The Last-mile Ecosystem

An excerpt from the IG Report created by the Logistics & Transportation Industry Group. It is important to underline that this report was prepared before the outbreak of the Ukrainian war in Europe, that has had significant impacts on the T&L sector in Europe, starting with the soaring in oil prices. Governments in several EEC countries are helping transportation companies with measures to limit or even reduce the cost of the fuel prices.

“As a result, demand for last-mile delivery is soaring and is expected to grow by 78% globally by 2030”.

Global online sales have been growing steadily for the past few years and the trend has accelerated due to the COVID-19 pandemic crisis. In 2020, global eCommerce sales grew by 24% to $4.29 trillion - a marked increase on the 17.9% growth recorded the previous year (representing 20% of all retail sales). E-commerce has become an important growth driver for the logistics sector. While the impact is undeniably positive on parcel flows and the turnover of logistics providers, the latter are nevertheless struggling to make their e-commerce activities profitable due to heavy investments, low economies of scale (the "last mile" problem) and pressure from e-retailers and end customers. For retailers, ensuring a smooth and satisfactory “last-mile” delivery is now more significant than ever (A superior last-mile experience engages and retains consumers and three-quarters are willing to spend more if they are satisfied with the delivery services*). But meet demand and service-level expectations will hurt retailers’ profitability and net profit could potentially fall by 26% over three years* unless it bolsters its last-mile delivery capabilities. Context and issues Urbanization, increasing purchasing power of the middle class, widening range of products that can be purchased online and the emergence of new digital business models, as well as technological advancements in the delivery segments, are different factors which fuelled the unparalleled growth in last-mile transport. In this context, the number of delivery vehicles in the top 100 cities globally will increase by 36% until 2030. Consequently, emissions from delivery traffic will increase by 32% and congestion will rise by over 21%.** In recent years, the face of urban commercial delivery has vastly changed. Parcel-delivery vehicles are double-parking and blocking lanes, e-grocers such as Walmart and Kroger, and food-delivery services such as DoorDash, Uber Eats and Postmates are increasing their online revenue by offering home deliveries in the downtown core via vans, bikes and scooters in increasingly shorter time windows. As a result, demand for last-mile delivery is soaring and is expected to grow by 78% globally by 2030. Drivers Here are the 5 main drivers of this development:

1. Urbanisation - 60% people living in cities in 2030, has led to increase since 2010
2. Customers - 2.1bn people were expected to buy goods online by 2021, They expect a 20% online retail share by 2023.
3. Products -. They estimate that 32% furniture will be sold online by 2023 as an example of how delivery services will change to encompass everything.
4. Delivery - last-mile delivery is soaring and is expected to grow by 78% globally by 2030.
5. Technology - technology is driving innovation in last mile delivery (drones, autonomous vehicle, automation, etc...). 14-35% new car sales across regions by 2030, and by 2024 most OEMs will release l4/5 autonomous vehicles

Trends To survive and thrive in the covid-hit world, businesses started to revisit their last-mile strategies and felt the necessity of shifting their traditional last-mile system to the digital realm. The outbreak has also made it clear that digitization of the last-mile processes and the overall logistics and transportation system will be the key to shape the future of e-commerce, manufacturing, food & grocery, courier & express delivery, and other industries. In general, technology is driving innovation in last mile delivery (drones, autonomous vehicle, automation, etc...). Key players and new entrants New players have entered the logistics market and particularly the last mile segment. Like Amazon for example, they are focusing on extremely fast last mile delivery and raising the bar for customers who are becoming more demanding. These new expectations in terms of delivery times or options (choice of location, progress tracking, low or zero costs, etc.) put pressure on traditional players, whose existing systems and operations are often less innovative and flexible.

2030. Consequently, emissions from delivery traffic will increase by 32% and congestion will rise by over 21%.**

Last-mile delivery has become a key consumer expectation (40% of consumers now rank delivery services as a “must-have” and one in five consumers (20%) say they are prepared to switch retailers if delivery services are not provided. M&A Deals Many companies in the sector are also turning to M&A, joint ventures, and alliances as a way to achieve collaboration. In 2015, much of this activity driven by large players looking to expand their international operations and service offerings. The annual volume of deals completed in 2021 hit a record high, with 66 deals completed at a disclosed deal value of £2.7bn. But with disruption on the horizon, there may be opportunities to use deals to enhance capabilities in key areas too; digital is a good example.   To read the Last Mile Report prepared by the M&A Worldwide Logistic & Transportation team, please click here.