Insight / Blog

COVID-19 and the last mile

Posted on 31st March 2020

Whether it was Mark Twain or Hemingway (or neither of them) who said it, the instruction “Write what you know” has never felt so appropriate as it does for marketing departments around the world this week.

In that spirit, here are some things we know about the effects of coronavirus on last-mile fulfilment for retailers and carriers. Of course, this all comes with a caveat – there is inevitably much we don’t know, and even more we can’t know yet. This is what we’re seeing and what we expect, a round up and some educated guesses.

Feast and famine in retail

Of course, grocers and mass-merchants are experiencing massive spikes in demand, including online, thanks to consumer anxiety and the imposition of social distancing measures. Ocado was frequently experiencing 10x normal demand last week, particularly when the daily televised UK government announcements were made. The online grocer resorted to refusing new customers and limiting the frequency at which deliveries could be made to an address.

Affected retailers are struggling to manage demand and hit SLAs. Walmart described a supply chain “catching its breath” and its curbside pickup service as “slammed”. Anecdotally, Amazon seems to seriously stressed: browsing for a webcam last week (admittedly a high-demand item as white collar workers start to work from home), I couldn’t find a thing that would reach me before April.

Most retailers have been forced to close stores, rendering them dependent upon ecommerce sales for the time being. Intuitively, one might assume ecommerce demand would grow massively for many retailers, as demand shifted from instore purchases towards online. However, that does not necessarily appear to have happened (yet). Publicly available data is scarce, but Retail Dive quotes a performance agency which tracks revenue and conversion for pure-play ecommerce retailers, saying that their revenues are down 63% and conversion down 35% compared to a pre-virus benchmark, suggesting that online sales are not a quick fix for retail. Whether this data is representative or not, we will have to wait and see.

Apparel has been hit hardest, with various retailers have actually shut down online sales for the time being, including Victoria’s Secret, TJ Maxx, River Island & Next.

Carriers are doing what they can and trying to keep drivers safe

Delivery drivers are being recast as heroes (alongside checkout workers and shelf-stackers) thanks to the pandemic, and carriers are taking steps to protect their workforces with personal protective equipment and changes to delivery policies. In the UK, DPD no longer requires signatures to prove deliveries. Instead, drivers take a picture of the parcel at the point of delivery. Other carriers have authorised drivers to make those signatures to eliminate the need for contact.

if ecommerce demand continues to swell in place of offline purchasing, it seems likely that carriers and posts may need additional resources. Amazon and Walmart both recently committed to huge hiring drives to get more products available on shelves and through warehouses faster.

In the long term, what will be different?

Let’s say that in 6/12/18 (delete according to your personal level of optimism) months we are back to something resembling normality, with self-isolation ended and retail stores fully re-opened. What will be different then?

Well, ecommerce adoption isn’t quite a one-way street but it’s close. Once a customer starts shopping online, they don’t tend to stop. That means the majority of new ecommerce adopters thanks to coronavirus will continue to be ecommerce users afterwards. Before now, fulfilment capacity ran alongside ecommerce growth, steadily increasing to manage the increasing volume.

Now though, we’ve had perhaps the biggest demand-side shock in the history of ecommerce. Fulfilment capacity simply won’t increase overnight to catch up to the volumes that millions of new shoppers are likely to generate. As long as we think about delivery as a question of moving parcels to homes, we will be significantly short on capacity, and so the industry will have to drive more of that volume to out-of-home options in future, to capture the efficiency gains of consolidation and guaranteed delivery that PUDO locations offer.

Senior Content Marketing Manager

Ethan joined Doddle in 2019. He covers news and analysis across ecommerce delivery and returns.

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