The future of last-mile delivery is electric
A decade ago, zero-emission deliveries in major cities around the world did not exist. With the exception of bicycle couriers, largely focused on the food industry, businesses lacked realistic options to deliver fast and flexibly whilst being environmentally friendly.
Not any more. In the past few years there has been an explosion of viable vehicle options for companies delivering on-demand and in the last mile. From La Poste’s initial trials of the Renault delivery van to the very recent Amazon incarnation developed alongside Rivian.
Major players in the global delivery and logistics market are investing substantially into electric vehicles. And it’s not purely the reduction in carbon-emissions that is emerging as business critical for these companies.
Amazon for instance, has embedded a host of technological innovations in its Rivian van from allowing integration with Alexa to hands-free access to route information and weather updates. All designed to ensure deliveries continue to become more efficient and better for the planet.
In order to support these vehicles, Amazon will build out charging infrastructure and optimised delivery stations, continually changing the landscape for on-demand delivery and delivery driver jobs.
Amazon aims to have up to 10,000 such vehicles in active service by as early as 2022.
In cities such as London, the government is increasingly scaling up its regulatory framework around low-emission zones. This is naturally forcing businesses to think more seriously about switching to electric fleets. Coupled with this, the future appears to be one which will include price subsidies and access to free charge points making electric the smart way forward.
Similarly, local communities are demanding more of their suppliers environmental efforts. Adding pressure at the consumer level by seeking out low and zero emission delivery options as fundamental to their purchasing.
As charging points multiply around the city, the cost benefit of electric power starts to add up. Electric costs a fraction of the price of fossil fuels and as battery technology evolves the vehicles are becoming more practical for the longer journeys as well. Most famously at Tesla, Elon Musk has recently touted the so-called “million-mile battery.” It is being co-developed with Chinese battery giant Contemporary Amperex Technology Co. Ltd and was in part by battery experts recruited by Musk.
With the reduction in battery costs bringing the overall production price of vehicles closer to the traditional industry prices for ‘affordable’ it’s clear that electric is the future.
For typical delivery drivers operating in urban areas, electric vehicles are quick to start, virtually silent and comfortable to drive making them an attractive choice if the overall cost is on point.
In terms of that cost, the magic number is 100. $100 per kilowatt hour is the cost at which many experts believe that the likes of Tesla and other automakers innovating in this space will be able to sell competitively against the market incumbents.
And it’s not only Tesla chasing down this elusive target. General Motors in conjunction with battery maker LG Chem is one of many big names rolling out their own versions of “Battery Day” and confidently highlighting their own credentials.
While US behemoths like Tesla and GM dominate most of the headlines, over this side of the pond there are some wonderfully innovative businesses driving forward the electric movement.
Hyundai and Kia are backing Arrival, a startup British maker of electric delivery vans. Arrival has taken an investment of more than $100million from the companies and the three are working together to jointly develop the business over the next few years. Tomorrow’s delivery drivers will have an incredible choice of high quality vehicles.
In comparison to Tesla’s ‘Gigafactories,’ Arrival intends to build ‘Microfactories’ covering just 10,000sqm. While these factories will produce as few as 10,000 new vehicles a year, they will benefit from sitting much closer to a local customer base, thereby reducing costs.
The current model has a haulage capacity of around 500 cubic feet of product. Currently the maximum range of the battery (produced by LG Chem) is 200 miles, however, this is expected to rapidly scale up in the near future. Although given the density of urban deliveries this does not appear to be a business critical objective particularly in the last mile space.
Aggressive growth in the delivery sector
Last year, across the globe there were in excess of 35 million e-commerce deliveries. Here in the UK, online food delivery has surpassed US$6billion in revenue and is growing fast.
Extraordinarily, even with a particularly challenging economic backdrop and the lingering effects of the coronavirus pandemic, users of food delivery services grew by more than 20% year on year (according to Statista).
The largest segment in the market is Restaurant-to-Consumer accounting for a projected market volume of US$4.1billion in 2020.
With such a massive and expanding volume of traffic in urban areas it’s imperative that more environmentally friendly options are made available for delivery riders and drivers.
The huge majority of the 35 billion eCommerce orders made in the past 12 months were delivered by vehicles with internal combustions engines – or ICEs for short. These vehicles are releasing huge amounts of carbon dioxide into the atmosphere, increasing air and noise pollution dramatically.
As the market for online delivery grows, the corresponding impact of the transport sector on greenhouse gas emissions is becoming an urgent matter. 20% of the UK’s entire carbon footprint is due to road transport vehicles such as delivery couriers. There is therefore huge pressure on the big players in the market to help contribute to positive change.
Same Day for Less
Household names like UPS, DHL and FedEx have long dominated the last mile delivery space. In the US for instance FedEx estimates that more than 95% of all e-commerce orders are delivered by itself, UPS, or the US Postal Service (USPS).
The e-commerce market is booming, ramping up package volume in most developed cities — The incumbents in the market are struggling to keep up with demand and this is paving the way in for last mile delivery startups to emerge.
Here’s how some of the established brands are approaching last-mile and same day and a little bit about some of the up and comers:
FedEx - offers a Fedex SameDay service accessed by account customers as well as same day freight for packages larger than 150 pounds. The company has been piloting a Fedex Freight Direct program in the state which includes a premium white glove service complete with unpacking.
XPO - comes at the last mile challenge via it’s 2015 acquisition of UX Logistics which helps then surface a greater spread of truck brokerage, expedited transportation, intermodal, technology-enabled contract logistics, and freight forwarding services.
City Sprint - provide same day, UK overnight, international and evening courier services throughout the UK 24 hours a day, 365 days a year. Claims to be the UK's largest same-day delivery network and is increasingly moving toward green options including cargo bikes, push bikes and eco vans.
ECourier - acquired in 2015 by Royal Mail to help them deliver same-day services. ECourier completes 92% of central London jobs within the hour and has an average 64 minute pick up time on same day orders.
Stuart - founded in 2015 to disrupt last-mile delivery and to address the huge growth of package deliveries in urban areas. Given the explosion of e-commerce, instant delivery services, aging infrastructures and outdated motorized fleets, urban logistics are at a turning point. Stuart’s large fleet of bicycle couriers are keeping last-mile green wherever they can.
Quiqup - originally founded in London, Quiqup relocated to Dubai driven by the relatively nascent marketplace and high disposable income of the young population. Uniquely, Quiqup offers an hourly rate to its last-mile workforce.
Ryders - London’s most recent player in the last mile space. Ryders is a ‘rider-led’ marketplace whose core proposition is that by focusing first and foremost on giving their riders a great experience, all stakeholders will benefit.
Last mile delivery is constantly evolving. Both the government and end consumers are demanding higher environmental standards of companies in the industry. With the cost of electric constantly reducing, these vehicles are becoming more palatable commercial options.
Today, the rapidly growing market sees the established players boosting their credentials but they are rapidly pursued by a younger generation of startups looking to drive real change.