Last-mile delivery volumes are higher than ever. Will it last?

The COVID-19 health crisis triggered a shockwave of changes in commercial and consumer behavior. Many people changed their social and purchasing behaviors nearly overnight. Manufacturers and retailers are still catching up with these shifts in demand and the pressure it is placing on their supply chains. As many brands scrambled to reach customers through new channels, last-mile package delivery has reached never before seen volumes.
But will the increase in demand for home delivery last? What does the future hold for last-mile delivery? We take a look at the latest numbers to find out.
Emin Younan

Emin Younan

December 15, 2020

Last-mile delivery rates are on the rise. Will they continue to climb post-pandemic?

Since the beginning of the COVID-19 pandemic, the number of last-mile deliveries made around the world has climbed. Supply chain analysts, local, and global delivery services report record increases in delivery volume as the world shifts to a to-your-door delivery model. Will the trend toward home delivery outlast the pandemic? What does the future hold for last-mile delivery?

A surge in online shopping and local demand are fueling the rise in last-mile deliveries

In a COVID-19 world, consumer behavior shifted rapidly to more online shopping and last mile deliveries. In the early days of the pandemic, consumers flocking online to purchase everything from home office supplies to household essentials caused sales at Amazon to rise 35%. 1 Other ecommerce retailers also experienced a bump in sales. Consumers turned to new brands and new stores to find the products they needed and fast at-home delivery became a core differentiator for businesses hoping to retain market share in the face of rapid shifts in consumer behavior.

This trend continued throughout the summer and into the fall of 2020 and online sales and package delivery volumes grew even more. DHL Parcel Netherlands reports that they have 40% more couriers on the road than normal and expect to process 70% more packages this year’s season than last as they enter the final month of 2020.2 Despite many consumers feeling economic stress, online sales over the 5-days beginning on Thanksgiving Day in the US and extending through the following Monday (the Cyber 5), were up 20.6% over the same period in 2019. 3

The supply chain is feeling the strain of high demand from the first mile to the last

Participants at every step in the supply chain have responded by adjusting their delivery networks and expanding their capacity. U.S. trucking companies’ new fleet orders surged 68% year over year in September of 2020 and a sizable backlog means that trailers ordered today may not be operational until July of 2021.4 Meanwhile, retailers and manufacturers are investing heavily in shoring up their supply chains, adding delivery partners, manufacturing and distribution centers to bring their products closer to consumers and shorten delivery times. 5

Demand for last-mile deliveries has risen to a point where even major supply chain participants are having trouble keeping up. In a surprise move at the beginning of the holiday shipping peak, United Parcel Service, Inc. (UPS) announced that its drivers would temporarily limit pickups from six major retailers. 6

But what happens when the current health crisis is brought under control and everything goes back to normal? Will the demand for last mile delivery drop as fast as it rose? All evidence points to consumers’ new shopping patterns being here to stay.

After the pandemic, demand for fast, reliable last mile delivery

Regardless of when the pandemic ends, the demand for reliable, efficient last-mile delivery isn’t going away any time soon. Consumers exposed to the convenience of online shopping and home delivery are likely to maintain their newfound habits and the shift toward home delivery pre-dates the present COVID-19 restrictions.

Consumers are likely to keep their new shopping habits

Usually, a new trend takes a while to catch on as it passed through early adopters to those last holdouts. In the current circumstances, businesses and the customers they serve were forced to quickly adjust to a new way of doing things and build new habits.

When consumers begin dining out and shopping in stores again, we can expect to see a slight drop in the demand for local deliveries. In particular, deliveries of take-out foods, groceries, and meal kits that were driven by consumer safety concerns or stay-at-home orders may decline slightly. However, many consumers who were first introduced to home delivery by necessity will continue to use delivery services for convenience.

According to a survey conducted by Oracle in November, 53% of consumers indicated that they had shopped for groceries online as a result of the pandemic. Nearly all of those shoppers (93%) said they will continue buying their groceries online post-pandemic.7 Business of Fashion estimates that 81% consumers who discovered new online retailers during the pandemic are likely to keep shopping with those retailers in the future.

A survey of consumers’ dining habits found that since the onset of the pandemic, 56% are foregoing restaurants and bars and staying home more frequently and 26% of those surveyed plan to continue this habit once the pandemic ends. 8

The pandemic didn’t start a trend toward online shopping and home delivery, it merely accelerated it

Before the pandemic, online shopping volume and the accompanying demand for last-mile package delivery had grown steadily year over year. The abrupt shutdown of local shopping options caused that demand curve to take a sharp turn. The move toward more convenient delivery methods wasn’t unexpected, it just happened faster than anyone had anticipated.

Analysts at McKinsey & Co. explain that many businesses were caught off guard when changes they thought would take place at a steady pace, happened “almost overnight.”9

What did the shift in delivery demand look like pre-pandemic and what has changed now?

Pitney Bowes’ Parcel Shipping Index reports that between 2013 and 2019, global parcel shipment volume saw a compound annual growth rate of 19%. Global parcel volume in 2019 hit a record high of 103 billion parcels shipped. This reflected a year over year increase in parcel volume of 17.7%. 10

Pitney Bowes further predicts that shipping volume will reach as high as 262 billion parcels by 2026. Estimates adjusted for the impact of the pandemic point to an annual volume ranging from 200 to 316 billion between now and 2026. In other words, in the worst case scenario, parcel shipping volumes are expected to nearly double in less than six year’s time. 11

Looking at last mile deliveries specifically, domestic parcel traffic reached 14.8 billion units in 2018. In 2019, more than 63 billion parcels were delivered in China and 14 billion in the U.S.12 In Germany, Deutsche Post DHL, which in 2018 handled 39% of the international parcel market, reported handling 5.2 million parcels during 2019. 13

Around the world, the new normal is being delivered to consumers’ doorsteps.

How can your business prepare for the future of last mile delivery?

For the modern business, convenient, fast delivery is no longer a nice-to-have but a must-have. The current crisis will pass, but its lessons should not be forgotten. Retailers, manufacturers, and their local delivery partners must be prepared to adjust rapidly to changes circumstances while delivering the best possible service to their customers.

Demand for home delivery isn’t going away. Innovative brands will continue to look for new ways to deliver faster, better, and with more transparency--leveraging technology and managing infrastructure to ensure that their customers can get what they want, when they want it.

Is your organization prepared to meet the growing demand for ship to home delivery? Routetitan can help. Check out our route optimization and planning features to discover how we can help you deliver on time, every time.

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