What Is Last-Mile Delivery and How Does It Affect the Customer Lifecycle?

December 6, 2021

What businesses call last-mile delivery, the final phase from the warehouse to the delivery truck and ultimately the customer’s doorstep, is one of the most important shipping elements in the supply chain. It directly affects the customer experience and, as a result, the customer lifecycle — especially as it relates to building loyalty.

Companies that improve their customer experience, from their online checkout process to last-mile delivery and customer follow-up, can grow their revenue by 4% to 8% above market expectations. That’s because a positive experience drives repeat customers, referrals, and growth.

What Is Last-Mile Delivery?

Merchandise typically makes a long journey from the manufacturer to a customer’s doorstep. This may involve long trips overseas in shipping containers, a stop in a distribution warehouse, and ultimately a road trip by a delivery person. That last leg of the journey — from the distributor to the door — is last-mile delivery, or last-mile logistics.

Why Is Last-Mile Delivery So Expensive?

Last-mile delivery costs can account for as much as 53% of a product’s shipping costs. Why is it so expensive? The process is time-consuming and personalized. Instead of shipping thousands of items in a shipping container to achieve cost savings through scale, each package must be delivered individually to the buyer’s home.

If the buyer is off the beaten path, delivery time and costs can climb even higher due to added time and rising gas costs. Add to these expenses increasing prices for packaging due to a number of factors, and it’s easy to see why last-mile delivery is so expensive. And since Amazon Prime has made free shipping not just a perk but a customer expectation, it’s challenging for businesses to successfully pass these costs onto consumers.

The Problem of Last-Mile Delivery

Last-mile delivery is expensive, yes — but it’s also inefficient. Traffic delays, human error such as drivers getting lost or dropping packages at the wrong house, and long distances from distribution warehouses to customers’ homes can all lead to delays. While we would hope delivery drivers would be conscientious and do their jobs as expected, worker burnout, exhaustion, and apathy can also affect deliveries.

Most of us have had the unfortunate experience of seeing our long-awaited package delivered into the bushes, damaged and possibly wet from the elements. Or worse, that gift you needed for a special occasion never arrived at all. The story in the news where hundreds of packages were found in a ravine is a last-mile delivery nightmare.

These are examples of last-mile delivery breaking down, and goods not reaching the customer as expected. At best, customers may request a refund of their purchase (if it didn’t arrive) or a discount or replacement (if it arrived late or damaged). At worst, they’ll stop ordering from that company. They may even leave bad reviews, and they definitely won’t feel comfortable referring that business to their friends and family or social media followers.

Why Shipping Is Part of the Customer Journey

When we start to look at the last-mile delivery problem as a customer-retention problem, it can open our eyes to solutions that can improve the experience. As a quick review, the customer journey involves:

Awareness (customers knowing that your brand exists as an option)
Consideration and nurturing (learning more about your brand)
Trust and purchase (buying from you)

Retention (buying from you again, subscribing to a monthly service, and referring their friends to your company)
If your process breaks down at any point, with a difficult checkout system or a late delivery, for instance, you won’t retain the customer and build their loyalty. Since it costs five times more to gain a new customer than to retain an existing one, customer retention plays a huge role in revenue growth.

To stay ahead of competitors, you may need to adopt new ways to streamline last-mile delivery and implement technology that can help remove failure points in getting merchandise to customers’ doors. The rewards will be worth it: Fast shipping can lead to a 300% increase in conversions.

Potential Solutions to the Last-Mile Delivery Problem

So what’s the solution to the last-mile delivery problem? There are a number of ways to streamline shipping and reduce costs. Innovative and eco-friendly packaging solutions can help reduce costs. You can also take a page from D2C (direct-to-consumer) companies and shift inventory to warehouse locations closer to your customer base to reduce shipping times and costs. D2C business models eliminate third parties, further reducing costs.

Companies are also turning to high-tech solutions, including delivery drones. Self-driving vehicles are also right around the corner for delivery services, with Walmart already rolling out a pilot program for food delivery in three cities.

Local Crowdsourcing Helps Solve the Last- Mile Delivery Problem

Most prevalent today in the race to solve the last-mile delivery problem is the use of crowdsourcing local services, much like an Uber for your packages. Thanks to low start-up and operational costs, crowdsourcing platforms are growing for the delivery of everything from food to soft goods. Customers can use the platforms to connect with local, independent couriers who can deliver their items on-demand. They can schedule delivery for times when they know they will be home to receive the package, reducing the risk of theft or damage.

Local crowdsourcing can also help ensure faster deliveries and happier customers. And because these couriers are independent contractors, they may exhibit a greater sense of pride in their work; if they don’t do a good job, they won’t get hired again.

It’s a new world when it comes to last-mile delivery, and companies who seek innovative solutions can retain customers, drive revenue, and grow faster as they tackle one of the biggest challenges facing e-commerce companies today.