A new report from DS Smith has revealed that 84% of e-commerce businesses across the UK and Europe are witnessing last-mile delivery cost increases, with 39% seeing rises of more than 10% in 2024.
The Last-Mile Delivery: The Future Unpacked report is based on survey research among 550 decision makers and shows that outgoing costs around couriers, returned items and products that have failed to arrive or experienced damage during transit have risen significantly within the last year, with 39% of e-commerce retailers surveyed experiencing double-digit rises in overheads because of supply chain challenges.
In addition, 84% of respondents believe that last-mile delivery cost increases are likely to continue to rise over the next 12 months, with 50% anticipating this trend to double again.
The coordination of last-mile planning and strategy is anticipated to have a significant impact on the profit and loss of e-commerce businesses, and almost 39% of those questioned reported lower profits because of operational challenges, with 35% stating that they have increased delivery fees charged to the end consumer to cover these costs, and 35% that they have increased the price of their products.
Innovation and sustainability
According to the report, the rise in delivery costs is affecting other trends within the e-commerce marketplace, with 27% of e-commerce businesses cutting back on sustainability initiatives to decrease their spending, and many reviewing their short- and long-term operations strategy. Similarly, 59% are reviewing their returns policies and 57% are managing future forecasting by imposing minimum order values for deliveries.
The emerging trends in last-mile logistics and delivery costs are thought to be compounded by rising consumer expectations around customer service, sustainability, packaging, timing and flexible options for reliable and secure receipt of their packages. Almost 75% of survey respondents reported that their customers expect to receive newly purchased items in sustainable packaging; 71% of those surveyed expect to see options for the tracking of deliveries and communications around this; 69% expect to see flexible delivery times; and 67% state that they anticipate sustainable delivery options.
Consumer expectations
The report reveals that some e-commerce businesses feel that they have not been able to fulfil customer expectations in the current climate, and less than 39% claim to have satisfied expectations around sustainable delivery options. Similarly, 36% are concerned that they have not met customer expectations around the costs of delivery in terms of keeping these as low as possible, and only 30% feel that they have successfully met their customer’s expectations around the flexibility of delivery times.
According to DS Smith, the findings suggest e-commerce businesses benefit from collaboration and external support when it comes to optimizing and developing their value and supply chains, and that a wider longer-term commitment to innovation is the best overall approach to finding solutions and staying ahead of trends within a competitive marketplace.
The report also outlines how e-commerce businesses that are open to new ideas and regularly review their approach to last-mile delivery are far more likely to forecast and manage potential issues or challenges in advance – 65% of those businesses with an innovative mindset are conducting regular supplier reviews for cost savings and 59% are using third-party planning and co-ordination to reduce overhead costs throughout their supply chain, from packaging and production to warehousing and transportation.
Olivier Cottard, global e-commerce and industries director, DS Smith, commented, “Amid this period of transition and fast changing trends, leading companies are developing innovative and effective ways to improve their e-commerce and supply chain models without compromising on customer service.
“The message from our survey is clear – innovative companies that are more open to new ideas, and which regularly review their set-up around last-mile delivery and explore new ideas with packaging suppliers, are better able to cope with the significant challenges that the e-commerce sector faces and in a better position to meet the demands of tomorrow.
“Equally, those with an ambitious and innovative approach have a greater strategic advantage in terms of finding ways to protect their supply chain costs and either meet consumer demands, or excel above expectations.”
Click here to read the full Last-Mile Delivery: The Future Unpacked report.