LAST MILE DELIVERY MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2024-2031)

Last Mile Delivery Market Size and Trends

The global last mile delivery market is estimated to be valued at US$ 174.62 Bn in 2024 and is expected to reach US$ 312.04 Bn by 2031, exhibiting a compound annual growth rate (CAGR) of 8.6% from 2024 to 2031.

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The last mile delivery process involves the transportation of goods from local distribution centers to the final delivery destination. It aims to deliver shipments as fast as possible using various modes of transportation like roadways and airways. This can be attributed to the rising demand for faster delivery options driven by booming e-commerce sales. Additionally, improvements in route optimization and adoption of new technologies like drones, autonomous vehicles and IoT is making last mile logistics more efficient and cost-effective. Key players are focused on offering value-added services and innovative delivery solutions to consumers.

Market Driver - Rapid growth of e-commerce and online shopping

The digital revolution has undoubtedly transformed the way people shop in this modern era. With the proliferation of smartphones and high-speed internet connectivity, online shopping has now become a very convenient option for consumers across the world. They can browse through a wide array of products sitting in the comfort of their homes and get them delivered right at their doorstep. This shift towards e-commerce has drastically increased the demand for last mile delivery services.

As people now heavily rely on online platforms for various goods ranging from grocery to electronics to apparel, e-tailers have witnessed tremendous growth in their business year-over-year. They often partner with logistics providers to ensure seamless delivery experience for customers. Various demographic and economic factors such as rising incomes, growing middle class, increasing digital literacy in developing markets, 24x7 connectivity etc have all fuelled the boom in online shopping. The trends clearly indicate that share of e-commerce in total retail sales will continue rising significantly over the coming years.

This rapid growth of e-commerce sector has put tremendous pressure on delivery players to scale up their last mile operations. They need to invest heavily in delivery fleets, warehouse infrastructure, tracking technologies to fulfill the unprecedented volume of deliveries emerging from the online orders. While metropolitan cities have highly optimized delivery networks, tier 2 and tier 3 areas still lack strong capabilities. Logistics providers are working toward expanding their reach and focus on same-day or instant deliveries as customers now expect lightning fast fulfillment. The dynamics of this industry are also evolving with new delivery models based on drones, lockers coming into play.

Market Concentration and Competitive Landscape

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Increasing consumer demand for quick and efficient delivery

With Amazon setting the benchmark of delivering packages within a day or same day, customer expectations around delivery speeds have risen manifold over the past few years. Consumers now want their online orders delivered to them without any unnecessary delays, especially for urgent or time-sensitive purchases. In fast-paced urban lifestyles, people have little patience or time to wait for packages to arrive. Same-day or instant deliveries within few hours of orders are gaining tremendous popularity.

Moreover, COVID-19 related restrictions during the pandemic have further ingrained the need for contactless and efficient deliveries among customers. As fear of virus transmission looms large, customers prefer getting their packages delivered at their doorsteps at the earliest rather than visiting stores. Ensuring safety and hygiene standards has also become a top priority for delivery workers and fleets.

This demand from customers to receive orders instantly is a big challenge for last mile service providers to address. Their entire operation from warehousing to routing needs to be designed for quick turnarounds. Adopting technologies like IoT, machine learning for optimized logistics planning and vehicle routing is crucial. Companies are experimenting with micro-fulfilment centers, smaller vehicles for last mile connectivity. Partnerships between retailers, logistics firms will help establish an ecosystem for seamless convenient deliveries. With consumer focus firmly on speed, flexibility and visibility, last mile industry needs continuous innovation and upgrades.

For instance, In October 2023, DPDgroup , Europe's  largest parcel delivery network, announced its merger with a local delivery service  to strengthen its market position. This strategic move aims to enhance DPD's service offerings and expand its capabilities in the rapidly growing same-day delivery segment, further solidifying its leadership in the logistics industry. The merger is expected to provide customers with improved access to a wider range of delivery solutions, reflecting the increasing demand for efficient logistics services.

Key Takeaways from Analyst:

The last mile delivery market is poised to grow significantly in the coming years due to the rising e-commerce industry worldwide. As online shopping continues to gain more traction, especially after the pandemic, the need for efficient last mile delivery will rise. Consumers now increasingly want their items delivered within the same day or within a few hours. This fast-changing consumer behaviour will drive more demand for last mile delivery services.

However, the high costs associated with last mile logistics can impede market growth. Last mile delivery is the most expensive part of the logistics chain due to the complex urban infrastructure and high fuel costs. Further, the rising traffic congestion in many cities poses operational challenges for logistics players. Driver shortages in certain areas also affect last mile delivery capacities.

But several opportunities around technology innovations can help boost the last mile delivery market. Advancements in autonomous vehicles, drones, and edge analytics offer promising solutions to address the challenges around the high costs and traffic. Collaborations between logistics players and retailers can also optimize delivery routes and schedules. Consolidating deliveries for an entire neighbourhood onto fewer, larger vehicles can improve efficiencies.

Market Challenge - High operational costs associated with last mile delivery

One of the key challenges for the global last mile delivery market is the high operational costs associated with last mile delivery. Last mile delivery involves delivery of shipment from distribution centers or warehouses to the end customer which incurs substantial delivery and labour costs for logistics companies. The costs are high due to factors such as traffic congestion in urban areas, requirement of dedicated delivery vans and vehicles which need to be maintained, and employment of delivery personnel which are among the largest expense elements. Further, issues such as low shipment densities, return shipments, and single delivery points contribute to higher costs per delivery. If the costs are not managed efficiently, it can squeeze profit margins for logistics players. However, with rising customer expectations of faster delivery options, last mile delivery providers need to explore cost optimization strategies through route optimization, flexible delivery options and automation to address this challenge.

Market Opportunity - Adoption of innovative delivery technologies (e.g., drones)

One of the key opportunities for the global last mile delivery market is the adoption of innovative delivery technologies such as drones. With the advancements in drone technology, delivering shipments through drones can help address the challenges associated with the last mile operations like reducing delivery time and costs involved. Drone delivery has potential to automate the delivery process and bypass traffic complexities in crowded cities. Major logistics players are testing drone deliveries to analyze their benefits. Wider integration of drones for delivery alongside regulatory changes can improve efficiency, sustainability and open new revenue prospects. It can optimize routes through aerial paths. Drone technology can enable on-demand and same day delivery models which is a fast-growing customer requirement, presenting lucrative opportunities for last mile delivery market.

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Insights By Service Type - B2C (Business to Consumer) drives the market, owing to the growing online shopping trends

The B2C segment in the global last mile delivery market is expected to contribute 65.3% of the market share in 2024 due to increasing online shopping activities of consumers worldwide. As more people embrace the convenience of ordering goods with a click on their mobile phones and computers, the need for fast and reliable delivery of purchased items rises steadily.

Key demographic groups driving this trend include tech-savvy millennials and Gen Z consumers who have integrated online shopping into their lifestyles. Their preference for quick access to a wide range of products is fueling the expansion of e-commerce platforms. The availability of a diverse selection of goods coupled with competitive pricing and cash-on-delivery options also encourages more consumers to shop online rather than visiting brick-and-mortar stores.

Consumers' rising expectations for fast delivery times within strict deadlines poses challenges to last mile logistics. However, it presents opportunities for delivery companies to differentiate themselves through innovative services. Several firms now offer same-day or instant deliveries in major cities leveraging their large fleets and strategically located warehouses. Time-slot booking for convenient receipt of packages has also gained popularity.

Moreover, value-added services like option for signature-free drop-off, click-and-collect from pick-up points, and notifications for delivery status updates enhance customer satisfaction with B2C deliveries. Continuous technology upgrades in logistics infrastructure and adoption of fleet telematics further aid in meeting tight delivery windows. The hyper-personalized experience appeals greatly to busy urban consumers.

Insights By Delivery Mode - The road segment dominates the market due to the extensive logistics infrastructure

The road segment is expected to accounts for the 71.5% share in the global last mile delivery market in 2024 owing to a well-established transportation infrastructure across regions. Vast road networks allow for flexible deployment of light commercial vehicles to transport parcels within short distances of the final destination addresses efficiently.

Countries worldwide have invested heavily in highway and intercity road construction over the years to facilitate the movement of people and goods. Major logistics companies leverage this accessibility through ownership of large private fleets or partnerships with independent owner-operators. Last mile routes can be readily mapped and optimized based on traffic conditions with navigation support on mobile applications.

Furthermore, land transport is more cost-effective compared to other modes when it comes to delivering average sized packages on a large scale. Trucks have greater capacity to hold shipments for multiple stops on a single trip. Regulatory compliance is also streamlined for road transport of goods in national as well as international routes.

While other innovative delivery modes gain ground in certain geographies and applications, road infrastructure provides a universal backbone for reliable last mile connection. Integration of advanced technologies like telematics, analytics and IoT further augment operational efficiency of ground transportation fleets. This positions the road segment strongly as the mainstay of urban logistics networks.

Regional Insights

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North America has established itself as the dominant market for last mile delivery. The region is expected to hold 37.2% of the market share in 2024. With the rise of e-commerce and demand for fast shipping options, customers expect quick and reliable delivery from major retail markets like Amazon and Walmart. North America's dense population near major consumption centers allows for efficient multi-stop routes that keep costs low. Strong domestic consumption and wealth levels have fueled larger basket sizes that have benefited last mile operators through economies of scale.

For instance, In June 2023, Amazon unveiled a new program aimed at collaborating with small businesses across 23 U.S. states to bolster its last-mile delivery capabilities. The initiative, known as Amazon Hub Delivery, welcomes participation from a wide range of small enterprises, including clothing boutiques, florists, and convenience stores. According to Amazon's estimates, small business partners could potentially generate up to US$ 27,000 in additional annual revenue by fulfilling delivery duties as part of this program.

Meanwhile, the Asia Pacific region has emerged as the fastest growing market for last mile delivery services. Countries like India and China are experiencing major expansion of the consumer class who increasingly prefer online shopping. Rapid urbanization is creating dense population clusters near tier 1 and tier 2 cities that serve as profitable coverage areas. Local logistics companies have invested aggressively to cater to the evolving needs through innovative delivery models. For instance, partnerships with motorcycle taxi services allow for last mile connectivity even in congested areas.

The varying landscape across different APAC markets allows operators to experiment with new technologies and customer-centric approaches. For example, consolidating parcels from different sellers into a single delivery minimizes the number of trips while enhancing environmental sustainability. Lockers at central pickup points enable secure, flexible collection of packages even when customers are not home. As disposable incomes continue rising across Southeast Asia, we expect the APAC region to further its leading position in the global last mile delivery industry over the coming years through continued modernization and optimization of fulfillment networks.

Market Report Scope

Last Mile Delivery Industry News

• In April 2024, PIESHIP, a logistics company located in Saudi Arabia, implemented AI and crowdsourcing strategies to optimize last-mile delivery routes and schedules, with the goal of reducing costs and improving customer satisfaction. Operating in the rapidly evolving logistics landscape of Saudi Arabia, PIESHIP focuses on providing efficient and reliable last-mile delivery solutions, particularly enhancing the service for e-commerce businesses and their customers through improved delivery processes.
• In November 2023, Shipyaari, a leading SaaS-based logistics solutions provider, announced a strategic collaboration with India Post, postal service provider, to transform last-mile delivery in India. This groundbreaking agreement is expected to significantly alter the last-mile operational landscape, allowing Shipyaari to extend its reach into even the most remote regions of the nation.
• In September 2023, XPO Logistics, a leading provider of freight transportation services, introduced a new same-day delivery service for urban areas. This innovative offering aims to enhance last-mile delivery efficiency and meet the growing demand for expedited shipping in densely populated regions, reflecting the company's commitment to providing comprehensive logistics solutions.
• In April 2023, FedEx, a global leader in logistics and package delivery services, announced its acquisition of a regional logistics company like P2P Mailing Limited, PAFEX, etc. to enhance its last-mile capabilities. This strategic move aims to strengthen FedEx's operational efficiency and service offerings, allowing the company to better meet the growing demand for timely and reliable deliveries in local markets. The acquisition aligns with FedEx's ongoing efforts to expand its logistics network and improve customer satisfaction.

*Definition: The global last mile delivery market refers to the market for transportation and delivery services for cargo and goods intended for end customers or recipients. It involves transporting and delivering items ordered online from distribution centers or warehouses to their final intended destination such as homes, businesses, PO boxes or other delivery locations. Last mile delivery serves as the final leg of the supply chain and aims to provide seamless, optimized and cost-effective delivery services to meet the needs and expectations of customers.

Market Segmentation

•  Service Type Insights (Revenue, US$ Bn, 2019 - 2031)
  • B2C (Business to Consumer)
  • B2B (Business to Business)
•  Delivery Mode Insights (Revenue, US$ Bn, 2019 - 2031)
  • Road
  • Drone
  • Bicycle
  • Walking
  • Others
• Regional Insights (Revenue, USD Bn, 2019 - 2031)
  • North America
    • U.S.
    • Canada
  • Latin America
    • Brazil
    • Argentina
    • Mexico
    • Rest of Latin America
  • Europe
    • Germany
    • U.K.
    • Spain
    • France
    • Italy
    • Russia
    • Rest of Europe
  • Asia Pacific
    • China
    • India
    • Japan
    • Australia
    • South Korea
    • ASEAN
    • Rest of Asia Pacific
  • Middle East
    • GCC Countries
    • Israel
    • Rest of Middle East
  • Africa
    • South Africa
    • North Africa
    • Central Africa
• Key Players Insights
  • Amazon Logistics
  • DHL Supply Chain
  • FedEx Corporation
  • UPS (United Parcel Service)
  • XPO Logistics
  • Schenker AG
  • DPD Group
  • JD Logistics
  • ZTO Express
  • Yunda Express
  • Postmates (Uber)
  • Glovo
  • DoorDash
  • Lalamove
  • Sendy