Last Mile: From “wow” to “required”

This differentiator—this “wow”—lasts for a period of time, but eventually becomes a minimum expectation for the consumer and is later described as a “required feature.”

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In marketing classes there’s usually a segment on customer expectations. When some new feature is added to a product or service it’s supposed to carry a “wow factor.”

This differentiator—this “wow”—lasts for a period of time, but eventually becomes a minimum expectation for the consumer and is later described as a “required feature.” A perfect example would be cup holders in cars.

At one time, the cup holder was a nice addition to a new car. For a while we even witnessed cup holder wars, as different brands added cup holders to all the seats to outdo their competitors. Today, we would be shocked if a car didn’t have a lot of cup holders conveniently placed—in fact, the typical front seat now has at least two.

In case you haven’t noticed, last-mile delivery for consumers and small businesses has moved from “wow” to “required’ in a very short time. Even small items are routinely delivered quickly to the door—often free of additional freight charges.

As on-line retailers and the supporting freight service providers have saturated the market with fast service, the expectation of buyers has risen to the point where we are confident of service, and thus we’re reducing inventories of everything from light bulbs to truck tires.

For those with buying responsibilities and those with responsibility for receiving product, the game has changed. Where they once focused on commodity prices in great detail, they now need to add freight pricing to their knowledge base. These buyers need to understand the underlying economics of transportation in order to truly understand total landed cost for the item purchased.

Understanding what the vendor is paying to provide you fast direct delivery, as little as two hours in some cases, helps you to decide if you want or need this premium service now seen as a standard—an ever more expensive standard level of service. Remember, somewhere you’re paying for delivery.

One indicator of the cost is the difference stated by vendors on their web site regarding terms of service level and the amount of money you’re spending. For example, there may be a minimum purchase to save a percentage on shipping, or there may be different prices for speed of delivery or an annual fee to be in the “club.”

Walmart released a new tactic where the customer is offered a discount of 5% to 10% for picking up the item they ordered on-line at a nearby Walmart store. This, of course, relieves the pressure on small shipment capacity at distribution centers as the item can be sent with a regular truck to the store, and at the same time attracts consumers to the store where they might be tempted to pick up more items while in the building.

This assumes, of course, that they have a pleasant experience waiting in line at the customer service desk trying to pick up their item. If not, this experience will drive them away from the retailer. In fact, a major home center told me that the customer pickup storage room in their store quickly exceeded 1,500 items, and it was taking up to 40 minutes to find items when folks came to pick them up.

Purchasing, transportation professionals and consumers need to pay attention to this new service experience. Convenience comes at a premium, and there may be alternate ways to satisfy a need at a lower total landed cost. Of course, getting a shopping list completed from the couch may well be seen as worth it. 

About the Author

Peter Moore
Peter Moore is Adjunct Professor of Supply Chain at Georgia College EMBA Program, Program Faculty at the Center for Executive Education at the University of Tennessee, and Adjunct Professor at the University of South Carolina Beaufort. Peter writes from his home in Hilton Head Island, S.C., and can be reached at [email protected]

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Article Topics

Final-Mile Delivery · Pricing · All Topics
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