The 2024 holiday peak season is the shortest since 2019. With only 17 shipping days between Black Friday and Christmas Eve, retailers will look for last-mile options that will not only be cost-effective but will also allow last-minute customers to receive packages on time.
“What forecasters and some of our customers are saying is, because of the tightness of the shipping season, that many customers will go into a store to complete their holiday purchases rather than having those orders delivered by UPS,” UPS CEO Carol Tomé told analysts in October.
However, as holiday deadlines pass to ship parcels by less costly services from FedEx, UPS, and other carriers, retailers are adding same-day/express options to their last-mile delivery basket that will allow customers to shop not only in-store but also online for delivery closer to Christmas Day.
“As we head into holiday, we’ve expanded our partnership to allow for same-day delivery options on academy.com, which is also powered by DoorDash. We expect this to be a big unlock the last four to five days leading up to Christmas,” Academy Sports CEO Steve Lawrence told analysts earlier this month.
Same Day Deliveries
Retailers have expanded their options for delivering products to consumers’ doorsteps over the last several years to compete with Amazon and other online retailers. In addition, high shipping costs and slow delivery times are major concerns when consumers shop online according to a DHL survey on online shoppers.
Indeed, more retailers are partnering with crowd-sourced service providers like DoorDash and Instacart. Dollar General is conducting a same-day delivery pilot from about 75 stores. The service is from an undisclosed third-party delivery company. Dollar General currently partners with DoorDash for some deliveries, and it also partners with FedEx as a pick-up and drop-off location for FedEx packages.
Walmart is also offering same-day and expedited deliveries through its last-mile delivery service. “The popularity of expedited delivery has resulted in more than 30% of orders coming from customers and members that elected to pay a convenience fee to receive their delivery in less than 1 hour or less than 3 hours,” Walmart CFO John David Rainey told analysts in November.
As retailers spread their parcel volumes among an increasing number of carriers, they are financially benefiting and also providing more options for their customers.
“I think they’ll [customers] will use us more for a fill-in between their big Costco brick and mortar shop to go into an Instacart and Uber and shop those lines,” Costco CFO, Gary Millerchip told analysts in early December. “So, I think that we’re finding that it’s the most cost-effective way to do some small nonfood item deliveries as well, where we would have otherwise shipped those via UPS or a carrier from a distribution center, we can now have those to a member within a few hours,” Millerchip continued.
2025 Outlook
As higher last-mile rates and surcharges go into effect for 2025, retailers will continue to look for last-mile delivery options to lower shipping costs and/or compete with other retailers. Regardless of last-mile carrier, retailers need to negotiate the best rates for the services that are needed. Once agreed upon, retailers will need to closely monitor shipping invoices each month to ensure they match agreements. Business advisory companies like SLB Performance, are typically the best option to help negotiate and audit invoices because of our deep shipper expertise, parcel knowledge and lack of bias.