In supply chain management, the “last mile” refers to the high cost of transporting goods on their final, short leg – to the customer’s home – after what’s generally a more efficient and cost-effective method of long-distance shipping. Online food retail typically means home delivery, which consequently results in the challenge of an expensive final leg of delivery, which is estimated to comprise up to 28% of a product’s total transportation cost. There is also the issue of perishable food items needing a temperature-controlled environment during delivery.
While many brick and mortar grocers in the UK offer inexpensive or free home delivery as the norm, the tactic is more about remaining competitive rather than making a profit. France and Italy have been somewhat more successful with an online click-and-collect option, which lessens labour and logistics costs. However, this does require a network of locations from where customers can pick up orders, and is arguably less convenient for the consumer.
Partnering with innovative start-ups, which enable the swift adoption of the latest technologies without intensive investment upfront, could resolve some of the last mile problems for brick and mortar establishments. However, we argue there are still limitations to the scope of online within food retail, as research shows that customers want to physically engage with the product before purchase.