Retailers’ omnichannel strategies create growing interest in last-mile delivery

XPO Logistics’ latest acquisition of Optima Service Solutions makes for the second last-mile delivery company XPO has acquired in a matter of just a few months; with the first being 3PD. In fact, interest in last-mile delivery is on the rise as the growth of e-commerce continues and retailers implement “omnichannel” strategies, linking online sales to physical stores, catalogs, and mobile and to other sales channels.

As noted in Ti’s July 25, 2013 brief, Growth of big ticket e-commerce leads to enhancements within white-glove delivery services, last-mile delivery services can vary from just the typical delivery to including “white-glove services” such as unpacking, set-up and removal of packaging and/or old merchandise.

With its acquisitions of 3PD and Optima Service Solutions, XPO Logistics has moved into this “white-glove” last mile delivery service.  While the size of this market remains fragmented and difficult to size, 3PD and XPO Logistics estimate that shippers spend about $12bn on last-mile deliveries of heavy goods annually. The growth opportunity of this market is evident in Optima Service Solutions’ latest revenue earnings for the 12-month period ending October 31, in which the company reported revenue of $35.7m and has generated a 16% compound annual growth rate over the past years. With this acquisition, XPO Logistics now adds an additional 250 carriers to its already 2,000 plus last-mile carriers obtained through its 3PD acquisition – thus, making the company one of the largest US last-mile service providers.

As more retailers link their various sales channels and outsource delivery services, IT solutions have become a key differentiator for delivery services. For example, as mentioned in Ti’s July 25 brief on this topic, SEKO Logistics introduced its mobile proof of delivery (POD) app.

Optima Service Solutions has developed its own proprietary technology, known as Evolution and it serves as the basis for its web-based order entry, scheduling and service completion services. According to XPO Logistics’ CEO Bradley Jacobs, this technology will be integrated into existing 3PD/XPO last-mile delivery technology.

Some retailers are also investing in IT solutions to manage this process. For example, Sears recently announced it plans to utilize Descartes’ home delivery IT solution. The cloud-based solution is comprised of several modules including Descartes Reservations for delivery appointment scheduling; Descartes Route Planner for route optimization, dispatch and tracking; Descartes Mobile for wireless communications and mobile applications; and Descartes Notifications for automated call-outs.

Last-mile delivery has become a competitive tool for many retailers. Much like the reasons for adopting an omnichannel strategy, retailers are looking to enhance the customer experience all the way into their homes. So, while IT is an important differentiator, it is also used as a means to improve upon this customer experience. Companies such as SEKO Logistics, 3PD and Optima Service Solutions have taken advantage of their IT capabilities by emphasizing their customer service skills throughout the delivery process, even to the point of following up with customers after a delivery is completed. The last-mile delivery market will need to watch carefully and emulate such capabilities or risk falling behind.