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Costco, Nordstrom, UPS Join Researchers to Tackle Last Mile Delivery

Costco, Nordstrom, UPS Join Researchers to Tackle Last Mile Delivery
Costco, Nordstrom, UPS Join Researchers to Tackle Last Mile Delivery
October 13, 2016   //   

By Daphne Howland

Dive Brief:

  • A new University of Washington research center, the UW Urban Freight Lab, is working with shipper United Parcel Service, retailers Costco and Nordstrom, and the Seattle Department of Transportation to study urban product delivery challenges.
  • The lab (part of the University of Washington’s Supply Chain, Transportation and Logistics department) was founded to analyze last-mile delivery in urban areas, including management of streets and parking for delivery trucks, bicycles, pedestrians and cars, according to the school’s news service.
  • Transportation and delivery experts, retailers, tech firms and urban planners will work together on UW Urban Freight Lab research, according to the report. Seattle department of transportation director Scott Kubly said the city will chip in $285,000 in funding over the next three years, an amount that could still grow

Dive Insight:

It’s only logical that this effort is taking place in Seattle, the hometown of Amazon, the e-commerce giant who arguably sparked the current frenzy for last-mile delivery options. In its wake, a growing number of retailers and delivery startups are providing same-day delivery, sometimes in one or two hours, in communities across the world.

“One- or two-day shipping is no longer an option,” Holger Luedorf, SVP of business at delivery startup Postmates, said earlier this year. “We are creating entirely new customer expectations.” 

But that assertion runs counter to much market research, which has consistently shown that most shoppers prefer free shipping over fast shipping. In fact, not much has changed from Boston Consulting Group’s 2014 finding that a mere 9% of shoppers said same-day delivery would improve their online retail experience, compared to 74% who said free delivery is important and 50% who said low prices are important. 

“Most customers don’t really need [product delivery] the same day,” Leigh Helsel, head of retail at tech solutions consultancy ICC, told Retail Dive earlier this year. “It’s nice in big cities — San Francisco, New York. But by and large I’m not sure. When you melt it down, is it really adding incremental sales?” It’s also unclear how much longer some retailers can continue shouldering the mounting costs of their delivery efforts, or how popular such services would be if prices rise.

The UW Urban Freight Lab could answer many of these questions, and find the kinds of solutions that could bring costs down enough to make last-mile delivery really work for retailers (which face higher costs and thinner margins in e-commerce even when more traditional shipping options are used). Notably, the research will also include investigations into the effects on the environment and cities’ livability as more vehicles crowd city streets to unload their retail packages.

Anne Goodchild, who heads the University of Washington’s SCTL department, told the school’s news service that the myriad of issues will take a concerted effort by a group of stakeholders to solve. “The problems where we can be of most value occur where a private company has to use public space or share public space — they can’t control that,” Goodchild said. “The ‘final 50 feet’ highlights the challenge of coordinating across numerous, diverse stakeholders. It’s a problem that isn’t going to solve itself and no one can solve independently.”