Remaking the last mile of
e-commerce
Here’s how four CEOs are helping brands deliver the goods.
Zur and his team have built Veho into a highly automated platform designed to create a win-win for merchants and consumers. Each morning, the company’s software determines optimal routes for thousands of crowdsourced drivers who use their own vehicles to make deliveries. With this army of drivers at the ready, the company can meet demand surges when traditional carriers have no more vehicles available, and it can downscale operations—and costs—when demand slows. Zur says the company delivers on time more than 99% of the time.
Veho’s biggest differentiation is how it puts consumers in control of the post-purchase experience. Shoppers can use its app to communicate directly with the driver, to find out exactly when a package will arrive. They can change a delivery address if the product hasn’t already been received and can leave specific instructions (say, hide the TV-shaped box behind the forsythia bush by the garage). And if they want to return something, they simply request a pickup via the app and leave the package outside their door. “You don’t even need to package it up or print a label, because a lot of people don’t have printers anymore,” Zur says. “If you make it easy to return things, people want to come back and buy more.”
Not all brands have gotten the memo. With high inflation and a potential recession on the horizon, many are rolling back free return policies and raising delivery fees. Zur advises brands to think of delivery not as a cost but rather as an opportunity to lift profits.
Zur says that hassle-free deliveries can boost sales and reduce churn, lifting the lifetime value of customers by more than 40% for some brands. Making returns simple also means consumers are likely to send items back sooner, eliminating potential inventory issues and raising the odds that a product can be resold rather than written off.
Going forward, Veho plans to enhance the ability for brands to offer differentiated personalized service to their most loyal customers. For example, Veho is working on ways to facilitate shoppers’ ability to reach live customer service reps, and offering tools that make it possible for brands to specify what feedback to gather from consumers and how to draw insights from that feedback to help increase the repeatability of sales. “It’s the kind of service that can help make a retailer recession-proof,” Zur says. “I'm incredibly excited about the next 12 months, because every crisis is an opportunity. And we don’t plan on wasting it.”
Sendcloud had experienced this issue firsthand while trying to build an e-commerce company to sell phone accessories. Carriers had incompatible systems, so it was almost impossible to identify the most efficient, affordable route for each delivery. There was daily paperwork—involving actual paper—to capture data from clipboards used by delivery people. And the cost per shipment was double or more what the Amazons and Apples of the world were paying. “It was clearly a big problem, because online forums were full of people complaining about it,” says Van den Heuvel. “Including us.”
They pivoted to this last-mile problem, and quickly decided to follow the Stripe blueprint. Just as Stripe made it easy to connect with dozens of payment processing providers, Sendcloud developed a plug-in for brands to connect to various carriers, from local outfits to FedEx and DHL. “Merchants connect to us and we connect them to the rest of the shipping world,” says Van den Heuvel.
When the pandemic started, Sendcloud saw revenue skyrocket, as retailers sought ways to bypass overloaded delivery services. “There’s no way to hire 2,000 drivers or build a new sorting center in two weeks,” he says. “But we can connect you to 15 carriers, and one of them is definitely going to be able to deliver your stuff.”
Today, nearly 25,000 online brands use Sendcloud to connect with more than 80 carriers in eight European markets. Sales growth doubled in 2020 to 130% due to the pandemic, and he expects the company to grow 60% and reach profitability this year. Even if there’s a bad recession, Van den Heuvel says, e-commerce will continue to grow, especially as companies like Sendcloud make home delivery more convenient for consumers and strategic for merchants.
“Ultimately, I don’t think brick-and-mortar stores will hold any stock,” he says. “You may go to a clothing store to get personal attention. But if you can have your purchases delivered before you get home or that night, why would you buy it in the store?”
Bringing innovation to a space that hadn’t changed much in decades has paid major dividends. Tens of thousands of businesses and individuals use Loggi to have meals, documents, and larger shipments delivered from another part of their city, often in less than seven minutes. Even long-distance orders, which typically take four or five days in Brazil, arrive in less than two days. And Loggi tends to be 70% cheaper than any of the country’s seven large courier service providers, says Lecuyer.
The company started small, using its software to deploy a fleet of Loggi-owned motorbikes to navigate Sao Paulo’s notoriously bad traffic. Soon it expanded to offer services within other cities, building a nationwide network that includes its own vans, trucks, and distribution hubs.
Sales leapt forward when the company figured out how to apply the dynamic allocation algorithm it used for the last-mile problem to the “first-mile” problem: how to optimize the pickup of products, whether from stores, pop-up trucks, or people’s porches. This was a particularly big deal in Brazil, where the majority of orders are shipped directly from thousands of stores or small warehouses, rather than through massive, Amazon-style distribution hubs.
“Sellers want to spend their time selling, but the only option for most businesses was to spend 30–40 minutes at the local post office,” he says. “That’s time they’re not in front of their computers marketing or selling.”
Loggi continues to improve its systems to further reduce costs. Engineers recently rewrote the code for its advanced sorting equipment so products are no longer dropped in a bin heading to a city or region but instead are assigned directly to a specific route and driver. Loggi also worked out physical security protocols so that products requiring air shipment could be X-rayed in its warehouse rather than wait in long lines to be X-rayed at the airport.
Like his peers at Veho and Sendcloud, Lecuyer believes that removing friction from product delivery is the missing link to a massive increase in e-commerce. “The e-commerce economy is very solid in Brazil, but it’s still less than 10% of all retail sales,” he says.
Saxena and his team decided to pivot away from e-commerce and instead build a delivery service that would give retailers a third option. In 2022, nearly 7,000 e-commerce companies and a range of other businesses used ShipBob’s service to deliver about $4 billion in products. They arrive just as fast and efficiently as with Prime and allow retailers to retain full control and add a personal touch. “We saw more than 100% year-on-year growth in shipments on Black Friday and on Cyber Monday thanks to merchants who have been able to build loyal followings with our help,” says Saxena. “ShipBob has given these entrepreneurs a fighting chance against the Amazons of the world.”
To pull it off, Chicago-based ShipBob has convinced smaller third party logistics companies around the United States, United Kingdom, Canada, and Australia to let it configure a portion of their warehouses with its software, which figures out how much inventory to keep on hand and how to fill orders as quickly and efficiently as possible. It now has 50 of these fulfillment centers in these markets. ShipBob customers pay for the warehouse space they’re using at any point in time and a pay-as-you-go fee for deliveries. Because the facilities are spread far and wide, merchants can often reduce shipping costs dramatically, as an in-state delivery typically costs half as much as a cross-country shipment.
ShipBob also gives merchants tools to build their brand in ways Prime doesn’t permit. They can ship in customized boxes, and include promotional inserts to cross-sell, up-sell, or reward their most loyal customers. “If you truly believe you have an amazing product, we give you a way to build that direct relationship,” says Saxena. In addition, these merchants retain full control of their data and the relationship with their customers.
While shipping was once seen as a capital-intensive, low-margin business, Saxena says ShipBob and others have proved it’s a massive market with huge potential. “You no longer have to ask if merchants will come, because they’re already there,” says Saxena. “Now, the only question is who can take the market the fastest.”
