US retail e-commerce is on a meteoric rise, thanks to the high levels of convenience that comes with the experience. Statista forecasts that its revenue will hit a whopping $1 trillion in 2023 and skyrocket to $1.5 trillion by 2027. That’s an enormous chunk of change, and it underscores the importance of optimizing logistics operations, particularly last-mile deliveries, to tap into this market. But there’s a perpetual thorn in the side of retailers: high operating costs at the last mile. So how do retailers cut costs and add to their bottom line?
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Costs involved in the last mile for retailers
To trim expenses, retailers need to sharpen their focus on last-mile optimization. Let’s consider the primary culprits driving up costs for retailers in the last mile:
- Bungled Routing: Nailing routing is crucial in last-mile deliveries. Poor routing can cripple delivery speeds, inflate fuel costs, and result in less-than-stellar customer experiences. Unfortunately, many retailers are currently grappling with this issue.
- Capacity Planning Chaos: Holiday and festival seasons trigger an avalanche of orders, overwhelming retailers and e-commerce vendors. Traditional systems aren’t designed to plan capacity proactively, leaving retailers unable to meet with demand, thereby impacting revenue.
- Customization Conundrum and Reverse Logistics: Retailers are often stymied by their inability to efficiently manage returns. The high cost of reverse logistics stems from subpar delivery systems that struggle with capacity and routing optimization.
- Sky-High Shipping Costs: The primary reason for cart abandonment in the US is high shipping costs. Retailers lose both customers and cash when exorbitant shipping fees appear on the checkout page. Partnering with the right carrier could offer customers more palatable shipping rates and reduce cart abandonment. However, carrier selection is often a manual, error-prone process for most retailers, with factors like service level agreements and costs poorly predicted, leading to increased expenses and shipping fees.
Transforming the Last Mile into a Profit Engine with Locus
As technology continues to advance, retailers must evolve their systems to tackle ever-growing challenges. To transform the last mile from a cost center to a profit engine, retailers should embrace the following tech strategies:
- Smart Routing System: Locus has developed a cutting-edge route planning system that considers 180+ real-world constraints, creating optimal routes for drivers that speed up deliveries, save on fuel costs, and reduce customer churn. As a bonus, Locus’ routing solution also curbs carbon emissions by offering sustainable routes.
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- Automated Capacity Planning: Locus’ automated capacity management system enables retailers to plan proactively. During driver time-off or holidays, the system seamlessly accommodates ad hoc orders and assigns them to the available resources, ensuring no orders are left unassigned, even during peak seasons.
- Delivery-Linked Checkouts: An intelligent delivery management system like Locus can provide customers with a customized delivery experience. With optimized capacity and route management, retailers can provide multiple delivery slots and options like sustainable and 1 day or few hours shipping options through our solution. By using the same vehicle for order deliveries and returns, retailers can optimize resource utilization and cut costs and make reverse logistics a breeze.
- Automated Carrier Selection: Many retailers outsource deliveries instead of captive fleets. Locus’ smart carrier management system offers retailers access to a wide network of carriers without the hassle of complex integration. The entire process is automated via rule-based algorithms that take into account factors such as weight, distance, SLA, and, most importantly, cost when assigning carriers for orders.
By implementing these top strategies, retailers can significantly reduce last-mile costs and achieve positive business outcomes.
Locus has already helped major brands like PVH Corp, TATA, and Nestle slash their last-mile costs and drive revenue growth with innovative technology solutions. If your last-mile expenses are undermining your revenue and budget projections, Locus might just be the game-changer you need.