Top 5 trends in SA’s last-mile delivery sector

Last-mile delivery - the final stage of the delivery process, where goods are transported from the warehouse to the customer’s doorstep - continues to gain momentum in South Africa.

These facilities are typically located in densely populated urban areas where demand is high, and they are often smaller and more affordable.

With e-commerce having become an integral part of the retail sector, there has been an increase in online shopping – a trend that was accelerated by the Covid-19 pandemic.

Retailers and logistics companies have quickly adapted to the changing consumer demands by offering faster and more efficient delivery options.

According to Gartner, global last-mile delivery valued at $40.5bn in 2021 is projected to reach $123.7bn by 2030.

However, this growth comes at a high cost, with last-mile delivery accounting for 53% of overall shipping costs due to driver costs, vehicles, and fuel. As a result, companies are focusing on streamlining delivery and optimising operations to improve their profitability without compromising customer satisfaction.

Data from Jones Lang LaSalle reveals that in the US alone, the need for last-mile delivery facilities is expected to reach 1.5 billion square feet by 2025.

In Europe, the demand for last-mile delivery facilities is also on the rise, with companies such as Amazon and DHL investing in logistics centres across the continent to meet the growing demand.

In South Africa, last-mile delivery is increasingly becoming a critical component of customer retention, building loyalty, and boosting sales in the real estate industry.

Despite economic pressures, organisations prioritise last-mile delivery as they recognise the importance of providing customers with a convenient and timely delivery experience.

Here are five trends to watch out for in SA’s last-mile delivery sector:

Increased investments

This sub-sector of industrial real estate is experiencing exponential growth, making it an attractive investment opportunity for investors looking to diversify their portfolios.

Historically, the industrial property sector has been a stable and profitable investment option as these assets are less vulnerable to economic fluctuations compared to retail and office assets.

Industrial assets are attractive for several reasons. They are often less expensive, making them accessible to a wider range of investors. Furthermore, they typically have longer lease terms and thus provide a stable income stream. And due to their strategic location close to main roads and highways with easy accessibility – tenants are drawn to these areas.

Retailer uptake

Retailers are increasingly interested in last-mile delivery. It has become a crucial part of their business model, and a key differentiator that sets them apart from competitors.

Last-mile delivery can help retailers improve customer retention and build customer loyalty. By offering faster and more efficient delivery options, retailers can provide their customers with a better overall shopping experience, which can increase customer satisfaction and encourage repeat business.

It also has the potential to help increase sales. By offering same-day or next-day delivery options, retailers can tap into a growing market of consumers who are willing to pay more for faster delivery. This can help retailers increase revenue and grow market share.

Their convenient locations are closer to urban centres and consumers. So by owning or leasing last-mile delivery facilities, retailers can improve their delivery times and customer service.

Retail executives and corporate boards are becoming more interested in last-mile delivery due to its effects on the bottom line. Retail logistics professionals will become more significant in developing business strategies, as delivery operations become as critical as sales and marketing.

Improving logistics efficiencies  

Improving efficiency and managing or reducing costs are the top two priorities for supply chain professionals in South Africa, according to the PwC Digital Trends in Supply Chain Survey 2022.

Companies will require efficient solutions to reduce costs while still providing the best possible customer service.

As such, South African real estate companies must re-evaluate their current delivery technology and consider how best-in-class software can optimise last-mile operations, improve sustainability, and scale as demand increases.

To achieve this, they must employ solutions that leverage artificial intelligence and predictive analytics to drive greater accuracy, making delivery promises a reality.

B2B customers want B2C-like experiences

Businesses will seek more certainty and transparency in B2B deliveries, just as consumers have become accustomed to B2C deliveries. South African real estate companies must meet precise delivery time demands, and provide total delivery visibility to their clients, particularly for perishables needed in restaurants and grocery stores.

Sustainability matters

South African real estate companies are committing to sustainability. With 77% already prioritising or planning to prioritise sustainability, according to a recent DispatchTrack’s Last Mile Sustainability Perspective report.

Companies will seek to make progressive improvements in reducing miles driven, decreasing the number of trucks on the road, or adding electric or semi-electric vehicles to the fleet.

Despite economic headwinds facing SA, growth in e-commerce and demand for last-mile delivery facilities is expected to continue.

Amid the pandemic, industrial assets driven mainly by last-mile logistics remained resilient, and these assets have the potential to achieve higher returns on investment due to high demand.