Reinventing last mile: Win the race to the top

Competing to survive

Traditional postal organizations are at a moment so pivotal that it will determine who remains profitable for decades to come, and who finds themselves obsolete within years.

It’s clear that commerce—the way consumers buy things—has fundamentally changed, but what few grasp is how that change has reshaped retail competition and is remaking supply chains. So much so that Accenture analysis predicts that by 2023, more than 50% of all eCommerce purchases will be delivered from local inventory—and that number could easily be 70%.

Why? Because today, last mile delivery has transformed from a cost of business to a strategic differentiator. Customers have made it clear that, when given a choice between standard shipping of three-to-five business days and same-day delivery, they want the faster option—and there’s no going back for retailers or for delivery organizations.

What do US consumers expect when buying online?

The race to the top

Not only do customers say they want speed when it comes to their deliveries, but they behave differently as a result of it. Fast and free shipping impacts the most important metrics for retailers, including customer loyalty, market share, basket size and, most importantly, growth. Target, the eighth-largest retailer in the United States, saw its digital sales surge 31%, with 80% of that growth driven by same-day fulfillment options.

But just as delivering on these expectations drives revenue upward, not fulfilling them puts entire businesses at risk. Thirty-nine percent of US consumers might not shop with a retailer again if they had a bad shipping experience. This is further complicated by the fact that 57% of US consumers hold the retailer or marketplace accountable for delivery issues—and only 31% blame the delivery company.

That means that the right last mile offering—one that is fast and low-cost (if not free) for the consumer—is a decisive competitive advantage. The last mile has increasingly become the front line in the eCommerce battle.

Winning an uphill battle

Of course, while offering fast, free shipping is critically important, it is also difficult and costly, causing many leaders to question the sustainability of fast and free delivery. There are some who believe that senders will have to stop “subsidizing” delivery at some point—that it is not a race to the top, but a race to the bottom. They evaluate delivery through old models that are focused on minimizing cost by consolidating delivery into regional processing centers, limiting their ability to offer the kind of last mile delivery that retailers need.

What retailers have realized is that the traditional delivery model is too difficult and costly for fast and free delivery. Instead, the answer is for inventory to be close to the consumer. That’s why retailers are investing heavily to create an omnichannel supply chain that enables greater speed, efficiency, transparency and flexibility.

So how are retailers investing to meet consumer expectations sustainably and efficiently? These five trends toward an omnichannel future are reshaping supply chains—and demand a corresponding change from traditional postal organizations.

How will postal organizations catch up?

While retailers are transforming their networks, traditional postal organizations are not. Since many retailers have already invested in localizing their inventories for speed and cost, they want to partner with delivery companies that capitalize on those investments and can quickly and efficiently make local deliveries. This puts postal organizations at risk of losing business from big retailers, who are instead turning to startups with new technologies, as well as to their own solutions, to solve the last mile challenge.

The good news is that traditional postal organizations are best positioned to offer the solutions that retailers are looking for—and may take advantage of this incredible growth opportunity. Postal organizations not only already have local infrastructure to facilitate last mile delivery, but they have a mandate to visit every address in a given country, most days (if not every day) of the week.

Traditional postal organizations already have the infrastructure in place for local last mile. Now, they just need to make it usable. But how?

3 key recommendations for postal organizations

The transformation of the last mile has begun, and when it is complete, the world of delivery will be drastically different. Retailers will see even faster eCommerce growth. Consumers will take advantage of and expect more delivery capabilities. In short, the way people buy and get things will be fundamentally changed.

Postal organizations are faced with immense opportunities and challenges, as well as a clear imperative to evolve. Done well, it will create remarkable growth and the foundation for sustained mission success. Done poorly, it will push them to irrelevancy, and potentially out of business. The choice is truly that stark, and there’s never been a more important time to get it right. It’s time to join the race to the top.