Even before the current crisis, e-commerce was already becoming a primary sales channel and was changing the warehouse, fulfillment, and last mile delivery landscape. The current pandemic and resulting stay-at-home economy are accelerating that shift and remaking retail supply chains. This has lent both urgency and opportunity to the search for creative fulfillment solutions. Solutions for getting products to consumers, quickly, safely, and profitably.

Here are a few of the shifting patterns that are happening in fulfillment logistics and final mile delivery.

A quick snapshot of the e-fulfillment landscape

• “Distribution in the US is a $6 trillion business.”
• E-commerce sales grew faster in the first four months of 2020 than in the entire past decade and e-commerce requires 3x the logistics fulfillment space of brick-and-mortar sales, according to logistics real estate company Prologis.
• Because of e-commerce growth, industrial real estate space demand could reach an additional 1 billion square feet by 2025, according to commercial real estate services firm JLL. 
• Retail accounts for 40% of the demand for warehouse space with 40% of that driven by e-commerce. The need for B2B fulfillment logistics space is also growing.
• Leasing deals for warehouse space that used to take 9 months to close are closing much faster, some in 30 days or less.
• JLL predicts total e-commerce sales could hit $1.5 trillion by 2025.
• U.S. e-commerce sales jumped almost 93% in May 2020, making up 22% of all retail sales—twice the percentage from one year earlier.
• Last-mile delivery driver jobs in the US grew 6.7% between February and June of 2020 and are up nearly 12% year-over-year as of June.
• <10% of all food sales were online before Covid-19. By June 2020 online food sales had risen to 45%.

Last mile real estate, local inventory, and repurposed spaces

To deliver orders faster and reduce costs, retailers and logistics companies are moving more inventory closer to customers. The goal is to be less dependent on large centralized warehouses by creating smaller local and regional distribution hubs for greater efficiency.  Creating what is essentially an omnichannel fulfillment and supply chain. These retailers, manufacturers, fulfillment centers, warehouses, and 3PLs are getting creative in their search for additional distribution space closer to customers. In addition to delivery, this local fulfillment model must also handle returns.

• Some retailers are using excess square footage in their brick-and-mortar stores to create mini-fulfillment centers and other retailers are using ‘dark stores’ for fulfillment. These are closed retail locations they still hold leases on.  
• Demand for small, local warehouse space has surged, driving the search for creative
  micro-fulfillment options.
• Underused space in a multi-story Chicago parking facility is being converted into a last mile distribution hub.
• Developers and mall owners are converting dying shopping malls into last mile distribution centers and failing brick and mortar stores are also being sought after for conversion into fulfillment centers.
• A third of US shopping malls are predicted to vanish by 2021.  
• Interest in on-demand warehousing is growing. This form of short-term leasing could help retailers adapt to supply chain uncertainties now and in the future.
• From 50-70 percent of all e-commerce purchases will be delivered from ‘local’ inventory by 2023.
• The increased need for last mile delivery is driving the development of new urban warehouse space on the outskirts of cities and the creation of multi-story warehouses by adding floors to existing buildings in urban settings.

Last mile service providers

Retailers have a variety of options for their last mile operations and today’s omnichannel world lends itself to a mix of solutions. Some insource, like Target who purchased Shipt for managing local delivery from stores, while a majority continue to use the large parcel delivery companies like FedEx and UPS. Other retailers choose to work with third-party logistics providers (3PLs) and regional last mile delivery services that are often less costly and offer more control.

• Third-party logistics providers (3PLs) are by far the top occupiers of industrial fulfillment and distribution space in the U.S.
• 83% of companies surveyed by ARC Advisory Group surveyed report using FedEx and UPS for last mile deliveries.
• 51% of companies also report using Last Mile and 3PL delivery partners to get their products to the customer.

Fulfillment from stores

While not a new idea, in-stores and curbside pickup are easy and convenient fulfillment options that have seen tremendous growth as a result of Covid-19 – becoming one segment of an evolving omnichannel fulfillment model.

• Retailers saw a 195% increase in click and collect order dollars.
• Buy Online and Pickup In-Store (BOPIS) shopping has increased 62%.
• 20% of online shoppers picked up online orders in a store in June 2020, compared with 13.1% of shoppers in June 2019.
• Almost 60% of customers surveyed would continue to adopt ‘Safe Delivery Modes’ long after the elimination of the COVID 19 threat.
• Some retailers fulfilling orders from stores are seeing greater profitability for those orders than they are for orders fulfilled from centralized warehouses.  
• 10% of all sales are predicted to be fulfilled by Click and Collect by 2025.

Crowdsource delivery trying to expand

Some crowdsourcing companies that originally transported people have shifted focus during the pandemic to add delivery services of foods and other essential goods. Others that started as food delivery companies are taking the opportunity to expand their services into a wider range of goods.

• Uber, a ride-hailing service, has branched out into final mile food delivery with their Uber Eats service. Uber is also purchasing Postmates, an on-demand delivery company, with plans to expand beyond food delivery.
• DoorDash has branched out from restaurant delivery to offer last mile delivery of essential items, opening distribution centers in US cities for a new service called DashMart. In addition to grocery delivery, DashMart will allow customers to order from convenience and drug store partners such as 7-Eleven, Walgreens, and CVS, among others.

Smart lockers, last mile drop-off

We are all used to seeing and using secure storage lockers in public places like museums, trains stations, gyms, and offices. Smart parcel lockers are an extension of that concept. Convenience and security are critical. Smart lockers are most effective in secure locations where customers are concentrated, such as on college campuses, in retail stores and multifamily dwellings, and anywhere that is ‘on the way’ in the customer’s daily travels. Of course, the Covid-19 pandemic has closed many college campuses and shifted employment to work-from-home. This reduces the convenience of this model somewhat, at least until the current crisis passes.

• The 2020 global Smart Parcel Locker market is valued near $569 million and projected to reach S1.8 billion USD in 2026.
• Application market segments for smart lockers include family, retail, university, office, and others. Retail made up about 57% of the global market in 2018 and e-commerce growth since then will undoubtedly have boosted adoption. A new global market report is now available.

Shortening the fulfillment cycle

Consumers have come to expect fast, flexible, and, for the most part, free home delivery, and retailers are looking for innovative ways to satisfy the customer. Regional last mile shippers like Leigh-David are helping retailers meet the rising demand for efficient and cost-effective last mile logistics and shorter fulfillment cycles.

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To learn more about last mile delivery and omni-channel fulfillment, contact a Leigh-David expert today at final-mile@leigh-david.com or tell us what you need using our contact form.

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Read the previous articles in the Last Mile Logistics Trends series:

• A mid-2020 update: Autonomous start-ups and last mile delivery
• A mid-2020 update: New shopping patterns and last mile delivery