Last-mile Delivery Predictions for 2023

Despite recession and inflationary worries, e-commerce spending continues to grow. Worldwide, retail e-commerce sales will grow to $8.1 trillion by 2026, 56% higher than in 2021 at $5.2 trillion. Given the influx in online orders, last-mile delivery has become the make-or-break point to a superior consumer experience. In 2023, retailers and carriers will face continued last-mile challenges in several key areas. My predictions for big changes in 2023 are:?

• Reliable deliveries will surpass fast deliveries
• Free returns will be history for many consumers
• Reducing cost-per-delivery will be critical?
• Buying a last-mile platform will supersede building one internally

Observing global market conditions and speaking with leaders in the industry, making last-mile more cost-effective is imperative as cost-to-deliver has risen to a point where it? impacts profitability. Currently, shipping is a drain on the bottom line. Yet, last-mile delivery is also the lynchpin to consumer experience. A bad delivery experience means potentially losing customers. Create a good shipping experience and you will gain customer loyalty and revenue. It’s a balancing act every company must get right in 2023.?

Reliable Deliveries Will Win in 2023

Retailers and logistics providers struggle to keep up with perceived consumer demand for faster last-mile deliveries. From next-day to same-day delivery and even 15-minute delivery, consumers’ expectations have grown due to the Amazon effect. But do consumers really want and expect faster deliveries??

In a November 2022 consumer survey, FarEye found that 38% of U.S. consumers prefer same-day or next-day delivery but 48% of consumers prefer to wait 2-3 days for deliveries while 30% expect same-day delivery. Shoppers don’t always prefer maximum speed. For smaller retailers, making unnecessarily fast deliveries can bring high costs.?

Delivery within 15 minutes may be more marketing hype than consumer demand. As companies struggle to fulfill faster times, one forgotten factor that can enhance consumer experience and brand loyalty is reliable, on-time deliveries. Consumers want to accurately know when an item will be delivered.?

A reliable last-mile delivery builds brand trust. Reliable last-mile delivery means products are delivered consistently and in the timeframe promised. The focus in the past few years has been on speed, but reliability wins consumers. Knowing when their package will arrive and being able to count on it builds brand loyalty. In 2023, reliable delivery will trump faster delivery.?

Free Returns Will Be a Thing of the Past

Returns are growing as rapidly as e-commerce sales have. According to the National Retail Federation, in 2021 Americans returned 21% of their online orders, up from 18% in 2020 and worth $218 billion. This creates a flood of packages returning at a heavy financial cost to retailers.?

Initially, retailers offered consumers free returns to incent them to buy online. During the pandemic, brands relaxed their returns policies regarding the length of time allowed to return merchandise. With lax returns policies, consumers began to buy multiple items with the intent of returning some, also known as bracketing.?

To curb the flow of returns as their profit margins become squeezed, retailers have changed their returns policies, reducing return windows to 30 days and charging for return shipping. Charging consumers for return shipping helps to partially cover their labor and shipping costs while deterring the volume of returns.?

The cost of returning a $50 product is roughly $33 and is made up of processing, transportation cost, losses from liquidation and product discounting expenses. Worse yet, the retailer doesn’t make a dime since the original purchase was returned. As returns continue to grow, many retailers cannot afford to sustain free return shipping without strongly impacting bottom lines. Free returns will become history in 2023.

Some retailers have adjusted their free returns policy and now charge shipping fees to return items by mail. Retailers including Zara, Abercrombie & Fitch, J.Crew and Calvin Klein are among retailers now charging shipping fees for returns.?

Reduce Cost-per-delivery with Last-mile Delivery Platforms

With the cost of last-mile delivery and returns climbing, reducing cost-per-delivery will be key. According to a report from Capgemini Research Institute, last-mile delivery costs an average of $10.10, where the consumer pays an average of $8.08 with companies funding the remaining 20% of costs.?

Failed first attempts at delivery also drive up the cost-per-delivery for companies. A 2021 report revealed that 8% of first-time deliveries fail, costing retailers an average of $17.20 per order or $197,730 per year. Companies need to absorb those delivery costs in order to build brand loyalty.?

Last-mile delivery platforms can help reduce costs and improve performance. Efficient last-mile deliveries can decrease shipping costs for companies and keep consumers happy. Route optimization intelligently routes orders to avoid disruptions, detours, and traffic, tightening up delivery accuracy and driver efficiency which will inherently lead to reduced cost-per-delivery and increased profits for companies.??

Buying Will Supersede Building a Last-mile Platform

One question every company must ask themselves about last-mile technology is should we build the platform in-house or buy an existing last-mile delivery platform from a vendor?

Companies with enough internal resources may consider creating an in-house last-mile solution allowing them to create a truly customized solution. It may initially be cheaper to create an in-house solution, but these questions should be considered.?

• How quickly can we build this technology to begin optimizing our last-mile deliveries??
• How challenging will it be to integrate our technology with other vendors, carriers and stakeholders who may also have their own customized technology?
• Will we be able to adapt quickly to industry shifts and trends to dynamically adjust to the latest consumer demands??

Custom solutions may not be as quick to adapt to changes in the marketplace. Generating efficiency quickly while keeping costs low is very important. Long-term, purchasing a last-mile delivery platform may make the most sense. Creating in-house solutions can take a long time, whereas existing solutions can be implemented and deployed rapidly, within weeks and months, fast-tracking success.?

Current last-mile technology vendors have the scope and flexibility to customize existing solutions to the needs of a business and adjust to dynamic, evolving consumer preferences. Using a last-mile platform provider helps spread out and control the development and maintenance costs of the technology across business units as an operating expense rather than a large up-front capital expense.?

Existing last-mile software solutions include access to large carrier networks, enabling a more scalable and resilient last-mile delivery network quickly and cost-effectively.

Efficiency, cost optimization, and balancing consumer expectations will continue to drive changes in last-mile delivery in 2023.

Let me know your thoughts and predictions in the comments section.?