Mastering the Last Mile, and the Power of Proximity

Ally Feiam By Ally Feiam | 03 Feb 2021

You can’t reverse innovation, and as Australia continues to catch up with the rest of the world in e-commerce, comes the need and understanding of investing in a reliable, effortless and swift last-mile solution.

Online retail has come a long way in the last two years. In 2019, Australian shoppers spent $32 billion online, which was an increase of 17.5 percent from the previous year. 

Then the pandemic hit, and retailers had to swiftly adapt and adjust to the rapidly changing times. As a result of the pandemic, online retail is expected to make up a whopping 15 percent of total retail sales, surpassing the goal, four years earlier than forecast. 

With such advancement in online retail over the last 12 months, retailers need to develop strong and robust strategies to stay ahead of the pack. Refusal to adapt could lead to a retailer slipping behind and failing to meet current expectations from customers online. 

Consumer Expectations are Changing

In April 2020, 5.2 million households shopped online, and of those shoppers, 200,000 were new to the e-commerce experience. As more shoppers adjust from bricks to clicks, retailers must re-analyse their strategies to flatter shoppers’ rapidly changing customer needs. 

From increasing discounts, sales events and fast, free shipping, customers are expecting retailers to modify strategies, otherwise, they will be abandoned. 

In a report from Australia Post, expectations for next day delivery increased by 32 percent between 2017 and 2019. Furthermore, the requirement of cheap or free shipping has also increased in popularity and expectation. 

By 2050, the United Nations predicts that more than two-thirds of the world’s population will inhabit the globe’s cities. How does this relate to e-commerce? If a retailer is scaling up its e-commerce offering, it must re-evaluate the density of population for its customers, and determine how far away inventory is from these homes. 

Mastering the Last-Mile

In a report from Goodman Group, TM Insight noted on how a retailer’s property accounts for 30 percent of the total spend, and the further 70 percent will be spent on operations. 

“While last-mile is geographically the shortest leg of your global supply chain – it’s the most complex and costly and accounts for about 40 percent of supply chain costs,” said Matthias Winkenbach, the Director of the MIT Megacity Logistics Lab. 

How can retailers master the last-mile without overspending, and securing a reliable, fast and smooth process? There are a few distribution options that retailers can rely on, including in-house logistics and third-party logistics. 

In-House Logistics

The first option for retailers, the in-house operations model is essentially managed by the business itself. 

There are several benefits with this option, including better control of the overall CX. Stock can be tightly managed, and gives the retailer full control over the customer experience, from the first meeting to the last mile. 

Thirty-one percent of retailers are now storing more stock locally, to avoid any delays and shortages in the event of another global event, such as a pandemic. 

Third-Party Logistics

Third-Party Logistics (3PL) is an option for retailers that would prefer to outsource the storage, logistics and shipping process.  The benefits of this option include the removal of rental fees, managing freight, organising storage and designing delivery routes. 

Delivery hubs and warehouse solutions that are 1,000 – 3,000 sqm are often the perfect sizes for smaller companies or logistics hubs. 

Does Location Really Matter?

The short answer to this question is: yes. 

Location plays a huge role in the speediness, reliability and loyalty that comes along with last-mile delivery. 

Now, let’s get local. 

Around 4.8 million people live in a 60-minute radius of Sydney’s city centre, which makes up around 20 percent of the country’s total population. 

Warehouses that are closer to urban centres often have quicker access to critical and key transport networks, which provides a smoother and more reliable delivery process, and further cuts away any wasted time in congested areas. 

Furthermore, proximity to critical infrastructures such as airports, major motorways and ports remain key for developing an efficient supply chain. 

In the case of Sydney, the inner west part of the city houses more than 4.4 million residents and could be an ideal location for retailers. Why is this? It’s close to the M4 Motorway, in prime proximity the Australia Post DC in Chullora, and close to the Enfield Intermodal Terminal in South Strathfield. 

Applying this logic to the remaining cities across Australia can accelerate the reliability and efficiency of deliveries for customers across the country. 

What Can Retailers Do About It? 

To thrive online, retailers need to evaluate the importance of free, cheap and reliable deliveries to its customers. Ideally, retailers should keep their stock in proximity to the bulk of its customers, making last-mile delivery as smooth and effortless as possible. 

Densely-populated pockets in urbanised areas remain one of the key tools for e-commerce businesses to continue to thrive in an ever-adapting online market.

Learn more about how Goodman can provide logistics space for five-star reviews.

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