How to Solve the Last Mile: Collection Point Networks

The digital world has created many advances across industries, demographics, and regions. Technology has made it easy to achieve just about anything with a click of a button or swipe on a screen. Due to the recent pandemic, technology is even more vital during this time for online shopping. In Australia, “April 2020 welcomed more than 200,000 new shoppers to the online space. Of these, over a third (35.5%) made an online purchase more than once, and 16.7% shopped three or more times [1]. 

With increases in overall Australian parcel volume and population density, logistics carriers are dealing with pressure to deliver on time to individual homes or places of work. “While home deliveries made up the largest portion of deliveries in April 2020, we also saw strong growth in alternate delivery options, up 30% YOY, and we expect this growth to continue [1]."

However, the increased demand spikes a problem for the retailers and carriers in eCommerce. Merchants face the challenge of adjusting strategy to fulfil consumer’s expectations and carriers face the challenge of delivering goods on time. The last mile delivery is now being disrupted by unprecedented conditions of high-density orders and consumer demand due to COVID-19.  

 

In this post, we chat about how the last mile delivery affects each player in the eCommerce industry and how the last mile can be solved through Collection Point Networks. As the online retail market continues to grow, the last mile delivery problem will affect more retailers and carriers unless the market becomes disrupted with new players to circumvent this problem.  

 

What is the last mile delivery problem?  

 “Last mile delivery is the final logistics stage in the order process. It takes place after the products have been received, placed in the warehouse, sorted, picked, packed, and shipped to the appropriate distribution centres [2].” So, what happens to the retailer and carrier involved in fulfilling the user buying experience?  

 

Say a carrier has 100 parcels to deliver each day and half of those consumers are not home to receive the parcel. Then the carrier needs to return to the locations they missed the following day. The average cost to the carrier is around $10USD for missed deliveries [3]. The consumer suffers from missed deliveries about 30% of the time where home delivery is the only option. 

 

Three challenges faced by retailers in the last mile  

 

In eCommerce today, retailers are dealing with similar issues across the industry. 

  1. Unable to fulfil expectations 
    When expectations are unable to be fulfilled, there could be a detrimental impact on the name and reputation of a brand. Within the eCommerce industry, retailers work closely with logistics providers to ensure that the purchase cycle is satisfactory for the consumer the whole way through till the delivery. Because of limited options for delivery and increased demand for eCommerce, retailers and carriers are both pressured to deliver parcels on time with a limited error. “The delivery volumes in recent years have seen a tremendous surge of around 20-30%. Due to which all the companies are expected to deliver shipments faster [4] .”  

  2. Unnecessary delays
    Unprecedented delays from the pandemic, weather, incorrect addresses, remote locations, and urban congestion are all factors that contribute to the delivery schedule being unfulfilled.

  3. Lack of real-time visibility
    Real-time and clear track and trace events makes it difficult for retailers to keep the consumer informed. However, technology is enabling merchants to improve their experience.  

Three challenges faced by logistics providers in the last mile 

 

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  1. Lack of communication  
    Communication and shipping accuracy are a crucial element of creating a seamless delivery to customers. By receiving visibility into who picks up the order, what time they will drop it off, and where they will drop it off, customers can gain a clear understanding of where they need to be when the parcel is ultimately deliveredAccording to Fix the Last Mile, “90% of the shoppers track the delivery status of their package and want their delivery to fit seamlessly with their schedule [4].” Clear communication will help decrease the likelihood of failed deliveries.

  2. Responding to last-minute changes 
    Carriers are faced with numerous factors that contribute to the overall cost of the last mile delivery. For example, delivery point proximity, traffic delays, and congestion make responding to last-minute changes more difficult to deliver as needed for a successful route. With the time it takes to get from location to location, proximity can slow down the schedule based on the distance necessary to complete the route. “The eCommerce and retail sector has always been troubled by the rerouting of deliveries due to last moment changes in the addresses done by the consumers [4].” 

  3. Missed deliveries 
    Delivering goods to centralised locations and office hubs help reduce the number of missed delivery attempts, as more people are available to sign for packages. Many consumers order parcels to work specifically because they know that dropping off at the home might take longer. According to the Fix Last Mile, “29% of the shoppers have changed the delivery time and location of their package. Furthermore, 50% would like to opt for it if that option is available [4].” When no one is home to deliver the parcels, the logistics provider must adjust strategy and wait to deliver the order in a secure place.  

 

Three business effects of a limited delivery system  

As mentioned above, the retailer and carrier deal with different consequences to the business during the last mile. When expectations are not met for the consumer, the business can lose a customer and profitability for the business.  

  1. Consumer feeling about the quality and reputation of the brand
    One of the main goals of keeping a consumer loyal is to make sure they have a solid experience throughout the whole purchasing cycle. The last stage in the buyer’s journey is a successful delivery, completing the purchasing cycle, and defining how the consumer evaluates the brandIf the parcel is received late and in a bad condition, brands are immediately alienated, and consumers are less likely to order again. For example, “84% of shoppers are unlikely to buy from a company again after a bad last mile delivery experience, and 98.1% of consumers say delivery is important for brand loyalty [2].” The old saying “keep the customer happy” still applies even within the eCommerce experience.
     
  2. Higher operating costs can affect the business 
    Missed or failed deliveries can cost your business money and time. “Higher rates of failed deliveries and unoptimised delivery routes and schedules lead to significantly higher operating costs [2].” Without having a secure place to leave parcels, logistics companies struggle with fulfilling their delivery schedule.  
  3. Cancellations and returns can lead to declining sales
    Taking time on delivering a product can lead to customers canceling their order, or more commonly, they will end up returning a product after buying a similar item from a brick and mortar store. “The average return rate of eCommerce products is a whopping 20%. If you sell consumer products online, you can expect at least one in five consumers to send their purchased product back [2].”  

How collection point networks help solve the last mile  

Limited delivery options routed to individual homes can create the chances of a missed delivery. What options can logistics providers use to be more efficient in the last mile?  

 

Well today, the new kid on the block enters the market. Enter collection point networks, sometimes referred to as alternative collection points or pick-up and drop-off (PUDO) locations. Pick-up and drop-off locations enable retailers to supply more choice, convenience, and control to their customers by enabling alternative ways to receive a parcel. Additionally, logistics providers can support their schedule by dropping off parcels in bulk and ensuring successful deliveries using the network.  

 

Benefits of collection point networks  

In Australia, pick-up and drop-off collection points are becoming more popular for the merchants and consumers to have more choice in where they receive or return parcels.  

 

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Solutions for the retailer  

  • More delivery choices increase shopping cart conversion.  
  • Improved customer satisfaction and brand loyalty to the business.  
  • Helps the environment by reducing carrier carbon footprint.  

 

Solutions for the logistics provider  

  • Lower cost to deliver parcels in density rather than to individual locations.  
  • Operational efficiency to ensure the last mile is optimised 
  • Sustainable last mile delivery reduces the number of trips taken to each delivery point.  

 
 

Solutions for the consumer  

  • Consumers have the choice to control where they want their parcel delivered and at a safe location.  
  • Consumers can have more choice and convenience to pick up and drop off parcels that complements their daily schedule.  
  • Supports the environment based on the impact of emissions needed to deliver parcels.  

 
 

HUBBED collection point network  

The HUBBED PUDO Network helps solve the last mile delivery problem and ensures more delivery choice for the retailer, reduced cost to carriers, and more control for consumers.  

 

The HUBBED collection point network works with local companies nationwide to provide delivery, pick-up, and drop-off locations. Extended hour HUBBED locations include convenience stores, service stations, self-storage centres, and smart parcel locker sites. By providing alternative collection points, consumers have more options to work around their schedule to retrieve a parcel when it best suits them.  

 

Benefits of the HUBBED collection point network  

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The HUBBED PUDO network increases order density, reduces reverse logistics costs, and supports the logistics and eCommerce industry's efforts in reducing carbon emissions.  

  • Efficient delivery drives down shipping costs from carriers.  
  • Supports local businesses by providing access to locations in proximity to the consumer's home or workplace.  
  • Safe and secure smart parcel lockers ensure that a consumer feels in control and peace of mind that the parcel is protected.  
  • Increased delivery density to collection point networks reduces the cost of missed deliveries.  

 

Take a look at our recent blog post and learn more about how HUBBED operates in Australia.  

 

Last thoughts  

Improving last mile delivery is crucial for both carriers and eCommerce merchants. PUDO network adoption and technology optimisation will improve the consumer experience as parcel volumes continue to grow.  

 

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[1] Australia Post, 2020 eCommerce Industry Report: https://bit.ly/3eCgdpo 

[2] Optima Route, What is Last Mile Delivery and How to Optimize it in 2020: https://bit.ly/3h2fZJS 

[3] Capgemini Research Institute, Last-mile delivery executive survey, October–November 2018: https://bit.ly/3j22xYl 

[4] Fix Last Mile, Last Mile Delivery for eCommerce: Challenges, benefits, and future implications:  https://bit.ly/2B17jnA