Estimations from 30% to over 50% of total cost of all goods delivery is in the last-mile leg. Reducing that cost in such forms as lockers, order online and pick up in stores is being done by many retailers as well as last mile delivery providers.
At the same time, utilizing a crowd-source delivery service option is becoming a popular solution particularly as the labor supply dwindles and the cost for existing labor is on the rise. Providers of such services such as Instacart, Postmates, Deliv and Amazon Flex often recruit college students, moms and others looking to either earn a few dollars as well as those entrepreneurial types wanting to be their own boss to pick up goods from stores or other facilities and deliver them, last mile, to customers.
Restaurants and grocery stores embraced crowd-source delivery services early on. However, Amazon’s continued expansion into last mile delivery options including its own crowd-sourced delivery option, Flex, seemed to raise a red flag at such U.S. retailers as Target and Walmart. In late 2017, Target acquired Shipt, an online same-day delivery platform that utilizes crowd-sourced delivery services. Target also acquired a transportation technology company — Grand Junction — to expand its supply chain and improve delivery capabilities. Grand Junction provides a platform that allows retailers, distributors and third-party logistics providers to manage local deliveries through a network of more than 700 carriers.
Meanwhile, Walmart has made a few stumbling attempts by partnering with a number of last mile solution providers including Uber, Lyft and even its own employees. While its order online and pick up at store service seems to be doing well, its last mile delivery options seem to be a hit or miss depending on consumers’ locations as well as the service provider that Walmart uses for certain locations. Certainly a disappointment from this writer’s perspective for the U.S.’ largest retailer who is known for its logistics strength and transportation subsidiary that manages its own fleet of trucks as well as third party transportation services.
But, things may be changing for Walmart as it is now partnering with Bringg, a technology provider which optimizes driver schedules, automatically dispatch orders, and allows drivers to communicate their availability. Walmart’s latest attempt which will be named Spark Delivery, is a crowd-sourced delivery service that will utilize a third party, Delivery Drivers, Inc, to handle the administration of driver management, which includes the recruiting process, screening and background checks, payments, accounting, and other services.
As more retailers, grocers, restaurants and others embrace crowd-sourced delivery service options, one may ask how sustainable this strategy is here in the U.S. particularly when there are more job openings than there are people out of work. In addition, how does a retailer maintain a consistent customer experience all the way to the customer’s front door steps? Or does it really matter since the last mile delivery location includes more than the customer’s front door steps?
What about the crowd-sourced delivery person? Are they classified as employees or contractors? Do they really earn the full hourly pay as advertised by the crowd-source delivery company or do their out of pocket expenses such as insurance, gas, automobile repairs etc. outweigh the pay? What about benefits including paid time off, health insurance and holiday pay?
A number of reports are now coming out questioning the viability of what’s known as the ‘gig economy’ as well as quantifying this ‘freelance’ option including recent reports from JP Morgan and from the U.S. Bureau of Labor Statistics. The basic gist of many reports is that the ‘gig economy’ seems to be good for those folks looking for just a part-time position, not a full-time one. If this is true, how can a retailer or any other business depend on such a model for their last mile delivery service? Perhaps the business is only interested in markets such as larger cities where the population could maybe sustain such a model. However, extending a crowd-sourced delivery option beyond larger cities may be questionable and perhaps could be used as a supplement instead. Regardless, last mile delivery is not cheap and for retailers and other businesses looking to offer this service will need to plan a well thought out strategy first to compare the viability of offering a crowd-sourced delivery service with other options.