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Last-mile pick-up, and the revitalization of brick & mortar retail?

Charles Kauffman by Charles Kauffman
August 23, 2016
in E-Commerce, Express, News Archives
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Yesterday, we provided an overview of e-commerce growth around the world. Our focus was on the disruptive impact growing cross-border e-commerce in China has had on air freight forwarders and the way in which one forwarder has responded. You can read that analysis here, while today we shift our focus to last-mile delivery, and the future role of courier companies in delivering online purchases.

Once almost exclusively the domain of express delivery providers and national postal services, last mile delivery is being redefined by the e-commerce giants — adding convenience and efficiency for the customer, but at the expense of the delivery companies as “delivery” itself is increasingly getting axed. Two projects in various stages of testing at Amazon, one in Europe and another in North America warrant the attention of not only couriers, but any company involved in e-commerce logistics.

To begin we turn to Germany where Amazon has forged a new partnership with Anglo-Dutch oil giant Shell, and has begun installing package pick-up lockers at gas stations throughout the country. At least 10 automated lockers have already been installed in Munich, and plans are reportedly in place to install hundreds more in the coming months. With more than 2,000 Shell refueling stations in the country, the program could be rapidly expanded if the pilot project’s success warrants doing so.

An Amazon Locker in New York, similar to those installed at Shell stations throughout Germany.

During the online order process, customers can select a pick-up locker at any participating Shell station. Once Amazon has fulfilled the order and stocked the locker with the customer’s order, a pick-up code is sent via e-mail. All the customer has to do is walk up to the locker, enter a code and retrieve the package.

DHL has been operating a similar service since it began installing pickup stations in 2001, and now has more than 2,700 stations installed throughout the country. Unlike Amazon however, DHL has been unwilling to install pick-up lockers near gas stations due to security concerns. Amazon on the other hand, has the advantage of knowing the contents of its packages, and therefore does not share the same concern about proximity to fuel pumps.

Moving forward, if Amazon and other e-tailers continue to expand such programs, what are the potential implications for couriers, consumers, and partners like Shell? In Germany one-in-seven packages contains an Amazon shipment, according to Handelsblatt, so last-mile delivery volumes could shrink significantly. This was the case when Amazon launched its own delivery service in Munich last year – some couriers have reported a 30% drop as a result. From a consumer’s perspective, the lockers are likely to appeal to professionals who are away from their home during normal delivery hours and would otherwise have to stop by the post office to pick-up their packages at a later date. Lastly, Shell seems content at the prospect of increasing traffic through its stores, and potentially boosting sales through promotions offered to Amazon pick-up customers.

Shifting from Europe to North America, Amazon is rumored to be piloting a drive-through grocery pick-up program in select cities, including Seattle and San Francisco. And while express delivery companies like FedEx, UPS and DHL are unlikely to be impacted by grocery pick-up warehouses to the same degree as parcel pick-up lockers, the broader disruptive impact on the supply-chain is worth thinking about.

Details regarding the project are still opaque, and Amazon has not yet even confirmed that the locations under development are theirs. However, planning documents for the 9,759 square foot site in Seattle’s Ballard neighborhood divulge more than enough information to speculate about both the owner and the future operation:

“When placing an online order, customers will schedule a specific 15-minute to two-hour pick up window. Peak time slots will sell out, which will help manage traffic flow within the customer parking adjacent to the building. When picking up purchased items, customers can either drive into a designated parking area with eight parking stalls where the purchased items will be delivered to their cars or they can walk into the retail area to pick up their items. Customers will also be able to walk into the retail room to place orders on a tablet. Walk in customers will have their products delivered to them in the retail room.”

The key question for airfreight is: could this model eventually be adapted to serve other types of retail as well?

Though these are just two examples of “last-mile pick-up”, this trend is likely to continue. Although not exclusively discussed in this piece, airfreight patterns could also be affected – especially with the rise of hub-to-hub air service with Prime Air.

If you would like to learn more about the impact of e-commerce on the air freight and express industry, join us at the Cargo Facts Symposium in Miami, 10 – 12 October, where we will devote a session to just this subject. To register, or for more information, go to CargoFactsSymposium.com.

Tags: Amazon AirDeutsche Post-DHLFedExUPS
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