Can last mile delivery cope with the festive frenzy?

E-commerce, already on an upward trajectory, is set to play a bigger part than ever in this year’s seasonal spending

November 19, 2020

As delivery firms and retailers contend with higher volumes of online orders this year, last mile delivery is evolving to get goods to where they need to go within ever tighter timeframes.

UK online Christmas spending is tipped to overtake physical store sales for the first time ever, according to research by courier ParcelHero, even though overall seasonal spend is expected to be the same at around £78 billion.

Across Europe, e-commerce has grown significantly during the pandemic – in Germany, for example, it’s predicted to grow by 10 percent this year to €103 billion.

As the first digital Christmas approaches, it’s raising questions both around how parcels get delivered to city centre postcodes – and the best locations for warehouses, says Patrick Remords, EMEA supply chain consulting director at JLL.

“In recent years, the supply chain has become increasingly consumer driven,” he says. “Delivery speed was already a major factor in the buying decision, with major online retailers offering same day delivery options.

“This year, while more people will order early online, others will wait to see if lockdowns are lifted and physical stores reopen. If not, there’s a risk of serious pressure on logistics providers in the week before Christmas.”

In preparation for a busy month, France’s La Poste is taking on 9,000 employees, while the UK’s Royal Mail postal service is hiring a record number of provisional Christmas staff.

Other factors in last mile delivery success are longer-term. More than ever, strategically-located warehouses on the edge of large urban areas are in high demand as third-party logistics providers (3PLs) and retailers look to move as close as possible to where consumers live.

Finding new ways to move goods

Last mile delivery is consequently getting more creative – especially as more European cities aim to reduce traffic and pollution on their streets. While still in their infancy, electric mini-vehicles and cargo bikes are rolling out in Europe’s cities; unlike bigger delivery vehicles they’re permitted to enter cities during peak times of the day.

In London’s Hounslow suburb, the UK’s first autonomous electric delivery vehicle, Kar-go, recently made its debut delivering medical supplies in a contact-free way. In Milton Keynes, meanwhile, the Co-op is deploying an 80-strong troop of Starship delivery robots to take groceries to people isolating at home. By 2030, some 20 percent of parcels globally could be delivered by drones, robots or AVs according to a study by Lux Research.

For now, at least, other retailers are taking more of a two-wheeled approach, with grocery chains Aldi and Sainsburys turning to food delivery providers including Deliveroo and Uber Eats to not only reach areas shut to traffic but also meet growing demand, especially as the Christmas food orders roll in.

While the pandemic might have accelerated the roll-out of newer last-mile delivery plans, they’ll also help to alleviate some of the pressure of the Christmas rush, says Ashley Smart, EMEA logistics development director at JLL.

“It’s likely that some Londoners will be receiving their Christmas goodies by cargo bikes for the first time this year however next year it could be most of the capital,” he says. “Cargo bikes, combined with micro-depots, have been conceptual for some time, but this year has really changed that - deployment will really ramp up in 2021.”

Closer to homes

To scale up, more micro-depots like the one launched by courier DPD in central London last year, will be needed. The UK could have 80 micro fulfilment centres by 2023, according to Interact Analysis, with some standalone and others part of larger stores, such as those planned by supermarket chain Tesco.

While Christmas is raising the stakes in the short-term, logistics companies are thinking longer-term with the pandemic having a seismic shift on long-held shopping habits.

“For many online retailers and 3PLs, it’s felt like Christmas all year,” Smart says. “It’s really highlighted the need to be as close to consumers as possible – warehouses in prime locations have never been more sought after.”

He points to 3PLs and parcel providers signing longer leases on urban warehouses and committing to locations for as much as 25 years in some central locations to secure supply of product via EVs or cargo bikes. “It’s further evidence that urban locations are here to stay,” he adds.

And while there are differences between European countries in terms of shopper preferences for receiving their goods – click-and-collect, parcel lockers or an out-of-home drop-off point – not to mention the rate at which online shopping is increasing, last mile delivery will continue to challenge retailers and 3PLs.

“From toys to fresh fish and foie gras, demand for e-commerce has exploded and last mile delivery has to adapt, starting from this Christmas,” says Remords. “But it’s not just a seasonal thing - it’s only going to get quicker, more robotized and dependent on fulfilment centres and warehouses being in the right locations to enable that.”