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E-commerce Companies Need To Help Resolve Last Mile Delivery Problems

With the holiday season comes the flurry of headlines about e-commerce records being smashed, as more consumers around the world turn to online shopping. Currently, just 6% of retail on average is conducted online, and even in the more advanced e-commerce markets that ratio is still in the 10-15% range. That’s a lot of room for growth.

And growth is happening. As with last year, Alibaba is leading the pack so far. The Chinese-based company earned $14.3 billion on November 11, a holiday known in China as Singles Day, which Alibaba has named Global Shopping Day to draw in buyers from other parts of the world. That’s up from $9.34 billion the year before. Expect billions more to be reported in the next few weeks, including the arrival further west of Black Friday in North America and Cyber Monday in the UK.

However, behind these numbers is an issue that could threaten consumers’ positive experiences with online shopping as it hits mass adoption levels. The telecoms industry provides some clues. One of the biggest areas of investment that telecom operators grapple with is the cost of connecting customers’ homes and businesses to their networks, which is known as the “last-mile.” Digging up streets, laying fiber optic cables, installing local switches all require a lot of expensive human labor and equipment.  The last mile is how all that data from video, audio, and gaming gets from the telecom company’s equipment onto your home screens.

An apartment complex in Korea where deliverymen are not allowed to enter the apartment complex grounds for safety reasons.

An apartment complex in Korea where deliverymen are not allowed to enter the apartment complex grounds for safety reasons.

The e-commerce industry is in danger of a last-mile problem, but unlike the telecom industry, it doesn’t seem to realize it yet.

As e-commerce companies ship more and more packages faster and cheaper, that means more and more deliveries to homes. This volume may mean more in the pockets of brands, retailers, and delivery companies, but there are signs that it is coming at a cost to those who own, manage, and work in the buildings where billions of people around the world live: multi-tenant buildings.

Colleges and universities where students live on-campus are having to revamp their entire mail system to cope with package volumes, particularly since Amazon offers its Prime service for free for the first six months to students. Doormen, building superintendents, and real-estate management companies are struggling to keep up with these volumes, considering they are expected to deliver packages into the hands of residents, who then complain they are not getting their deliveries on time (for more details on and sources for these developments, see last month’s E-Commerce Round-Up).

There’s also the issue of the increased amount of packaging – the cardboard boxes, the Styrofoam, the bubble-wrap – that buildings and the municipalities in which they are located have to process when tenants throw them away.

Think these are not problems for the e-commerce industry to help solve? Think again. As e-commerce grows in popularity, it becomes an increasingly important part of a customer’s experience with a brand, even the parts of the experience in which the brand has little or no direct control. 

Those college students with overloaded mailrooms are tomorrow’s full-service Prime customers. A next-day delivery that does not get to its buyer the next day is a broken promise, regardless of the reason. If you then call Amazon customer care to find out why, it’s not likely that you will be satisfied if that customer care rep responds with “Dunno what happened, we delivered it, nothing I can do.” That’s what you would do when your telecom operator promises to show up but does’t – you would call them and expect them to remedy the situation (not that telecom operators have the best record for customer experience, but that’s a whole other topic). 

We live in an increasingly urbanized world, and some of the fastest growing e-commerce markets are those where a large segment of the population lives in apartments in densely populated cities. In Korea, where the photo above was taken, about 60% of the population lives in apartments. If e-commerce companies don’t help to come up with solutions to this last-mile delivery problem now when e-commerce is just 6% of retail, what will they do when it is 16% and higher? When millennials, who name sustainability as a key issue in where they choose to shop, see the packages pile up and spill over in their apartment hallways and garbage bins? Those who are disrupters of traditional retail today may find themselves being disrupted by future providers of e-commerce delivery management solutions tomorrow if they don’t start thinking about solving these problems.

What do you think about e-commerce delivery issues? What are some possible solutions?

For more information or to discuss your e-commerce project with an analyst, contact us.


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