Drones and robots dispatching online purchases within the hour sounds like the stuff of sci-fi, but many ‘last mile’ delivery companies would have us believe that reality is just around the corner.
Futuristic-sounding companies such as Starship are already trialling robot couriers in several countries and has a pilot in the works with JustEat; while location referencing UK start-up What3words has partnered with unmanned aircraft built by Altavian to deliver to the most remote places on earth.
In the words of cyber punk novelist William Gibson, it’s easy to believe: "The future is already here – it's just not evenly distributed."
Snail mail
Yet not everyone is convinced. "We’re fine with the postman, the basic solution," Luca Marini, chief operating officer of women’s fashion business Finery tells Essential Retail at a ZX.YCN event in London. Despite being a new business itself – the label launched online two years ago and is now stocked in a number of high street stores – Marini is happy with a service that has been around for centuries.
"Last mile doesn’t matter to a business like us…if you are food business, then it matters. So what if I told you your clothes are going to come a day later? Who cares? OK so maybe 30% of women are going to email and say they are pissed because they had a dinner – but they don’t really care."
He believes the market for delivery within 1-2 hours is at best niche. "How many women in the world are going to freak out because they have an event that evening [and they don’t have anything to wear]? And those women that freak out, they don’t buy Finery, they buy Gucci or Valentino."
Even something like Amazon Locker isn’t an idea that would work for Finery, he says. "It’s a small box and our parcels would get squished." Good packaging is more important to the customer experience than instant availability, and in any case he says the company doesn’t sell via the Amazon platform. "You have to think where on the value chain do I put my money?"
Trevor Stunden, managing director of drinks company Anheuser-Busch InBev’s VC arm ZX Ventures, is more enthusiastic about the possibilities of last mile. He believes automation has the potential to dramatically reduce delivery costs.
"Robots and drones are clearly the future, the opportunity is immense," he tells us at the same event. "I would love to get a case of cold Corona, put into a Starship robot and send it to a park on a sunny day on a Saturday. Could you imagine you are sat having a picnic and then it arrives?"
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A saturated market
Nevertheless both retailers and start-ups themselves admit the delivery market is saturated.
"There is a challenge in the industry," says Stunden. Everyone is racing for scale in order to make money against fixed costs, but only a few will succeed: "I think we will see consolidation in the industry within the next 6-12 months."
Olivia Rzepczynski, comms head at What3words, says there are something like ten-thousands delivery start-ups that have emerged over the last year. "It is highly competitive and a lot of them are not making money… they will need to work out the aspects that aren’t making them any money. And I do think the number will reduce down."
That’s something Marini has witnessed first hand. "Two of my friends have done delivery start-ups and failed. So the balance of power is on the retailer: we are sitting at strong side of table. The people who are fighting for it are all the delivery companies. There are constant new models emerging and we are just sitting there and watching."
The elephant in the room is, of course, Amazon. Exactly how the multitude of start-ups will take on the might of the retail colossus is difficult to see. Not least because it already dominates the next day delivery space. Amazon has even taken out patents for a floating airship warehouse for its delivery drones; and one for a subterranean network to deliver packages in underground tunnels.
"It’s a tough game," says Marini, who is speaking at RBTE's conference in May. "There are all sort of variations of delivery start-ups doing the same thing. Realistically, very few will survive. Amazon will come and eat everyone’s lunch."
However, those who do survive stand to play a significant role in the future of the market.
