Last Mile Deliveries Became a Multi-Billion Pounds Investment Opportunity in Europe




Last-minute logistics, guaranteed deliveries within two-hour windows, drop-offs in places without street addresses and a stationary location, having robots helping to organise the deliveries. Parcel delivery companies have been talking about all of this for years. The fact that the future has now arrived is no surprise, the important question is who is leading the way?

New entrants in the field:

Startups and giant e-tailers, confiscating the opportunity created by digital technologies and the rise of e-commerce, are revolutionizing in ways that are upsetting and overturning the industry. These newcomers are focussed their services in the spaces where their offering alternatives to services still charge a premium. Such as same-day delivery or same hour delivery. 

As new ways of attaining scale have arisen, the incumbents’ asset-heavy networks are losing significance. In many cases, those networks and the legacy systems that underlie them are slowing incumbents’ embrace of new realities.

Venture capital

When the e-commerce boom began, little venture capital money was invested in last-mile delivery, an ostensibly stable business with very high barriers to entry. That has changed in the last few years. More than $6 billion has poured into the parcel and express last-mile delivery sector since 2012.

Investments as a whole increased some 20-fold and late-stage funding increased more than 30-fold from 2014 through 2016. Ten startups have received more than $175 million in cumulative funding and ten others have received more than $50 million. A new development that incumbents need to start tracking is all the logistics company formation that’s happening in Asia. Most of the funding has gone into just six companies: Cainiao, Best Logistics, New Dada, Hive Box, Yimidida, and Yunniao Logistics.

Last Mile Delivery in Europe was not as attractive as it was in Asia. Perhaps the main reason was due to high labour cost and lack of multi-drop facilities in large cities. Whereas, after the significant bans and cut on fuel and an increase in traffic in and out cities, the cost for van and truck deliveries were significantly rising. Especially for companies such as UPS, DHL, Addison Lee, DPD, Fed Ex, etc. where they use their own vehicles and their cost-effectiveness is even further due to maintenance and storage cost. Therefore this is the rise of last-mile delivery in Europe. 

In a new report – How a Digital Storm Will Disrupt the Parcel and Express Industry. BCG takes a detailed look at startups’ assault on existing business models. BCG’s first report discussed five trends that have reshaped the industry. A next BCG report will focus on what incumbents need to do to add the necessary in-house digital muscle.

New competitors

In interviews done for the BCG study, parcel and express companies made it clear that they consider e-tailers (such as Amazon in the US and Alibaba and in China) to be their biggest threat. When they build their own parcel delivery capabilities, e-tailers has different reasons. They often concerned that incumbent deliverers won’t be able to meet their customers’ expectations.

Reliability and speed of delivery, even during peak shipping seasons, have become non-negotiable matters in the minds of most online shoppers. So has flexibility. Most online shoppers want the option of either next- or same-day delivery. Therefore, the track-and-trace services, and are starting to look for rerouting options. In cases where traditional deliverers can’t offer these benefits, it makes sense for e-tailors to offer the benefits themselves, according to BCG. Therefore the giant companies are hugely investing in startups and innovative ideas for their delivery solutions.

Anytime, anyplace, anywhere

New players, with new technology solutions, are entering the logistics space with each month that passes. The real focus for incumbents should be on staying ahead of the changes in their markets and on avoiding disruption and commoditization. It’s all about being the first to anticipate what customers will need. To the extent that executives can do this, they won’t be the ones playing catch up.

Source: Citylogistics