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March 29, 2021
6 minutes

Last mile – trendspotting by Mats&Axel

“Last mile” is a term that has become increasingly popular in recent years. Online retailers are struggling to be able to offer their customers new last-mile options. Venture capital companies are looking for new last-mile carriers to invest in. Consumers are wondering what last mile is. So before we get into an analysis of what the future holds for last mile, it’s probably a good idea to take a look at the definition. Wikipedia defines last mile as “the last leg of a journey comprising the movement of people and goods from a transportation hub to a final destination.” You can also read about how the term originated in the telecom industry, where it referred to the last mile of cable leading to a house, which was by far the most expensive part of the cabling because it was only used by a single household.  But when we talk about the last mile in relation to deliveries, it would probably actually be more accurate to say “last miles,” since not many people live within just one mile of a freight terminal.

So the last mile (or miles) is about how your parcel gets from the terminal to your home. This means that deliveries to pick-up points and package lockers are not last-mile deliveries because, as the end consumer, you are in effect the last-mile carrier. Because if we’re going to be honest, there’s actually only one delivery method, and that’s home deliveries. All parcels have to make their way home to you one way or another, and it’s either you or the carrier who drives the last mile.

Last mile is important, but let’s not forget the first and middle miles.

But are there any pure last-mile carriers? Can it be that last-mile carriers are quite simply carriers who perform home deliveries? Kind of like how “mousse au chocolat” is just a fancier name for chocolate pudding? And why is all the focus on the last mile anyway?

Our options as consumers, that is, how we can select a delivery window and how we can monitor in real-time how many stops are left until it’s our turn, is of course important. But to be good at the last mile, it’s important to not forget about the first mile. And the middle miles. To be able to deliver quickly and accurately to the end consumer, the carrier has to pick up the parcel at the right time from the online retailer. Preferably as late as possible, so that the customer can shop as late as possible. And maybe several times a day to allow for steadier flows in the online retailer’s warehouse. But also to enable fast and efficient handling at the terminal.

Online retailers optimize their picking and packing routines according to the carrier’s “cut-off times.” The online retailers that are good at this show on their website when consumers have to place their orders in order to get a certain delivery window. Take Apotea, for example, which clearly displays this information on its website so that consumers can plan their purchases according to the delivery method they want. Order before 3:00 p.m. and get your order delivered to your door this evening with carrier “X.”

At the same time, it’s important to not have too many or too-sparsely packed transports, as this isn’t sustainable from either an environmental or a financial point of view. Letting the carrier pick up half-full shipping crates isn’t good for the online retailer. First and middle miles are at least equally important to creating both a good customer experience and profitability for everyone involved.

What does the future hold for last-mile carriers? And is there any difference between last mile and home deliveries?

But coming back to the question of whether there are any last-mile carriers who only handle the last mile… They are a little hard to find in Sweden, it’s true. Urb-It did make an attempt to sell deliveries from agents to the homes of private consumers, but it was hard to find profitability. What was exciting about Urb-It was that the delivery could be made not only to your home, but also to a park bench, subway platform, or wherever you happened to be just then. A few years ago, a big taxi company also came out and said they could drive parcels that last mile in their taxis, which were driving around the city anyway. Unfortunately, the cost was too high and it was difficult to find profitability in it. Other suppliers will undoubtedly try their hands at filling this niche considering that many consumers prefer home deliveries while many smaller online retailers are only able to offer delivery to a pick-up point, since this is usually cheaper. We can already get food delivered from a restaurant within 20-40 minutes for a small fee. The challenge is to be able to do this on a large enough scale that it becomes profitable for carriers.

But, hair-splitting about the difference between last mile and home deliveries aside, we can’t ignore the fact that there have been incredible developments in home deliveries in recent years. It wasn’t so long ago that home deliveries meant a wrinkled pink slip in your mailbox saying something like “We tried to deliver a parcel to you, but you weren’t home so now your parcel is at a terminal at the airport. See you there!” Home deliveries have in a short time gone from being something associated with trouble to one of the easiest ways to get things delivered. But what will happen with home deliveries over the next three years? We’re not going to try to answer that, but we will list some questions that will be exciting to follow:

  1. When will the new last-mile carriers start pulling in a profit? The new startups are still seeing losses and are dependent on venture capital. Will they be able to find a long-term profitable business model?
  2. Will all carriers continue to compete for the same delivery routes? Or will we, with a view to sustainability, be forced to make laws limiting the number of delivery vehicles on our streets?
  3. Is there a risk that Amazon will eventually start handling distribution themselves, as they do in other countries, and what will that then mean for the carriers? Will we see companies start merging together in order to be competitive?

With these thoughts, Mats&Axel wishes you a great rest of your e-commerce week!


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