During the pandemic, fitness equipment for the home, computers and monitors, and furniture for newly established home offices filled the trucks of last-mile delivery providers. That, along with consumers relegated to their homes and undertaking all types of home improvement projects, drove last-mile volume growth at a 40% annual pace as over-the-threshold, “big and bulky” deliveries surged.
Fast forward a year. Consumers are still ordering goods for home delivery and installation, but often after visiting a brick-and-mortar store versus going online and filling a digital shopping cart. And while by some accounts, orders of fitness equipment and electronics have “flattened,” consumers have tossed the market a change-up, ordering goods for delivery to hybrid offices, being more selective about what they’re buying for the home, and scaling back on discretionary purchases as inflation raises the costs of virtually everything.
“What [the last-mile market] did in 2020 and ’21 was not reality,” nor was it sustainable, notes Satish Jindel, chief executive officer of shipping analytics firm ShipMatrix. “With [government stimulus payments,] everyone believed there was a Santa. But Santa is real only for children,” he quipped.
Instead, consumers are shifting much, though not all, of their spending back to services, Jindel says, adding: “People want and need human interaction, which is why you find people [doing more] eating out, spending more on travel and entertainment, and going back to the gym” while dialing back on buying big and bulky goods for the home or office.
Estes Express Lines, as a less-than-truckload (LTL) carrier, has performed residential deliveries for years, notes Billy Hupp, the company’s executive vice president and chief operating officer. But it has been in the last five years that the company has formalized last-mile home delivery as a discrete service, investing in specialized equipment, driver training, and a complementary agent network in locations where Estes doesn’t have a significant presence.
During the pandemic, “we delivered more 65-inch TVs than the world could ever use,” joked Hupp. Estes does not itself do the “white glove” in-home delivery and installation service, instead deploying a network of agent-partners to provide those deliveries with two-person teams. The majority of Estes’ home deliveries are “to the threshold” service. “We do help get it in the house or put something in a garage or the backyard, as an accommodation if the customer requests it,” he clarifies. A dedicated customer service team for residential is there to help as well, while Estes’ tech platform provides real-time ETA updates texted to the consumer’s phone.
Like other providers, the company has seen a shift in the types of products going to homes in the past year. Where there once was a preponderance of electronics, fitness equipment, and office furniture, now it’s goods like pavers for a driveway. Patio furniture and backyard play structures. Outdoor grills. Tools and materials for home improvement projects, where the customer orders online and Estes delivers it to the home on behalf of the retailer.
Nationwide, Estes operates from 220 terminals, with a fleet of some 7,500 tractors and 30,000 trailers. As the residential business has grown, so has Estes’ investment in it. Today, Estes deploys some 2,000 lift-gate–equipped units, a combination of straight trucks and 28-foot pup trailers, and 1,000 electric pallet jacks. The carrier has also upped its game on mobile technologies and customer-facing apps that improve visibility and communication. An added benefit of these investments has been driver satisfaction, says Hupp. “Adding lift gates and providing pallet jacks is a real advantage that improves driver’s daily work experience and makes for a better customer experience as well,” he says.
He cites the company’s LTL network, which provides often-needed flexibility and capacity, as another advantage. “When a residential delivery agent gets swamped, we can swing some of that freight into LTL and vice versa,” he notes. And while the overall last-mile home delivery market has flattened somewhat, it remains an in-demand service that will continue to grow. “We’re here to stay,” he says. “We’ve equipped ourselves to be multifaceted in our approach so we can be more flexible, and that’s a competitive advantage.”
The last-mile, big-and-bulky over-the-threshold business is one of the hardest jobs in trucking from a driver’s standpoint, observes Jeff Abeson, vice president of business development for Ryder. “You’re driving a very large vehicle in residential areas. You’re carrying heavy stuff into people’s homes, goods they’ve spent a lot of money on,” he explains. “And then you’re assembling it and sometimes taking away the old goods that are being replaced.”
Ryder operates a national network of 82 locations that serve as hubs for last-mile home deliveries. And while the market has shown signs of softening, “we are still seeing an incredible amount of volume” of last-mile business, Abeson notes. Companies are still dealing with back orders of goods, balancing and repositioning inventories, and managing through the residual supply chain effects of earlier port delays and rail congestion.
Where future demand is headed is tough to predict. Yet the fact of the matter is that the business of hard goods delivered into the home, in Abeson’s view, has not really slowed. “It’s hard to get your head wrapped around that [post pandemic] … since while many are back in an office, many more people are still working from home.” And because they’re spending so much time in the same space, that’s where they’re making their investments.
The majority of Ryder’s last-mile business is over-the-threshold, in-home deliveries, often with installation, Abeson notes. The infrastructure supporting that service is challenging. It requires systems, physical warehouse capacity, labor resources, and specialized equipment. Variability is constant in a business where “your forecast really is only as good as your customer’s forecast,” he says, adding that Ryder works diligently with its customers to flex capacity to match demand.
The biggest focus for Ryder, Abeson says, is continued material investments in technology evolving around the end consumer. “It could be as simple as scheduling a delivery and putting an appointment automatically on [the customer’s] calendar, then sending them text updates. It gives the customer confidence we’ve scheduled them and are following up,” he says. Such technologies “reduce inefficiency because we’re more predictable and we’re delivering the first time more often.” Speed to the customer also is high on the list. To enable quick deliveries, Ryder’s customers are forward-stocking fast-moving SKUs (stock-keeping units) at Ryder facilities. “We are all being conditioned in that way” to expect fast deliveries, he says.
One continuing wrench in the works, a holdover from the pandemic: supply chain delays creating partial orders. “You bought a table and six chairs, but only the table is in the warehouse,” Abeson explains. “You’re not interested in just getting the table. You want the whole order at one time. So, from an operator’s perspective, we have to account for how that affects warehouse space and labor, driver labor, and scheduling. “Many of our customers’ supply chains continue to be challenged in this way, but we just have to manage it and support our customers.”
Fernando Rabel, interim president of last mile for RXO, a digital truck brokerage that was spun off from XPO as an independent company this fall, sees two immediate effects on last mile from the post-pandemic environment. “First, the increase in operating costs has been significant and impactful. Second, high inflation has impacted the overall market for furniture and appliances.”
And while RXO’s delivery volumes remain relatively flat compared with a two-year average, “we believe we are well positioned to maintain our lead while capturing even more share within this $16 billion industry.”
From a product perspective, “we’re seeing the typical cyclicality one would expect, with appliances more resilient than bedding, furniture, and fitness equipment,” Rabel says. He cites one metric that points to continued strong growth in last mile: “By 2025, heavy and bulky penetration is expected to increase to nearly 30% of all e-commerce. We expect in the long term that this tailwind will drive continued demand for last-mile services,” he says.
He notes that RXO Last Mile covers 159 markets, with its network putting it within 125 miles of 90% of the U.S. population. The company handled more than 11 million deliveries last year.
Dennis Moon, chief operating officer for Roadie, a company that utilizes a crowdsourced network of drivers to make same-day deliveries and which is now part of UPS, says that shipper supply chains continue to evolve in an effort to “get product closer to the customer. That’s everyone’s holy grail.” He cites as an advantage “the scalability of our platform and its flexibility to move up and down with a customer’s volumes.” His product mix has shifted as well. “We are seeing a lot of lift in the medical area—everything from crutches to wheelchairs. Prescription and medical deliveries are one of our largest growth areas.”
The company also is doing more shipment consolidation to gain density. Before, one of Roadie’s “on the way” drivers might make one pickup and deliver it. Now through sophisticated technology, they are doing more batching and consolidating, which is good for drivers, who can make more money, and good for shippers, who benefit from a better rate.
Technology advances and innovation also are driving more responsive operations and customer service for last-mile carriers. End-user consumers want an Uber-like experience that gives them flexible delivery options, up-to-the-minute visibility into shipment status, and an immediate feedback loop post-delivery. New cloud-based, low-cost systems are rising to the challenge, bringing sophisticated tools that once were the domain of the large players to smaller operators.
Krishna Vattipalli is chief executive of software developer Fleet Enable, which provides a full-cycle platform and workstreams that help last-mile fleets wean themselves from manual workflows and drive better processes. “Many small to mid-sized operators are using at least four different systems,” including spreadsheets and even white boards, to plan and run their business, he says. Fleet Enable provides a single-source solution for last-mile delivery fleets, optimizing 16 workflows in the lifecycle of an order, including appointment scheduling, route and capacity optimization, visibility tracking and alerts, asset forecasting, payroll, and billing and invoicing.
Even with companies bringing workers back to the office, there are still many working from home or on a hybrid schedule. That’s extending demand for big-and-bulky last-mile service into B-to-B (business-to-business) markets, complementing B-to-C (business-to-consumer) deliveries. That, along with a continued demand for speed and convenience, is one reason last-mile delivery will continue to grow, Vattipalli believes. “Technology these days is no longer a differentiator; it is a basic requirement,” he says. “Carriers need to be smart about their investments in technology. That will help them achieve better margins and give them an edge to negotiate better with shippers.”