Originally printed in the October 2022 issue of Produce Business.

Pandemic-driven e-commerce sales have surged across Europe, and this momentum has sustained sales despite ongoing economic challenges. New services with new models entered the market and expanded quickly, changing the expectations that even longtime online shoppers have about what is now possible.

Consumers in Western Europe who spent 561 euros, roughly US$552, online per capita in 2019, increased this spending to 881 euros in 2021, a 57% rise. While demand has been a boon for growth, it has also strained logistics providers, including last mile services.

Beyond demand, ongoing economic challenges have increased costs for shippers and caused delays in distribution, while cities across Europe are starting to rein in unfettered access for last mile services. Despite these complex challenges, many last mile providers across Europe are innovating now to future-proof their offering and to be more attractive to shippers and more reliable to consumers who are eager for a sense of stability and reliability.

While compelling services now help brands navigate complex pricing strategies and ensure on-time arrivals, the most successful are also preparing for a more sustainable European market. A brand that navigates these delivery options effectively will build loyalty and enjoy a long-term market advantage.

ON-TIME ARRIVALS AND PRICING

According to Euromonitor International’s Voice of the Consumer: Digital Survey results regarding delivery services, a longer-than-estimated wait for delivery was the most commonly reported challenge for consumers in 2022. On-time arrivals have become an important way for brands and last mile services to communicate value, and there are more solutions emerging. Companies offering end-to-end logistics management solutions, for example, digitally optimize deliveries by finding the most suitable logistic partners in real time. For instance, Helsinki-based OGOship works with large multinational brands to ensure products with complex supply chains are shipped across Scandinavia without disruption.

Rhenus Logistics has been localizing nodes of distribution in Berlin, Germany, by installing what it refers to as micro-depots, or small warehouses, along the edges of the city to pre-stage goods and shorten last mile journeys. Rhenus also offers appointment scheduling, allowing the consumer to choose a delivery window, while “eco-windows,” or time slots that minimize carbon output given the location of the delivery vehicles in an area, are also available. This empowers the consumer to have greater control over the delivery process, and increases the likelihood of successful delivery.

Beyond dependability, proper pricing models ensure services remain cost-effective. Prices online can be more dynamic than in stores to adapt to changes in operational cost or to react to price changes from competitors. Being nimble in pricing helps ensure a service remains viable.

SUSTAINABILITY AND THE CIRCULAR ECONOMY

While on-time arrivals and pricing can be a competitive advantage now, last mile delivery is only viable in the long term if it is also more sustainable. Sustainability is at the heart of a major shift in thinking across the European logistics space and supports the EU’s ambitions to build a more circular economy, which impacts every part of the supply chain. In this spirit, DPD in Germany publicly reports its own CO2 emissions. By being proactive in transparency, DPD is also more attractive to brands that see this as a crucial part of the way they communicate value to consumers.

DHL, another German delivery company, introduced IOT tags to track individual packages and create a product footprint. This kind of technology enables online retailers such as Arkive, a Dutch beauty retailer, to redirect unsold or overstocked products to minimize waste and build more efficient supply-demand production models. Again, DHL is helping to reduce waste here by attempting to standardize last mile containers for delivery vehicles, similar to how standardized global sea containers help reduce space inefficiencies on maritime container vessels.

Finally, electric-powered delivery vehicles are becoming increasingly viable and more attractive for city regulators because they reduce air and noise pollution. In Amsterdam, for example, only electric vehicles will be granted access to the city center where deliveries are not only crucial for consumers at home, but supply businesses such as shops and restaurants, with many cities across Europe expected to implement similar restrictions. This will give electric last mile delivery companies such as Picnic, a Dutch grocery delivery player, a strong first-mover advantage.

The surge in demand and the broader economic challenges have certainly been a catalyst for change in what was a traditional logistics industry. Brands selling goods online will need to collaborate with the most suitable last mile players if they are to remain competitive, but will find room to stand out in the market with future-proofed last mile partners.

Stephen Dutton is a client insight research manager at Euromonitor International with a focus on services and payments research. Based in Düsseldorf, Germany, he is a project lead for Euromonitor’s global consumer foodservice research as well as an editorial contributor of strategic analysis in the consumer foodservice and travel industries. Euromonitor International is the world’s leading provider for global business intelligence, market analysis and consumer insights, with offices around the world, analysts in over 100 countries, and the latest data science techniques and market research on every key trend and driver.