The last mile problem

Consumers are becoming increasingly aware of the Internet as a channel to market. As established brand names move part or all of their offer online, customers are regularly turning to the web to make their purchasing decisions. They are not only reviewing product information and reviews but also are now ready to buy online as a mainstream way of shopping rather than as just a novelty experience. As a result the home delivery market is growing. Paradoxically, this success is causing logistical problems, which threaten the future success of online business-to-consumer trade. The problem is how to get the goods the last mile. A UK government Foresight (2001) report gives estimates that by 2005 home delivery will be worth £34.5 billion. However, they also predict: 'As customer demand [for remote purchasing] increases, the likelihood of their being at home to receive their purchases decreases' (Foresight, 2001).

There have been a number of possible solutions to the delivery problem, including unattended delivery points in the form of secure purpose-built boxes or collection points at a local store where customers could collect their goods when convenient, but none have been particularly well received by the consumers. Whatever the solution at the customer end there are wider implications; at the company level they must resolve warehousing and distribution and the cost associated with providing a service which involves many deliveries of small quantities; at a societal level any increase in the number of small vans required to deliver online orders as in the case of online grocery retailer tesco.com is likely to cause further local traffic congestion.

Task

1 List five physical products that you or one of your neighbours might purchase via the Internet and require delivering to your home. Try to choose products from different categories, e.g. an item of clothing, fresh food, furniture, drink and computer equipment.

2 State the times of day you are available at home to receive delivery of these goods.

3 Describe the difficulties that an online retailer attempting to deliver the goods to you might encounter.

4 Suggest a solution for the last mile problem that will encourage consumers to increase the amount of goods they purchase via the Internet.

This section has discussed the choices a retailer wishing to operate online might consider and how some established characteristics of a business might affect decisions of which format to adopt for current and future online operations.

Mini Case Study 10.4

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