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Published: January 1, 2001

 
 

The Last Mile to Somewhere

Stronger partnerships between a category killer like Amazon and last-mile deliverers seem logical, too, especially since Amazon owns a big stake in Kozmo and about 10 percent of the combined Webvan/HomeGrocer. Amazon currently employs Kozmo to deliver books in select cities in response to BarnesandNoble.com's same-day service. A more substantial partnership might offer Webvan delivery services to Amazon customers - which would be faster and less expensive than normal mail service. The combination would offer a new, potentially superior offering in the speed versus variety trade-off.

The Next Mile
For the last-mile deliverers, the road forward appears anything but straight. Disruptive technologies and business models may still blindside them. The wireless Internet represents the most obvious disruption on the horizon. Should impulse purchases shift to handheld Web devices, the same-day specialists will face significant risk that their target customer, on the move with a cell phone or PDA in hand, will find nearly immediate curbside pickup as convenient as one-hour delivery. But mobile commerce, despite being a cultural phenomenon in Japan and Scandinavia, is a threat that's surfacing relatively slowly in the U.S. - at least by Internet standards. No "killer app" has yet emerged to drive global adoption, and key wireless hardware and software vendors in the U.S. suggest a near-term focus on B2B applications.

Another potential disruption could come from alternative delivery models that attempt to solve the problems of delivery density and attended delivery. New competitors — and complementary businesses — now offer options such as office-centered delivery points and mobile lockbox delivery containers. To address the delivery density challenge, the startup Shipoint.com has formed partnerships with building owners to offer secure, and even refrigerated, pickup points for building tenants, concentrating deliveries at single locations, thus providing more convenient service for some consumers. As one of its founders notes, "Why try to deliver to the home when 68 percent of the online consumers are at work all day?"

Inplex, a Toronto-based startup, entered the office-centered business several years ago by accepting contracts for centralized mailroom services in select office buildings. From that base, it began offering a multitude of services to tenant companies - and this year Web-enabled the services and further expanded its offerings. It now plans to roll out the model across all major North American cities.

One company approached us with a plan to use returnable lockbox containers that would eliminate the need for attended delivery. The company envisioned a business built on managing a circulating inventory of insulated, secure containers for use by any last-mile deliverer. The players we met with were uninterested in changing their current models to adopt a new lockbox system. However, tests of a similar idea currently under way in San Francisco — that hotbed of experimentation — suggest that the concept is far from dead.

Which company will win? As consultants, not oddsmakers, we'll pass on the chance to make specific predictions. The results will depend on the willingness and ability of company management to implement change — and investors' patience to let them try. Our recent visits to last-mile e-tailers show many (but not all) scrambling to address the fundamental economic challenges we identified last summer — with an aggressiveness we hoped for but would not have predicted.

Investors are another story. They continue to show impatience with business models awash in red ink — so the ability of companies to stretch their existing cash becomes paramount. Recognizing the great consumer value proposition of the last mile, we remain hopeful that some company will evolve rapidly enough to survive the treacherous terrain.

Closing Thoughts
Of course, there's far more to operating strategies than just delivery. We value feedback from our readers as we do from our clients — collaborative interactions expand our point of view and help us refine our thinking. We hope you will join us — and help us — as we explore the strategic operations issues facing companies today.

 
 
 
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