What is The Last Mile for ECommerce?
If you keep up with tech news, especially stories relating to Amazon, you’ve probably seen reference to the term “the last mile.” But what does it mean?
Definition & Explanation
The last mile is a metaphor used to describe the movement of goods from a fulfillment centre to their final destination. In other words, the last mile is the last leg of your product’s trip before it arrives on your customer’s doorstep.
Why The Last Mile Matters
Sucharita Mulpuru of Forrester Research refers to the last mile as “the moment that matters.”
Mulpuru elaborates that for eCommerce companies, owning the moment that matters is an important long term strategy, because that is when you “lock in” the customer, telling The New York Times:
One thing Amazon has done very successfully…is they’ve owned the entire value chain. They’ve owned the last mile, the moment that matters. That moment is when the package arrives.
Once you can own the moment that matters, you build a loyal customer base.
Building a loyal customer base is critical to your success, and a good way to do this is to begin to understand their needs and wants. For example, eCommerce customers don’t like having to wait, partly because the internet has conditioned them for instant gratification.
Technology Challenge of the Decade
We rarely have to wait for digital goods. Want the new Sia album? Download it immediately from iTunes. Feel like watching Portlandia? Stream it now on Netflix. (One annoying exception to this is the amount of time it takes to download old episodes of Game of Thrones from iTunes, but I digress).
Marcus Wohlsen of Wired recently made the case that this battle for delivering physical goods the last mile will be the technology challenge of this decade:
Just as getting those bits the “last mile” into homes and businesses was the defining technology challenge of the ‘00s, so getting actual stuff the last mile will be the tech challenge of this decade. In short, logistics—the tech industry’s boring sideshow—has emerged as its central drama.
Logisitics is the least fun part of your business, but it may just be the most important.
The Complexity Underpinning The Last Mile
Of course, anyone who has dealt with the complexities involved in shipping actual products knows that logistics and the last mile is an incredibly difficult problem to solve.
Even Amazon, with its giant size and ability to play the long game hasn’t yet entirely solved the last mile and its holy grail—same-day shipping.
For example, Amazon is grappling with the question of whether to outsource all of its delivery or to do at least some of it in house, in order to control “the moment that matters.” So, while it still relies heavily on USPS, UPS and Fedex, Amazon is testing its own shipping network. We see the Amazon Fresh trucks everyday here in San Francisco.
The question of how to solve the last mile isn’t a new one. In an important 2001 paper for MIT Sloan Management Review Hau L. Lee and Seungjin Whang wrote:
But in the future, e-businesses that can deliver the goods and services at a reasonable cost will have the edge. Order fulfillment can be the most expensive and critical operation for both the online and offline businesses of companies engaged in e-commerce. The ability to fulfill and deliver orders on time could determine an e-tailer’s success.
The good news is that there are a range of new technologies coming down the line that may help eCommerce retailers overcome the last mile challenges.
- automation and autonomous land, air and sea vehicles
- better interfaces (mobile apps, voice recognition, IoT devices such as smart fridges that automatically detect when the milk—or in our house chocolate—is low)
- better data for understanding and predicting customer needs
- internal efficiency improvements to the layout of warehouse facilities
- changes to the proximity of fulfilment centers for major metropolitan areas.
There are also a number of startups focusing on the last mile, such as:
- the “Uber of Delivery” for Asia, GoGoVan
- Shyp, which is focused on “the first mile” (the last mile for vendors)
- PostMates, the on-demand delivery service from every restaurant in your city
- Uber itself, which has experimented with delivery.
We’ll try to think—and write—more about these technological trends, and the startups that are grappling with the last mile, over the coming months.
[…] we’ve written before, the “last mile” in eCommerce is the moment that matters for the customer. After all, that’s when they actually get to see, […]