The FarEye Eye on Last-mile Delivery Report, conducted with Researchscape International, explores retailers’ and logistics providers’ last-mile delivery priorities and opportunities over the next five years. Since the year of 2020, last-mile delivery has gone through a transformation, yielding a complex, expensive, inefficient, and unsustainable process.
To reduce growing last-mile delivery costs, FarEye’s research revealed that 57% of retailers have outsourced delivery networks over the past five years, yet 84% of them claim their organization needs more control over their outsourced delivery networks. In a climate where revenue growth, efficiency and sustainability are key priorities for companies, last-mile delivery strategies must adapt to balance reducing delivery costs and improving consumer experiences.
What were the drawbacks of outsourced delivery?
Outsourced delivery networks yield lower cost, faster delivery, and increased capacity but sacrifice control over order tracking and branded consumer experience. The trend for retailers to outsource their delivery networks contrasts with the fact that only 27% of retailers are using one last-mile delivery platform yet 72% believe it is very beneficial to merge all technology solutions into one platform, offering a single view, more agility, control and lower cost.
“For retailers that don’t have scale for their own fleet of drivers, outsourcing delivery networks is the most cost-effective way to deliver products with flexibility, however, the tradeoff is less control over order tracking,” said Stephane Gagne, Vice President, Product, FarEye.
“Rather than outsource their entire last-mile logistics network, retailers should consider their own last-mile platform providing them the flexibility to experiment with different hybrid multi-carrier approaches, outsourcing in some markets, and insourcing in others. This would offer the level of control and visibility they’re after, while retaining a superior consumer experience.”
What were retailers’ top priorities?
Last-mile delivery is generally expensive, accounting for 53% of overall shipping costs. Fifty-five percent of retailers surveyed are focused on reducing cost of delivery over the next five years, in addition to increasing their customer satisfaction (53%). These are their top two priorities.
The factors contributing to high cost of last-mile delivery include fuel (59%), address location (39%), labor (36%) and first delivery failure (34%). The speed to deliver is a contributing factor as only 44% of retailers reported that all or almost all of their deliveries are made on-time today. However, retailers have a goal of increasing that rate to 70% in 2027. In addition, 35% of retailers reported offering same- or next-day delivery now, and 64% aim to offer it by 2027.
“Instead of speed, retailers should consider improving the reliability of orders through AI and machine learning technology that will help route orders accurately and efficiently and ensure carrier allocation and capacity levels match the present customer demand,” noted Gagne.
What were the last-mile delivery growth priorities?
In terms of last-mile delivery outlook, 66% expect their budgets for last-mile delivery technology to grow over the next five years, and 78% of retailers claim they will likely change or buy a new last-mile delivery solution in the next 1-2 years. 48% percent of retailers expect to buy a last-mile delivery platform in the next five years, vs. building their own in-house (32%).
By 2027, retailers also plan to expand their carrier fleets to be more sustainable. 60% of EMEA and APAC respondents and 40% of U.S. respondents planned to use electric vehicles in their fleets in the next five years. Autonomous vehicles are a priority for 43% of APAC respondents, 25% for U.S. and 20% for EMEA respondents, and drones were a priority for 34% of APAC respondents, 29% of EMEA respondents and 22% of U.S. respondents, over the next five years.