Last Mile Logistics

Ten years ago, having a package delivered that you ordered online in say… six days was considered a modern miracle. Five years later, the miracle went from six-days delivery, to two-day delivery (thank you, Jeff Bezos). Fast forward to today— we expect what we order to arrive at our doorsteps in one day (in the case of most eCommerce packages), or minutes (in the case of food, groceries, and the like.) And it goes beyond the speed of delivery. Nowadays, we buy almost everything online.

Covid lockdowns are to blame here, in part at least. But this is also a trend that started when Amazon first set up shop, back in the early 2000s, and it is finally coming to its logical conclusion: soon enough, brick-and-mortar will be a thing of the past. In fact, an Accenture report estimates the eCommerce global market’s value at about ~$3.9 trillion as of last year, and expected to reach $4.5 trillion by the end of 2021. Another report, this one by Adobe Analytics, shows that eCommerce sales went up by 55% in the first seven months of 2020 alone. In Q3 of 2020, almost $1 in $5 were spent online in the US and Europe.

This is a present (and future) I can get behind: one in which goods are abundant and easily accessible. But there’s a problem, of course: though it may seem that our Deliveroo orders arrive at our doorstep as if by magic, they do not. In fact, speeding up delivery, particularly once packages arrive in urban areas, is a very hard challenge, and incredibly costly (and inefficient, too.) Our ever-growing need for faster, more seamless delivery is not going away. Companies are scrambling to figure out how to fulfill it. This, in industry terms, is called Last Mile Logistics.

 
Last Mile Logistics

As the name suggests, the term Last Mile Logistics or Delivery describes the last step in the delivery process of goods ordered online. This, as hinted above, includes both retail eCommerce, and things like food delivery and grocery delivery. The Last Mile Logistics process is simple, at least in theory: you click a button on your phone or computer, placing an order. The order then reaches the vendor, usually via some sort of software product. In the case of Retail, the order is picked, packed and delivered to a warehouse near you (a step we skip in food delivery, usually). At this (getting goods to warehouses) companies are good at. The problem begins when the good needs to travel from the warehouse to your doorstep.

Because here is the thing: last mile logistics is the most expensive and time-consuming part of the shipping & delivery process. By far. In fact, last mile logistics accounts for 53% of total shipping costs, mainly due to its complexity, and dependency on the variability of local environments (i. e. towns, cities, etc.) Here’s the issue: there is no one-size-fits-all solution for last mile logistics: cities and towns vary in size, density, labor cost, regulations, shopping behavior, customer expectations. There are, broadly speaking, four challenges in all things last mile logistics operations:

  • (1) High Delivery Cost, and (2) environmental unpredictability, which we’ve already touched on.
  • (3) Transparency Expectations, meaning more and more customers expect to know the exact location of their order, and by when it’ll reach their doorstep, in real-time.
  • (4) Route Planning: particularly in cities, planning the most effective route for delivery of products is an incredibly complex process to tackle. It involves a myriad of factors, from congestion predictions, to fuel efficiency calculations, and simply can’t be solved using the brain alone.

But as is always the case, wherever there’s a need, someone will try to solve for it. The bigger the need, the bigger the potential upside for those daring enough to build solutions around it. And so it is that a flurry of startups emerged. Their goal is simple: to use technology to solve the ‘last mile delivery problem’.

As I mentioned above, there is ‘no one-size-fits-all approach to last mile logistics.’ So it is no surprise that these startups calling themselves Last Mile Logistics Tech are tackling the issue from a multitude of angles, including, but not limited to:

  • (1) Urban Warehouses & Delivery Lockers,which ensure there’s always nearby storage space for products within cities and towns, both for delivery and pick-up.
  • (2) Real-Time Inventory Visibility and Smart Tracking Technology,which leverage GPS and AI technology to improve last mile delivery, tracking shipment movements, weather changes, congestion upticks, and the like.
  • (3) Crowdsourced Delivery,which facilitates local drivers taking charge of delivery to local consumers, increasing the speed and reliability.
  • (4) Click-and-collect Software solutions,a customer fulfillment re-centralization delivery method which gives customers the choice to pick up their orders at a convenient location, and at their desired time, shifting some of last mile logistics work back to consumers.
  • (5) Delivery Drones & Bots,which seek to skip the congestion and route planning challenges altogether by building flying and self-driving devices that can get goods to doorsteps in a matter of minutes.

Europe has many players actively working on the space, some bigger and more established, other smaller, but nonetheless strikingly ingenious and innovative in their approach to Last Mile Logistics. These include:

 
Investors’ Appetite

As the eCommerce global market grows in value, the Last Mile Delivery Market follows. A recent report estimated its value at $18.7 billion in 2020, with a growing CAGR of 18.9% over 7 years — meaning the Last Mile Delivery Market might reach a size of $62.7 billion by 2027.

It’s only the beginning, and already investors are flooding into the space: in Q4 2020, last mile logistics startups in the US and Europe raised a grand total of $3.1 billion, according to Pitchbook data. And it’s not slowing down. In 2021, already three European last-mile logistics companies (Wolt, Getir and Gophr) have achieved unicorn status thanks to recent rounds. In June, Sweden-based Budbee raised €52m after a 50% uptick in demand thanks to Covid-19. Instabox, the smart-locker company, raised a €75 million Series B in February 2021 led by EQT Ventures — their second round in less than a year after a €36 million raise in April 2020. And there are others: UK-based Gophr raised £4 million after a 300% revenue uptick during the last year, and Bringg, the last-mile logistics software, raised a $100 million Series E led by Insight Partners.

The upside potential of cracking the Last Mile Logistics Problem has attracted some of the world’s most renowned investors. Funds and Angels actively participating in the European space include:

 
Funds

 
Angels

  • Lukasz Gadowski (invested in Manna)
  • John Collison (invested in Manna)
  • Patrick Collison (invested in Manna)
  • Mikko Silventola (invested in ZITICITY)
  • Carlos Blanco Vazquez (invested in Citibox)
  • Bernardo Hernandez (invested in Citibox)
  • Javier Rubio (invested in Citibox)
  • Andreas Mihalovits (invested in Citibox)
  • Michael Moritz (invested in Getir)
  • Lukasz Gadowski (invested in Wolt)
  • Ilkka Paananen (invested in Wolt)
  • Thierry Petit (invested in Cubyn)
  • Xavier Niel (invested in SpaceFill)

 
Challenges

Above I hinted at several challenges inherent to the last mile logistics problem, including raising congestion and labor costs in cities particularly. These issues are not going away, meaning they are not for Last Mile Logistics startups to tackle, except for Drones, maybe (though those are still a thing of the future, so far no company has successfully implemented a drone delivery strategy. ) It’s as if there’s an ongoing race: Last Mile Logistics startups vs growing congestion and labor costs. If the tech fails to keep up, it may be left behind.

Another challenge, belonging particularly to urban warehousing and delivery lockers, is that of an ever-limited space in urban areas. Companies like Instabox or Citibox have been able to buy up a bunch of real-estate or partner with stores to provide their services to customers, but at one point or another they will ran out of space, at least in big cities, or be forced to pay stupidly big amounts of money. Or they could run into regulation trouble — how many dark warehouses, kitchens and stores can we add to a location before its inhabitants tire of them?

Last mile delivery also happens to be one of the most emission intensive aspects of the delivery chain; according to a recent WEF report, “increasing last-mile traffic will lead to a 36% increase in the number of delivery vehicles, a 32% increase in emissions and a 21% increase in congestion in the world’s top 100 cities by 2030 if no countermeasures are taken.” How many more scooters and vans can we add to our streets, how much more pollution to our air, before regulators say enough?

And then there’s the legacy players. Particularly, the elephant in the room: Amazon. If the American giant takes over eCommerce fully, we’ll be left with a world where only Amazon, and small mom-and-pop local stores remain, and everything in between dies. And it just happens that most last mile logistics tech service precisely that in-between stage; in this world the lucky will be bought out by Amazon (or Fedex, UPS, etc), and the rest will simply vanish into oblivion…

 
Πηγή: seedtable.com

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