August 12, 2024
Rising delivery costs are no secret across many different industries, including industrial supply, construction, manufacturing, retail, and others. Are things going to get better? Unfortunately, the answer is “no.” Recent headlines suggest that middle and last mile delivery costs will continue to climb in the coming years, driven by a number of factors.
Check out the headlines below to learn more about the rising cost of delivery, and contact the FRAYT team to discover how delivery partnerships can create better customer experiences while controlling costs.
The holidays typically represent a huge opportunity for shippers. Demand skyrockets and it’s a time to rake in revenue. But there’s a wrinkle this year, according to a report from Salesforce: The costs of middle and last mile shipping are going to put a strain on margins.
The global supply chain is dealing with a lot of issues right now, including instability in the Middle East. At the same time, the rising cost of delivery is naturally eating into margins. Salesforce is forecasting that retailers and brands will spend an extra $197 billion on middle and last mile expenses in 2024, which is an astonishing 97% increase over 2023.
There are solutions to this problem, and there is also plenty of time to take advantage of those solutions before the holiday season swings into full tilt. When you work with an experienced middle and last mile delivery partner, you’re better positioned to control costs due to your partner’s expertise. Working with a partner can also help you create better customer experiences through middle and last mile delivery, which helps generate greater customer loyalty, more repeat purchases, and more word-of-mouth referrals.
Your business cannot change the dynamics affecting the cost of middle and last mile delivery, but you can take action to mitigate those costs to achieve the last mile ROI you need.
Why are delivery costs rising so much? A considerable part of it is e-commerce’s increasing share of the total retail market. The less people buy things in person, the more they buy online, and the more strain gets placed on delivery infrastructure and capacity. It’s expected that worldwide e-commerce sales will grow to represent 20.1% of total retail sales in 2024, which is the first time that figure has climbed above 20%.
We’re seeing this play out on a case-by-case basis, too. Academy Sports + Outdoors has seen its total sales drop while its e-commerce sales have increased. This rise in e-commerce and online buying is just another reason why brands should seek out delivery partnerships with service providers who know how to operate efficiently while balancing costs.
There’s another unique dynamic that’s leading to a rise in delivery costs: Consumers are starting to make smaller and more frequent online purchases (according to Walmart). This stresses legacy delivery operations, which were designed to service consumers who were making fewer but larger online purchases.
Amazon has been a leader in adapting to changing consumer activity and preferences through the years, including using two-day delivery to dominate the e-commerce market. But not all brands have the resources of Amazon to facilitate two-day delivery and create experiences that perfectly align with customer expectations. Again, middle and last mile delivery partnerships are the clearest path to building a delivery program that can keep up with highly resourced companies like Amazon without breaking the bank.
How are leading brands attempting to overcome the rise in last mile delivery costs? They are increasingly turning to better pricing structures and technology improvements. This article from Supply Chain Dive highlights Walmart, Target, and Kroger as companies that are taking action to reduce costs. But what about smaller businesses?
Most smaller businesses struggle to create in-house solutions to the most pressing last mile delivery challenges (like rising costs). These struggles lead these companies to form last mile delivery partnerships that can be leveraged all the time or simply during peak seasons. In some cases, shippers will handle some portion of last-mile delivery in-house while outsourcing a portion as needed to a trusted partner.
Are there sunnier days ahead for the 3PL industry? 3PLs have been dealing with rising fuel costs, a tight labor market, and increasing competition. An Inbound Logistics article suggests that 3PLs are finding ways to “weather the storm” by getting creative in reducing costs.
Supply Chain Management Review shares a similar sentiment, stating that 3PLs have faced huge risks in recent months related to inventory challenges and geopolitical issues — but that they’re also implementing carrier partnerships and other strategies to overcome those challenges and risks.
We recently wrote about hotshot deliveries as an approach to growing a 3PL’s service lines, creating better customer experiences, and standing out in a challenging market.
The last mile delivery market is poised for enormous growth in the coming years. Estimates suggest it could scale from $31.42 billion in 2023 to $106.42 billion by 2030. As the delivery market grows, inexperienced service providers will flood into the market. It’s important that construction companies, manufacturing firms, 3PLs, logistics providers, industrial suppliers, retailers, and others who rely on last mile delivery look for partners that offer quality drivers, diverse fleets, a presence in key markets, and a track record of success in providing last mile delivery service across all industries.
FRAYT is the solution for shippers of all kinds who need effective middle and last mile delivery that balances costs. We offer the drivers and vehicles you need, plus access to technology and on-demand capacity when you need it most. Are you ready to master delivery through partnership? Start shipping now
