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Last-mile Delivery Costs Increase for Retailers as Population Decentralizes

The retail world was already in the process of shifting to digital storefronts and home deliveries prior to the onset of the Covid-19 global pandemic, but the sudden call for social distancing and lockdowns resulted in an unprecedented surge of demand for the digital shift. This left many retailers scrambling to find a solution to meet their customer’s needs.

As a result of the skyrocketing adoption rate of online shopping, the logistics industry was forced to make changes to adapt to the increased consumer demand, many of which are likely here to stay for the foreseeable future.

US Population Moving Away from Urban Centers

Perhaps one of the largest changes coming our way is a massive exodus from urban areas to less densely populated rural and small town residences. According to a recently published Gallup poll, nearly half of Americans (48%) said if they could choose to live anywhere it would be in a town (17%) or rural area (31%).

This poll, conducted at the end of 2020, shows a sudden jump from 2018’s 39% of respondents who indicated the same preference for living outside of urban areas. Furthermore, the US Census Bureau released their 2019 report that shows 9.3% of the population moved during that year, with a tendency for relocations to rural and suburban areas.

The millennial generation shows a particularly strong preference for non-urban residences. According to Tractor Supply president and CEO, Hal Lowton, “There continues to be a net migration out of urban areas largely driven by the millennial segment.”

One of the primary factors making rural and town life more enticing is the convenience and accessibility of online shopping and home delivery services. However, last-mile delivery (the final step in the logistics process that brings goods from warehouses to doorsteps) services are not built for decentralized populations.

Spread Out Populations Result in Last-mile Delivery Woes.

Years of online shopping standard practices have resulted in customer expectations for inexpensive or, most often, free, and speedy delivery. However, home delivery logistics becomes more expensive and more complicated as the population spreads out geographically.

Warehouse and distribution centers are positioned close to densely populated areas to allow for quick and inexpensive last-mile delivery. As the population moves out of largely urban areas, this strategy of positioning warehouses near populated centers becomes less viable. Additionally, crowd-sourced delivery services like DoorDash and Grubhub are also less reliable in less densely populated areas where drivers are harder to come by and demand is lower.

Dozens of lower populated areas will find less availability of home delivery services. In addition, retailers shipping to less populated areas also endure additional costs from last-mile courier services like UPS and FedEx, which charge delivery area surcharges (DAS) for delivering to locations outside of urban centers.

The result of these factors is the adoption of services like BOPIS (buy online, pick up in store) which allows for easier delivery for retailers, but requires that customers perform the last-mile step of delivery for themselves. BOPIS and curbside delivery have drastically increased because of social distancing protocols, but they are likely to continue even after the pandemic is over and lockdowns are lifted for good.

Customers in less densely populated areas can also expect longer wait times on their shipments and less availability for same day delivery services. If population decentralization continues to pick up steam, retailers and logistics companies will need to find better solutions to reduce costs while still meeting customer expectations.

While consumers are concerned about when they will get their orders, businesses are worried about having the products in stock and that is where a reliable logistics partner, such as ClearFreight, comes in handy.

We have logistics experts at the ready, to not only answer your questions, but to take the reins to your supply chain. Why trouble yourself with ship schedules, airport delays and dealing with customs? Let ClearFreight help you manage your logistics and simplify your supply chain. Contact us today to learn about our shipping solutions and how they can make logistics easier for you.

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