How crowdsourcing shipping through technology will make last mile delivery cheaper

How crowdsourcing shipping through technology will make last mile delivery cheaper

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The proliferation of e-commerce has transformed free shipping and same-day delivery from perks to table stakes — and retailers are paying the price. With daily parcel volumes surging and customers increasingly unlikely to foot the bill, companies have been tasked with finding new ways to offer speedy shipments without eating costs.

last mile share of delivery costs
Breakdown of transportation costs by leg including last mile delivery BI Intelligence

Breakdown of transportation costs by leg including last mile deliveryBI Intelligence

Among the most popular strategies is crowdsourced delivery, the Uber model helping online shops solve the most expensive part of shipping: the last mile problem. Like Uber and other ride hailing apps, a number of crowdsourced delivery solutions have been cropping up over the past few years to ease these pains by connecting customers directly with local couriers. And it’s not just startups either; Amazon, the world's undisputed e-commerce leader, is investing big in crowdsourcing deliveries.

How much does Amazon spend on shipping?

“Free shipping” comes at a high cost. According to Amazon’s 2017 annual report, the company spent $21.7 billion in shipping last year — a number that includes sortation, delivery center, and transportation costs. This is nearly double the $11.5 billion it spent on shipping in 2015. And as the expectation of free, same-day delivery becomes the standard for online consumers, even giants like Amazon need to seek alternative solutions.

The crowdsourcing solution to the last mile problem

The last mile of delivery is the most expensive and time-consuming part of fulfillment for retailers and their logistics partners, comprising 53% of the overall cost of shipment. Crowdsourcing takes the onus off of companies, instead connecting customers directly with local couriers to expedite deliveries and cut down on costs.

The crowdsourcing model is already popular among meal and grocery delivery and, seeing the success of startups like Uber, Airbnb, and GrubHub, e-commerce retailers are now eyeing it to fulfill their online orders. As a result, general use crowdsourced delivery companies have emerged to meet this need.

Here’s a look at how three companies - Amazon Flex, Hitch, and Deliv - are trying their hand in the shipping industry — and what’s coming up next.

Amazon Flex - Deliver with Amazon

Launched in 2015 and piloted in Seattle, Amazon Flex lets customers order and receive packages through its on-demand delivery service, Prime Now, which guarantees free one- and two-hour deliveries. For Prime customers with already high expectations for prompt delivery, not much changes; the service primarily markets itself as a side gig for couriers.

Amazon Flex
Amazon Flex Crowdsourced Delivery Amazon

Amazon Flex Crowdsourced DeliveryAmazon

For the most part, the app is only open to people who have cars (except in select regions allowing commercial bicycles), so those who want to make deliveries on bike or foot might have to look elsewhere. The service is particularly attractive to rideshare drivers who may want to make extra money without having strangers or potentially disruptive passengers in their cars. Anyone 21 or older with a smartphone, car, and valid driver’s license can log into the app and schedule their availability to start making deliveries.

Shipments can originate at an Amazon location, store, or restaurant. Drivers use their smartphone camera and GPS to scan packages and get turn-by-turn directions to their destinations. As long as they deliver the package within the allotted time frame, couriers make $18-25 an hour — all through a cashless transfer to their digital wallet on the app.

Learn more about Amazon Flex.

Hitch - Crowdsourced Delivery

Hitch
Hitch Crowdsourced DeliveryHitch

Founded in 2014, Tampa-based startup Hitch gives consumers, “the choice to be Shippers, Travelers, or both.” The platform touts “turning your commute into cash” by pairing up shippers (the people placing the orders) with travelers (the local couriers) who are already heading in the direction of the delivery.

Users create profiles on the app to join the socially vetted community, where they can then rate one another and verify their accounts by adding bank account information. Shippers put out requests to have packages delivered, and Travelers can input travel information to see if there are any available deliveries along their route.

The app uses GPS to find the quickest route and provide tracking, as well as camera functionality to show proof of delivery. All payments are exchanged through Hitch’s third-party payment processing partner, Stripe.

Learn more about Hitch.

Deliv - Same-Day Delivery

Deliv is a general use last mile solution offering same-day service to over 4,000 omnichannel businesses in 35 cities across the country. Some of its biggest partners include Macy’s, Best Buy, Walmart, and IBM.

Deliv Fresh
Deliv Fresh package Deliv

Deliv Fresh packageDeliv

Rather than just fulfilling ad hoc deliveries for consumers, Deliv seeks to be a long-term business partner solving companies’ last mile problem — evidenced by its breakdown into Deliv Small Business, Deliv Enterprise, and Deliv Fresh for groceries. It offers SLAs, performance metrics, and integrations into business’ online checkout processes.

And the company is growing. In February, 2018, it launched Deliv Rx to extend these same-day services to patients, doctors, pharmacies, hospitals, labs, and clinics. Deliveries can include things like prescriptions, x-rays, medical equipment, documents, and even pet medicine.

Learn more about Deliv.

Growth & Future of Crowdsource Shipping

Want to learn more? The Crowdsourced Delivery Report from Business Insider Intelligence examines the rise of the crowdsourcing model in the last mile delivery space.

In this report, we detail the top use cases for crowdsourced deliveries, as well as the benefits and challenges of using this model for delivering online orders. We also provide insights into how to optimize crowdsourced deliveries for e-commerce and, lastly, we explain the long-term potential of startups appearing in the crowdsourced delivery space as automation plays a bigger role.

Here are some of the key takeaways from the report:

  • Retailers are looking for ways to deliver goods faster to consumers' doorsteps to stave off Amazon's threat and meet customer expectations.
  • To accomplish that, retailers and delivery providers are zeroing in on the "last mile" of fulfillment, the most expensive and time-consuming part of the delivery process, which is when a package reaches the customer's address.
  • Startups like Postmates, Instacart, and others are looking to disrupt the last mile delivery space by leveraging the "Uber model," and connecting businesses to non-professional couriers who can deliver goods instantly.
  • Crowdsourcing can drastically speed up deliveries in urban areas, where there is a high density of deliveries and potential couriers to be matched.
  • However, as delivery volumes increase, crowdsourced delivery startups will need to further optimize their deliveries to improve cost efficiencies.
  • Many of the deliveries these startups perform today will likely be automated in the future, raising the possibility that these startups may eventually look to incorporate new technologies like delivery drones or self-driving delivery vehicles.

In full, the report:

  • Details the factors driving investment and growth in crowdsourced delivery startups.
  • Examines the benefits and drawbacks of using crowdsourcing to deliver online orders.
  • Explains how crowdsourced delivery startups can improve their cost efficiencies to tackle greater delivery volumes.
  • Explores the role that crowdsourcing will play in the future of delivery once automated delivery options, like drones and robots, arrive.

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