What does The Great Inflation mean for last mile delivery?

The past five years, supply and demand have been steadily on the up. But record-breaking inflation has started to dampen demand. What can retailers do to navigate these tricky waters?

Over the past five years or so, supply and demand have been steadily on the up. Salaries were increasing; people had more money to spend. Companies responded to this by launching fresh, creative offerings. Many of them are designed with ultimate convenience and flexibility in mind, from product offerings to delivery options.

Take rental models, for example. These have become popular for durable goods like furniture. Delivered to your (home) office, assembled where needed and picked up when you’re finished with it. Simple! Subscription models have also boomed, especially in food. It’s easy to see why: convenience and deliciousness are brought right to your door.

We’ve also seen wide-ranging innovation in delivery trends. Click and Collect lockers are increasingly popular, for example. And not just due to pandemic-related zero-contact — it’s the convenience that’s key. Same-day delivery looks set for continued growth, and dark stores have created a new generation of high-speed, pared-back fulfilment centres.

However, times have changed.

Record-breaking inflation continues to dampen demand. Consumers are, naturally, cutting back on luxuries. Newly cost-conscious, many will be seeking opportunities to cut excess spending — including on delivery. So what can e-commerce stores and companies do to navigate these tricky waters? Here, we’ve compiled strategies to help you stay on top of the situation. From gauging shifts in customer priorities to optimising deliveries. And from flexible fleet management to enhancing customer loyalty. 

1. Understand evolving customer needs  

How have your customers adapted their behaviour in this high-inflation reality? Taking the time to understand their thinking is key to realigning your services with their needs.

Are customers, for example, now willing to wait a few extra days for free delivery? Would they be happy with a longer free delivery window? It’s also worth considering the motivation behind the high-convenience options you’ve introduced in recent years. Were they driven more by competitive advantage than by responding to customer needs or wants?

Implementing added options in your check-out flow can help gather these useful insights. Will customers choose a) next-day delivery for a fee? Or b) free delivery in 4 days? Are they still opting for the most popular, convenient delivery windows? Even if you up the cost?

A little experimentation will help you gauge customers’ refreshed priorities. Then you can map a middle ground that’s still profitable and efficient for you as a retailer. Say customers are now happy with longer free delivery windows. Then, you’ll gain scope to maximise deliveries per vehicle. There’s no need to compromise on service quality, either.

With real-time tracking, your customers will know if your driver is still 5 hours or just 15 minutes away. Enabling them to plan their schedule, without being stuck waiting at home. This will help create the healthy balance your business needs. Still delivering on customer expectations, while staying safely afloat.

2. Optimise deliveries for cost-efficiency 

Having an in-depth understanding of your customers’ current needs enables you to optimise your delivery model accordingly. Grocery retailers may find it’s more the items customers buy that change, rather than their delivery preferences.

Yes, branded and luxury products may be swapped for own-brand staples. Fresh produce purchases might reduce while long-life products increase. But many shoppers might view paying more for their regular delivery slot as a necessary expense. As a result, major shifts in delivery scheduling may not be needed.

When it comes to non-perishable goods, however, retailers will likely need to adapt more. As customers cut back on items like furniture and hardware, delivery volumes will shrink. So efficiency is more important than ever. Luckily, there’s more scope to nudge customers to wait a little longer for delivery. Durable goods won’t go off, after all. Likewise, increasing the minimum order value to qualify for free delivery is an option.

With smart route optimisation software, you can also combine orders with multiple delivery windows into a single route. Overall, you’ll have more orders, in full vehicles, optimising your routes for fuel use and cost. Ensuring flexibility, for maximum efficiency.

3. Utilise flexible fleet management

Fundamentally, a streamlined fleet is a cost-efficient fleet. So why pay more for vehicles you don’t always need out on the road?

Many companies find themselves running a fleet that’s simply too large for their actual need. Vehicle oversupply can soon become eye-wateringly expensive — maintenance and parking costs alone quickly add up. And that’s aside from the fact that vehicles are an inherently depreciating investment!

But let’s explore an ideal — and very much attainable — scenario. You only purchase, fuel, maintain and store the minimum vehicles your delivery model requires. Then during peak times, you collaborate with a trusted delivery partner to meet demand. You can meet customer expectations while minimising fleet costs. That spans from vehicle purchase to repairs, fuelling and garage space. In addition, expanding your fleet will no longer be directly delayed by auto industry supply chain disruption. Ideal! Plus, smart, centralised tech solutions make kickstarting collaboration with a delivery partner stress-free and simple.

4. Ensure world-class delivery

Much like customers are watching costs, you as a business are too. And your retention/acquisition ratio will be a key focus here:

  • Acquiring new customers is hugely expensive. It costs 5x more than customer retention.
  • Conversely, increasing customer retention by just 5% can boost profits by up to 95%.
  • Success rates of selling to existing customers sit at 60-70%. For new customers, they fall to just 5-20%.

Essentially, business cost-efficiency rides on happy customers returning for more. Achieving this hinges on delighting them the first time round. How? With stand-out service experience, of course. Linking us back to our first pointer, a key element here is understanding customers’ needs. Then, you can adapt your service offering to meet them. This will allow you to shape a great experience throughout your touchpoints. From a customer’s very first website or in-store visit, right through to delivery.

There are a couple of other elements to creating ultimate convenience for your customers. The ability to send real-time notifications is crucial. Likewise, being able to follow up right away by asking for customer feedback. How did they experience the delivery? What did they value most and where might you improve? With the right delivery management software, you’ll be able to set up this close customer communication. Positioning you to gain insights invaluable to enhancing your service and building all-important customer loyalty.

Stay in control with the right route optimisation tech 

Keen to talk through your company’s specific needs and situation? Reach out to us! We’ll be more than happy to share details about our offering. Helping you streamline your fleet, maximise efficiency and — most importantly — delight your customers.

Or perhaps you’re ready for a platform demo or free trial? Get started here.

Picture of Rasmus Hallgren Sánchez

Rasmus Hallgren Sánchez

Marketing Manager at Gordon Tech. Rasmus is passionate about all things marketing, e-commerce, and digitalisation. Has an almost incurable predilection for hockey and tacos.

Gordon is a cloud-based platform that empowers retailers to manage, track, and optimise their last mile deliveries.