Amazon has set the benchmark for Last Mile Delivery. With massive Distribution Centres within a short distance of every major population centre they are able to offer fast delivery of virtually any product they sell. The Amazon Prime Now service promises delivery within 1 hour. Amazon Fresh is their grocery delivery option and with their Whole Foods acquisition they are obviously planning for rapid delivery. And the Amazon promise of drone delivery will further cement their leadership in the Last Mile Delivery race.
So how do you compete with that? What are your options? And what is your Strategy?
The Amazon Last Mile Delivery Benchmark
First and foremost your Last Mile Delivery Strategy should start with what is important to your customer. Certainly Amazon is driving to shape the E-Commerce landscape as well as customer expectations around the importance of rapid, last mile delivery. But is rapid delivery the factor that is most important to your customers?
Amazon Prime provides for free shipping although you must pay an annual fee for this “free”service. And by having their Distribution Centres close to major urban centres they can delivery quickly regardless. All of this is part of a very deliberate strategy on Amazon’s part to get customers to believe that they must have fast delivery. They are basically defining for customers what those customers want. Further their size and scale position Amazon as one of their very, very few companies who can meet those expectations.
Those customer expectations for fast, free delivery are being reinforced each and every day. Ten to twenty years ago the promise of fast or free delivery was more of an aspiration. Now it has become a customer expectation. For every category that Amazon adds to their portfolio their competitors are now faced with having to offer a similar capability. When Amazon started offering free delivery on books the book retailers had no choice but to similarly offer a free delivery capability. This has been repeated for every category that Amazon devours.
The last mile delivery bar has been set very high. eMarketer reports that 61% of internet users in the U.S. would pay to receive their purchases on the day of order. Small Business Trends reports that 28% of online shoppers will abandon their purchases if shipping costs are perceived as being excessive.
Yet we also know that Amazon’s shipping costs are 18.5% of net product sales (in their most recent quarter) as compared to their shipping revenues which are 10.5% of net product sales. Who else can afford to take such an enormous margin impact just to provide free or fast delivery?
What is your Last Mile Delivery Strategy?
Certainly one option that is available for companies is to use the Fulfillment by Amazon service. For a set of fees you can have your product advertised on Amazon’s website and fulfilled out of their vast network of Distribution Centres.
Alternatively you could partner with Logistics partners so that you can position your product close to the geographic markets that you choose to serve. There will be more work required to manage these partners and your inventory and orders across their myriad locations.
But beyond trying to physically position your inventory across the geographies you choose to serve do you have other options? While rapid, low to no cost delivery has been set as a benchmark for last mile delivery is their the possibility of differentiating yourself from this market expectation?
If your product design, functionality, demand or brand is uniquely different from what consumers can get anywhere else then you may have a window of opportunity to sell your product on that basis without the need for rapid delivery. Certainly customers will not wait indefinitely for your product but if you can provide delivery comfortably within 1-2 weeks then your unique product differentiation strategy may buy you that time.
Additionally what is just as important to customers is last mile delivery INTEGRITY! If you make a commitment to deliver to a customer on a certain date, and you meet or beat that commitment, that can be more important than rapid delivery. According to Retail TouchPoints on time deliveries will cause 72% of consumers to make repeat purchases. Alternatively eDelivery finds that 38% of consumers will stop purchasing from a retailer if they have a negative delivery experience.
So delivery integrity should be a key part of your last mile delivery strategy. Your extended supply chain, from your Distribution Centres through to your Logistics carriers, needs to have robustness in the business processes to ensure that you can meet this commitment every single time. A SINGLE negative customer experience will be communicated far and wide in the age of social media.
Further considerations in your last mile delivery strategy can be to provide differentiation by way of the services you provide. Depending on your product you may provide a white glove service. If your product requires in home set up, installation, trouble shooting or repair then you can add this to your last mile delivery strategy. Delivery status and visibility can also be unique offerings. If customers can stay updated online as to where their product is and when it will arrive (on time) they may be less concerned in having it delivered immediately.
Last mile delivery is a critical competitive background in the age of E-Commerce and online ordering and delivery. Amazon has set an enormous benchmark, and customer expectation, with their capabilities in providing rapid and free delivery.
To effectively compete in this space you must have a last mile delivery strategy. It is not always critical to have rapid and free shipping. There may be ways to differentiate yourself from this customer expectation based upon the uniqueness of your product and brand, your ability to delivery on time and meet your commitments, and your ability to offer unique delivery services.
But don’t be complacent. Amazon will continue to drive customer expectations for increasingly fast, and free, delivery.
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