The Last Mile Delivery Race Is On

Ten years ago, people thought two-day shipping was unbelievably fast. The new "unbelievably fast" standard is turning into same-day or even one-hour shipping.

There has been a 15% increase in e-commerce sales during the past year, and the delivery infrastructure is having a hard time keeping up.  The so-called Last Mile presents particular difficulties because of delays, repeat delivery attempts and "front porch" theft, which accounts for nearly 1% in lost revenue for retailers.

A titanic battle for dominance is taking place in this market, not only among established players but with numerous startups  attempting to get a foothold in this fertile territory.

Every discussion has to begin with Amazon. E-commerce accounted for 42% of retail growth last year, with Amazon - whose sales grew by over 30% - holding the majority of that increase.  The acquisition of Whole Foods gives Amazon a brick-and-mortar logistics hub that will greatly assist in Last Mile delivery. Combine that with the returns-policy arrangement it recently signed with Kohl's, and Amazon is well on its way to solving the two biggest e-commerce problems  dislike -  delivery time and returns.

Other retailers are responding.

Target's program Restock allows customers to choose from thousands of household items and have them delivered the next day for a $5 delivery charge.

Walmart is experimenting with large kiosks that allow customers to order online and then pick up at the nearest Walmart location, plus it has launched a program where Walmart employees can make deliveries on their way home from work. Walmart is also partnering with Uber for on-demand grocery deliveries.

Both Amazon and Walmart are experimenting with smart-lock programs that allow delivery personnel to  enter customers' houses to deliver packages.

Can startup delivery companies survive against these behemoths? Possibly, but success will probably depend on improved personalization and bundling with other services. 

The large retailers focus on more densely populated areas for obvious reasons, which makes for opportunity in the exurban and rural areas.

Either way, the bottom line will continue to be - whoever is faster and cheaper wins the race.