Should retailers take control of the final mile?

The dramatic growth of e-commerce is having a significant impact on what activities retailers regard as core to their business.

There is clear evidence of the importance of logistics to retail success in this new environment. For example, the work done by John Lewis to position itself to take advantage of this new market has clearly paid off – sales have grown by some 26 per cent over the past five years.

But what to do about the final mile? Most retailers rely on specialist parcel carriers – however, this could be changing. Walmart, parent company of Asda, has just bought “Parcel” a same-day start-up delivery company in New York City.

Nate Faust, Walmart’s senior VP for e-commerce supply chain argues that delivery is increasingly one of the most important elements for today’s online shoppers.

“Parcel is a proven leader in e-commerce package delivery, including taking fresh, frozen and perishable food, the last mile – that is, the last step in the shipping process as products make their way from a fulfilment centre to your door.”

Walmart is currently the world’s largest retailer, but earlier this year US business magazine Forbes highlighted the threat presented to it by the rapidly growing online retailer Amazon, which is now the third largest retailer on the planet, and Alibaba, which is the sixth.

Only last week, Alibaba set out plans to invest more than $15 billion in its logistics network to drive its growth globally.

In the UK, AO.com, the online white goods retailer, has long made a virtue of its logistics expertise – in particular its in-house delivery operation through Expert Logistics. Expert is now a £97 million business in its own right and is growing at 12 per cent a year.

For Walmart, buying Parcel is a small initiative. The significance is in the statement of intent that is represents.

Talking about the deal, Faust highlighted the technology platform that Parcel has created: “They’ve built a technology platform from the ground up to automate their operations and provide clients and customers with live updates throughout the delivery process.” That technology could find its way into Walmart operations all around the world.

It’s worth noting that another US retail giant, Target, recently bought Grand Junction, which offers a software platform that’s used by retailers, distributors and third-party logistics providers to manage local deliveries through a network of more than 700 carriers.

Arthur Valdez, executive vice president, chief supply chain and logistics officer, said: “This acquisition is part of Target’s on-going efforts to strengthen Target’s supply chain to provide greater speed, reliability and convenience for guests.”

Clearly, the traditional retailers are moving increasingly quickly to develop the logistics operations they need to compete with the online giants. Taking control of the final mile is one option – but it means rethinking what a modern retail business looks like.