They say in investing that the trend is your friend, and the changing delivery economic landscape certainly falls into that category. Years ago, it might have taken 30 days for an ecommerce order to arrive. Now, some deliveries can arrive in just 30 minutes. Not only do quicker deliveries delight customers, but today their costs are declining, and this of course will improve Post’s profitability.
As more people order online, drop densities increase, meaning that Posts can re-think their delivery strategy and decrease last-mile delivery costs. In this piece, we discuss how and why drop densities are improving and the benefits these changes bring to Post economics.
Customers value their time, so many are gravitating towards online shopping. Rather than waiting in lines at the store, consumers can browse digitally from the convenience of their home. And at checkout, customers expect efficient, frictionless service. So it’s no surprise that online spending went up by 32% while retail foot traffic went down 40% last year.
Although some of this change can be attributed to store closures during the pandemic, many consumers have permanently altered their buying habits, entering stores less frequently, opting for ecommerce or curbside pickup. In fact, 25% of US consumers are making nearly one-fifth of their purchases from DTC brands online, driving 80% growth in retailers shipping from stores over the past year.
Statista estimates ecommerce revenues will rise to $6.54 trillion by 2022. With more and more people turning to online shopping, Posts will be expected to provide near-instant, seamless delivery experiences. The problem is that last mile delivery has historically been expensive. McKinsey estimates that last mile delivery costs can make up 50% of the overall cost of delivery. It’s far more expensive for Posts to deliver 50 parcels distributed across several neighborhoods, than 50 parcels in a single area.
The good news is that the uptick in online purchase behavior translates into larger volumes of parcels that need to be delivered, and this means a greater opportunity for Posts to get increased efficiencies from their deliveries. Put simply, drop densities are improving.
In 2014, 12 parcels were shipped per person, and today, 27 parcels are shipped per person on average. In just seven years, the number of parcels per person has more than doubled, and this trend shows no signs of stopping. With higher drop densities, there’s more opportunity for Posts to decrease costs such as reducing the number of unused delivery trucks, limiting unnecessary expenses,. and through route optimization. This all translates into online orders getting to where they need to go faster—a win for the customer and a win for the Post’s wallet.
An improvement in drop density translates to better economics for Posts. More deliveries transported to roughly the same location means that drivers can deliver more packages in less time. To further optimize your delivery routes, consider our Riposte platform. With Track, Trace, and Last Mile Delivery, you can design your routing process to meet specific KPIs and offer your customers real-time visibility, proof of delivery, parcel intercept and so much more.
For further information, contact the experts at Escher Group