By: Hunter Hartman
I have had the opportunity to sell many USPS products as well as USPS work-share products. Some of these products consist of final mile deliveries being handled by the USPS. There are many work-share products in the marketplace for eCommerce shippers. Reasons these are used is to lower cost and increase profit margin. While there is value in saving money and offering free shipping, there are consequences in slowing down the package to a 3-7 business day delivery. One common theme I’m hearing from customers is the demand to be on Amazon Prime. Amazon Prime has caused tremendous disruption in the last –mile delivery segment. They have been growing 30% since 2011, as detailed by Andre Pharand, Accenture’s global management consulting lead for the postal and parcel industry.
Why is it so difficult to compete with Amazon and their tremendous disruption? To start, Amazon is creating expectations for faster fulfillment. There has been an increase in on-demand and same-day delivery. I live in Ladera Ranch, CA and with Amazon Now, I can get product to me in a matter of hours. Most of what I want from Amazon Prime is on Amazon Now and it is being delivered out of enterprise rental vans by 1099 contractors. This is on commodities, books, and entertainment products. There is an even high demand on food delivery and pharmaceuticals. Customers are now demanding a window of delivery within a few hours.
There has been an attempt to try to compete with traditional logistics with crowdsourcing apps. Most of these have been successful in urban cities like New York City and San Francisco. As mentioned above with Amazon now, there are companies like Postmates, UberRUSH, and Deliv. The interesting thing about this is people that have a bike or a car that want to make some extra money can with apps. It’s an interesting dynamic that allows for some additional money to be made.
With the last mile disruption, the USPS is changing with the times and making an effort to scale with growth. The mail industry has declined year over year. The USPS is the only company in the country that goes to every household every single day. So their residential delivery cost is only incremental to them. It’s much more expensive for UPS or FedEx to go to a residential home, hence why SurePost and SmartPost have become so popular and also why we’re seeing so many additional last mile carriers evolve. I imagine we’ll continue to see change in this industry with the work-share product.
We all remember when Jeff Bezos said we were going to have final mile deliveries by drones. We saw this on YouTube and the people out in the sticks said that they would shoot these drones down as target practice. We heard this would violate HOA rewquirements and privacy. Well, these futuristic delivery options are being developed and tested but I still don’t know if I believe they’ll work or not.
If this happens, this is going to change the game entirely. The highest cost in a delivery is labor which is about 60% of the total cost. Deliveries are currently limited by labor cost, availability and shifts. Robotic delivery could be done 24 hours a day. Drone deliveries will have a lot of regulation to overcome before it is successful. I see this happening in decades, not years. In places in like San Francisco, it is already being tested but they’ve been testing driverless cars in San Francisco for a long time as well. The culture will have to change before this happens, but as Amazon has proven, convenience and speed will change the culture.
Thanks for reading. Let me know if I can help out. - Hunter Hartman
Hunter Hartman is an eCommerce consultant for Postage Force and is based in Ladera Ranch, CA. His focus is on small-to-large eCommerce companies that are shipping business-to-consumer. Through his shipping expertise he has helped hundreds of companies save money shipping small parcels and helped to integrate a more automated solution. For more information and a free consultation, please contact Hunter Hartman or visit www.PostageForce.com
Hunter Hartman is a shipping consultant in the eCommerce world. He blogs about the changing landscape of shipping.