{"id":26621,"date":"2017-11-15T22:43:16","date_gmt":"2017-11-16T03:43:16","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/race-to-the-last-mile-challenges-to-wal-mart-e-commerce-deliveries\/"},"modified":"2017-11-15T22:55:06","modified_gmt":"2017-11-16T03:55:06","slug":"race-to-the-last-mile-challenges-to-wal-mart-e-commerce-deliveries","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/race-to-the-last-mile-challenges-to-wal-mart-e-commerce-deliveries\/","title":{"rendered":"Race to the Last-Mile: Challenges to Wal-Mart E-Commerce Deliveries"},"content":{"rendered":"

E-Commerce is Overpowering the Parcel Delivery Industry<\/strong><\/p>\n

The growth in e-commerce is vastly outpacing the rest of the retail industry. While total retail industry sales for the second quarter of 2017 grew 4.1 percent over that in 2016, e-commerce sales rose 16.2 percent.[1]<\/a> \u00a0This growth, coupled with the insatiable consumer demand for faster deliveries started by services like Amazon Prime<\/em>, have stretched the existing parcel delivery infrastructure to its limits. Complications and cost premiums arising in the final leg of the delivery process have become known as the \u201clast-mile\u201d problem.<\/p>\n

According to a McKinsey study, last-mile costs account for more than 50% of delivery costs, even if they take place over a small fraction of the total transportation distance. Additionally, customers are demanding faster deliveries but remain sensitive to delivery price changes, especially in the grocery sector.[2]<\/a> Currently, most e-commerce retailers depend on third-party companies like FedEx or UPS to complete the delivery process. For retailers like Amazon, the gap between what they charge for delivery and what they pay to third-party companies is growing wider.\u00a0With rising costs and fewer resources available to the market as a whole, efficient and innovative solutions to the last-mile problem can provide a crucial differentiator.<\/p>\n

Wal-Mart: From Lumbering Beast to Plucky E-Upstart<\/strong><\/p>\n

Wal-Mart was a late entrant into the e-commerce arena, which has been dominated in the last decade by Amazon. However, recent investments by Wal-Mart into their online platform have paid off, as e-commerce sales in the previous two quarters are 60% greater than in the same period in 2016.[3]<\/a> In a short time, Wal-Mart has successfully transitioned from a brick-and-mortar retail model to an omnichannel model.<\/p>\n

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Rising last-mile delivery costs are a fundamental concern for Wal-Mart since they derive a large part of their competitive advantage from offering the lowest prices. Wal-Mart is approaching the last-mile delivery challenge in a variety of ways:<\/p>\n