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Future-Proofing Last Mile Delivery for the European Circular Economy

9/14/2022
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Pandemic-driven e-commerce sales have surged across Europe, and this momentum has sustained sales despite the many ongoing economic challenges that are ever-present and top-of-mind for consumers. New services with new models entered the market and expanded quickly, changing the expectations that even long-time online shoppers have about what is now possible. Consumers in Western Europe who spent EUR561 online per capita in 2019 increased this spending to EUR881 in 2021, a 57% rise. While demand has been a boon for growth, it has also strained logistics providers, including last mile services. However, those with potentially most at stake are the consumer-facing brands dependent on last mile players to fulfil orders as expected.

Beyond demand, ongoing economic challenges have increased costs for shippers and caused delays in distribution, while cities across Europe are starting to rein in unfettered access for last mile services. Despite these complex challenges, many last mile providers across Europe are innovating now to future-proof their offering and to be more attractive to shippers and more reliable to consumers who are eager for sense of stability and reliability. While compelling services now help brands navigate complex pricing strategies and ensure on-time arrivals, the most successful are also preparing for a more sustainable European market. A brand that navigates these delivery options effectively will build loyalty and enjoy a long-term market advantage.

On-time arrivals and pricing

According to Euromonitor International’s Voice of the Consumer: Digital Survey results regarding delivery services, a longer than estimated wait for delivery was the most commonly reported challenge for consumers in 2022. On-time arrivals have become an important way for brands and last mile services to communicate value, and there are more solutions emerging. Companies offering end-to-end logistics management solutions, for example, digitally optimise deliveries by finding the most suitable logistic partners in real time. For instance, Helsinki-based OGOship works with large multinational brands to ensure products with complex supply chains are shipped across Scandinavia without disruption.

Rhenus Logistics has been localising nodes of distribution in Berlin, Germany, by installing what it refers to as micro-depots, or small warehouses, along the edges of the city to pre-stage goods and shorten last mile journeys. Rhenus also offers appointment scheduling, allowing the consumer to choose a delivery window, while “eco-windows”, or time slots that minimise carbon output given the location of the delivery vehicles in an area, are also available. This empowers the consumer to have greater control over the delivery process, and increases the likelihood of successful delivery.

Beyond dependability, proper pricing models ensure services remain cost-effective. Prices online can be more dynamic than in stores to adapt to changes in operational cost or to react to price changes from competitors. Marketplace-style delivery services such as Paris-based Cajoo, Jiffy in the UK or Gorillas in Germany, are especially attractive for partners because of the incredible amounts of data they collect. This knowledge is important because there is a fine line between the value that delivery adds in convenience and the cost of delivery as a non-essential service. At some point, delivery becomes a luxury that can be cut out. Being nimble in pricing helps ensure a service remains viable.

Sustainability and the circular economy

While on-time arrivals and pricing can be a competitive advantage now, last mile delivery is only viable in the long term if it is also more sustainable. Sustainability is at the heart of a major shift in thinking across the European logistics space and supports the EU’s ambitions to build a more circular economy, which impacts every part of the supply chain. In this spirit, DPD in Germany publicly reports its own CO2 emissions. By being proactive in transparency, DPD is also more attractive to brands which see this as a crucial part of the way they communicate value to consumers.

DHL, another German delivery company, introduced IOT tags to track individual packages and create a product footprint. This kind of technology enables online retailers such as Arkive, a Dutch beauty retailer, to redirect unsold or overstocked products to minimise waste and build more efficient supply-demand production models. Again, DHL is helping to reduce waste here by attempting to standardise last mile containers for delivery vehicles, similar to how standardised global sea containers help reduce space inefficiencies on maritime container vessels.

Finally, electric-powered delivery vehicles are becoming increasingly viable and more attractive for city regulators because they reduce air and noise pollution. In Amsterdam, for example, only electric vehicles will be granted access to the city centre where deliveries are not only crucial for consumers at home, but supply businesses such as shops and restaurants, with many cities across Europe expected to implement similar restrictions. This will give electric last mile delivery companies such as Picnic, a Dutch grocery delivery player, a strong first-mover advantage. Picnic delivery vans are also purpose-built, uniquely shaped and highly recognisable, and small enough to make deliveries in dense, difficult-to-reach urban residential areas.

The surge in demand and the broader economic challenges have certainly been a catalyst for change in what was a very traditional logistics industry. Brands selling goods online will need to collaborate with the most suitable last mile players if they are to remain competitive, but will find room to stand out in the market with future-proofed last mile partners.

For further insights into global supply chain challenges, visit Euromonitor International’s new Inflation Surge insights page, or consider a bespoke consulting solution.

 

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