Due to digitalization across all areas, consumer expectations towards delivery services in various sectors have shifted towards higher flexibility and convenience.
Consumer behaviour therefore substantially drives delivery expectations and poses transforming challenges for logistics providers to fulfill these. Last mile delivery is especially prone to and affected by these changes. This poses the following questions: How exactly were last mile delivery logistics affected by digital transformation? Which concrete examples of successful last mile delivery provider can be found?
Impact of digital transformation on consumption and delivery behaviour
Digitization has and will significantly change consumer behaviour: all-time access to messaging, e-mail, media and the presence of online shops right beneath the touch of our fingers on smartphones generate fast-moving, simple, and efficient experiences for consumers. Products and services must be readily available and at hand with little room to waste time. Exactly this expectation creates an ‘on-demand’ behaviour of consumers – we want it and we want it now. The on-demand economy can be described as the economic momentum created by technology companies and radical technological integration in fulfilling customer demands through the immediate provision of goods and services. This new economy represents exactly the aforementioned evolution in consumer behaviour due to its manifestation of technology and innovation. New business models and technological advances to fulfill the on-demand needs of customers have opened the way to real-time processing of products and services, thereby embracing the new frequency of busy consumer behaviour evermore.
For the logistics industry, this shift in consumer behaviour implies that consumers expect fast, cost-effective and efficient delivery right at their convenience. This focus on convenience, speed and simplicity is especially noticed in e-commerce, where order quantities are significantly lower than before and shipping times substantially shorter. This generates a shift from e-commerce to quick commerce.
Logistics providers, more specifically delivery services, need to adjust to meet changing expectations of consumers by embracing exactly this digital transformation that drove consumer behaviour in the first place. Through last mile delivery right at the doorstep, real-time tracking and transparency of order processing and shipment, the on-demand concept and preceding customer expectations can be effectively fulfilled. Technology companies competing in this arena have revolutionized logistics-dependent industries which have been prone to slow innovation so far. Hyper-growth examples in this on-demand world include the transportation as well as the grocery and food sector. This growth is mainly a result of the digitalisation of logistics services and the integration of technology on top of an existing infrastructure.
As other industries with close links to logistics, such as retail and food, are revolutionized by digital technology, linked delivery services also have to adjust. Delivery will become increasingly important as online ordering accelerates to quick commerce. This can be seen by the rise of quick commerce leading to new digital entrants in the last mile delivery market. The digital transformation in logistics is especially noticeable in the last mile delivery due to its close link to customers and their expectations as well as heavy reliance on logistics to fulfill these.
Last mile delivery technology: An enabler for quick commerce
Due to aforementioned shifts in consumer buying behaviour, quick commerce is the natural evolution of e-commerce. Hereby, speed and convenience constitute major determinants of buying behaviour and are expected to be fulfilled through delivery services. This poses challenges as well as new opportunities for last mile delivery logistics as channels must be intelligently connected and linked to deliver orders as quickly as possible.
Quick commerce brings small quantities of goods to customers almost instantly, whenever and wherever needed. Last mile delivery in this case, is more than just the mere simple pick-up and delivery of goods but rather the complex bundle of customer orders in convergence of different technologies. Digital solutions revolve around inter-connection, collection and linking of data and their intelligent interpretation as well as the design of their applications in last mile delivery services.
To provide examples of these, current trends in last mile delivery technologies include:
- On-demand delivery platforms
- On-the-go traceability
- Gig worker and hybrid fleet real-time data hubs
- Predictive analytics for route optimization
- Purchase and delivery automation based on subscription
Especially the corresponding quick commerce sectors such as food, that are increasingly relying on logistics services, has been relatively weak in innovation and technology integration so far. The Covid-19 momentum has further reinforced consumer expectations in online grocery and food ordering and makes last mile delivery a key expectation. Thus, digital transformation in logistics along last mile delivery grows in huge importance.
Examples of digital transformation of logistics in last mile food and convenience delivery
According to the Capgemini Research Institute Study (2019), 40% of consumers now rank delivery services as a “must-have” feature for food purchases. This underlines the growing customer expectation within the food and convenience segment for last mile delivery services.
The number of consumers who use food delivery weekly is expected to climb to 55% by the end of 2021. Germany and the Netherlands will see particular acceleration in adoption, with 18-19% growth respectively. Thereof, the food sector and respective last mile delivery provides a substantial nourishing ground for transformation of delivery services and businesses to provide these. Specifically, dissatisfaction with current services due to lack of same-day and on-time delivery opened the gap for new business models to enter the market.
So what are successful technology-based last mile delivery businesses addressing digital transformation and changing customer expectations in the food and convenience sector? We have identified three examples prominent in the German market:
Berlin-based hype startup Gorillas, operates across Europe and delivers groceries in less than 10 minutes. CEO Kağan Sümer states that Gorilla is designed around expectations of customers instead of customers designing their needs around supermarkets. Hence, the focus lies on emergency and convenience deliveries rather than bulk purchases. In terms of technology, Gorillas uses a network of centrally-connected fulfillment centers as well as optional purchase and delivery automation next to on-the-go traceability of orders. Gorillas is currently aiming to raise 100 million euros in order to boost their expansion. New York hedge fund Coatue just invested $44 million in Gorillas – at a pre-money valuation of 160 million.
With the delivery service Flaschenpost, customers can order a variety of beverages, groceries (and now also household items) via an on-demand app. The promise made: delivery will be made no later than 120 minutes after ordering. This customer expectation is realized not only by route optimization and data hubs, but also by on-the-go ordering traceability for customers. The Oetker Group has just recently acquired the German drinks delivery startup Flaschenpost for 1 billion euros.
ANGEL Last Mile by FIEGE
ANGEL connects stationary retail and pure e-commerce players with their customers at a more convenient and personalized level. Opposite to other logistics providers, ANGEL is centered around the customer: delivery time and place can be chosen based on individual preferences. This does not only enable higher customer satisfaction and convenience, but also lower CO2 emissions due to unnecessary delivery routes. The infrastructure itself is based upon networks of partners to use existing but unused capacities. An advanced IT platform matching free capacities of local partners with dynamic route optimization, helps in achieving same-day delivery right at the doorstep. Real-time interaction, delivery transparency, personal client-communication and sustainability stand at the heart of ANGEL’s City Logistics Concepts. Founded by FIEGE as a corporate startup, ANGEL Last Mile could tap into specialized logistics knowledge from the very start and was able to fulfill growing on-demand customer expectations.
The on-demand economy is here to stay. And with it the striving opportunities in logistics-based industries such as quick commerce in the food sector. It is more than clear that digitalization and automation are the future of on-demand urban delivery concepts. New consumer expectations have triggered these two aspects across all industries, not only logistics. However, last mile delivery logistics as its main enabler are – not only through the Covid-19 momentum – no exception for this transformation.