Transforming Urban Logistics 2024

Evolving customer expectations Consumers now expect faster deliveries as standard – and this trend is here to stay. E-commerce retailers are using delivery speed and easy returns to differentiate themselves in a competitive marketplace. Average delivery time dropped to 2.15 days in 2023 from 2.36 days in 2022. This has inflated last-mile costs, which accounted for 53% of the total cost of shipping in 2023 compared to only 41% in 2018.6 Insufficient delivery speed causes 23% of abandoned orders, with a further 48% attributed to shipping fees,7 highlighting the importance of shipping in e-commerce. Home delivery remains the preferred option for more than 60% of e-shoppers.8 Shorter delivery windows are also crucial, with more than 68% of online shoppers citing this as a determining factor for placing online orders.9 The pandemic has also changed travel habits, reducing office deliveries and increasing the need for flexibility in delivery locations.10 Sustainability is also becoming a priority, with over 70% of shoppers indicating they value sustainable delivery options in 2023.11 While many customers are unwilling to pay extra, some may accept longer delivery times or out-of-home alternatives when this is communicated as a more sustainable option.12 All of these shifts have placed substantial pressure on retailers’ bottom lines. Retailers must therefore balance the need to meet consumer expectations with the pressure to make deliveries cost-effectively and sustainably.The changing urban landscape Many cities have embarked upon an urban transformation that focuses on sustainability and liveability. Road space is increasingly allocated to public transport, cyclists and pedestrians. Urban planning is focusing on creating walkable communities to improve interaction with retail, leisure and services as well as overall quality of life. The varying nature of cities – in terms of population, density, demographics, congestion, climate, quality of infrastructure and digital readiness – requires nuanced analysis. This white paper uses six city archetypes (detailed in Figure 1) to quantify future challenges. High-level modelling simulates the impact of business-as-usual on congestion and emissions in sample cities, alongside qualitative assessments of health, productivity and economic costs. This paper examines strategies by retailers, delivery companies and city authorities to tackle last-mile challenges. These include the use of microhubs, the electrification of fleets and the implementation of zero-emission zones, as well as making consumers aware of the impact of their choices. The potential impact of interventions on delivery costs, number of vehicle journeys, congestion and emissions has been modelled. Qualitative assessments cover noise pollution, customer satisfaction, road safety and ease of implementation. The paper highlights the need for change and the operating models and initiatives that can balance the needs of communities and the environment with consumer expectations. It offers recommendations for stakeholders – including retailers, delivery companies and city governments – with due consideration given to the very different nature of cities around the globe.Sustainability is also becoming a priority, with over 70% of shoppers indicating they value sustainable delivery options in 2023.70% Transforming Urban Logistics: Sustainable and Efficient Last-Mile Delivery in Cities 6