimensional weight fees for every sale. In order to compete with larger retailers, offering fast, free delivery options is non-negotiable.
Last-mile delivery providers are tasked with keeping both sides happy. Their goal is to streamline the route and supply chain as much as possible to bolster timeliness and cost-efficiency, even though they still have to deal with spread-out routes and low drop sizes.
Every portion of the journey is also now expected to have full transparency, and end recipients are often tracking their package every step of the way – from when the package leaves the facility to when they receive the package. With more and more companies, residents and students expecting to track their package until it’s in their hands, it’s important that they can experience the same ease of access that they experience throughout the rest of the package’s journey – or else the user experience for the recipient is less than expected.
Amazon and Last-Mile Delivery
Amazon has been trying to nudge their way into last-mile delivery for a while, though this process didn’t hit full stride until the company acquired Whole Foods, effectively flipping the last mile into the first mile.
The Whole Foods Acquisition
Amazon was poised to turn its eye toward delivery since it took control of its entire supply chain in 2013. By doing this, they can find new profit margins by ironing out every inefficiency in the system, making them faster than any of their competitors.
The Whole Foods acquisition in 2017 provided an essential stepping stone in the supply chain for Amazon. Before, when Amazon had to deal with the last-mile problem, Whole Foods offered Amazon hundreds of user-friendly, easily accessible warehouses: Whole Foods stores.
This would allow Amazon to use Whole Foods stores as distribution centers, eliminating the need for new distribution centers and cutting the cost and logistics of last-mile delivery.
The Amazon Effect on Logistics
In doing so, Amazon has been able to turn the logistics industry on its head.
Amazon’s goal is to replicate the entire in-store shopping experience—choosing a product, fetching a debit card to pay for it, and taking possession of the product—all in a few minutes through a computer screen.
The remaining advantage that brick-and-mortar stores have over Amazon is that customers don’t have to wait a few days to get their product. Same-day delivery and a dramatic reduction of the last-mile problem effectively eliminate that disadvantage.
Here’s how the Amazon effect plays out in the logistics industry (to the advantage of the consumer):
In a brick-and-mortar store, you can trace a product’s progress from the shelf to your cart to the checkout line and into your bag with your own two eyes. Online shopping lacks that advantage, and this is where Amazon is stepping in to change things.
Amazon allows users to track their product at every step of the process, driving transparency throughout the logistics process and forcing companies to boost their efficiency.
Amazon is, above all, a data company, which means it’s to their advantage to be in an industry driven by data analytics.
After all, data analytics are the force behind a fast, efficient supply chain. With the Amazon effect, the pressure is on for companies to expedite their supply chains, driving higher standards in technology and data.
Using Shipping to Your Advantage
In the age of virtual amenities, adding value is the name of the game. Efficient solutions for package anxiety can no longer be ignored, and luckily, it’s not. If you work for a company that extends the final mile (large building, corporate mailroom, student housing, etc.), it’s imperative that you offer your employees the same visibility they get every other step of the way.