Can aftermarket e-commerce emulate last-mile delivery of Amazon?

Feb. 6, 2018
E-commerce is making rapid delivery a high priority across multiple verticals, including the aftermarket.

E-commerce is making rapid delivery a high priority across multiple verticals, including the aftermarket.

According to the report, “Changing Course: E-Commerce and Its Impact on the Automotive Aftermarket,” from Emerging Market Investors Association (EMIA): “Increasing consolidation among suppliers in the aftermarket industry and the ability to sell directly to customers are intensifying competition with OEMs. Aftermarket suppliers are progressively bypassing regional distribution centers and directly shipping to DIY and DIFM customers. However, this presents many logistical challenges given the need for a huge array of parts and rapid delivery times. Over the past decade, the number of parts per car has increased by over 50 percent to reach 10 thousand. The sheer variety of parts – and the often unpredictable nature of what will be in demand – presents considerable logistical demands for companies developing e-commerce platforms and directly servicing customers.”

E-commerce has spurred a significant growth in these types of delivery services. In North America, the express delivery market is expected to have a CAGR of 5.72 percent through 2021, according to data from HTF Market Report.

The State Post Bureau in China reports that the country’s express delivery services saw a 28 percent increase in the number of parcels delivered between 2016 and 2017, as well as a 24.7 percent increase in revenues. Employment in the sector is up 130 percent, according to the China Federation of Logistics and Purchasing.

Last-mile delivery – where rapid or express services are frequently in demand – can account for up to 55 percent of total shipment costs, according to research firm IDTechEx. Rapid delivery growth is being driven both by customer demand (having the part fast makes it more likely you can make the sale) and by the popularity of new rapid services like Amazon Prime Now.

The Amazon service relies on local fulfillment and a network of delivery drivers that operate on a model similar to Uber. More than half of U.S. households have a Prime membership through Amazon, which makes them eligible for Prime Now delivery of some goods (depending on which city they live in).

While Amazon’s two-hour delivery service is only available for a fairly limited selection of goods – everything from electronics to glue to take-out food – the retailer is establishing a large, responsive logistics network that will eventually include its own fleet of trucks and air services, as well as the local delivery services established through Prime Now.

A start-up based in the United Arab Emirates, One Click Delivery Services, follows the Amazon model, providing on-demand, last-mile delivery for businesses that deliver food, groceries, parcels and other goods. Even large retailers are getting in on the act, with Target announcing it would offer same-day delivery from half of its stores in 2018, leveraging its acquisition of Shipt.

Walmart plans to offer a similar service through its acquisition of New York-based same-day delivery startup Parcel. It’s also piloting a program that would pay store associates to make home deliveries during their commute.

Some similar companies are addressing the needs of the auto parts sector. Rapid Response Delivery in Maryland provides outsourced parts and tire delivery to distributors and manufacturers, whether they are looking to completely outsource the work or just need some additional capacity. The company also offers on-site dispatch services, providing a dispatcher to manage delivery activities on-premise for its clients.

The problem these companies are solving is one of fleet utilization. A dedicated vehicle fleet (even a small one) can be expensive and complicated to maintain. Dedicated drivers require a salary; if you instead opt to have other employees also act as delivery drivers (a common scenario for aftermarket parts distributors and retailers), then the delivery function becomes a second or third priority, which affects the reliability of the service.

Since rapid delivery services are typically difficult to predict, being able to tap into an on-demand service that provides contract drivers is more cost effective.

The challenges involved in managing all of this internally were on full display this past holiday season when UPS – overwhelmed by an unexpected surge in last-minute online Christmas shopping – faced the possibility of missing a large number of deliveries. With a shortage of temporary drivers, the company had to draft staff from its finance, accounting, and marketing teams to deliver packages using their personal vehicles.

How effective the Amazon/crowdsourcing-style method of last-mile delivery could be in the automotive sector remains to be seen, particularly given the specialized shipping required for larger, heavier parts. There’s also more of a learning curve – drivers have to be able to navigate crowded repair center facilities, or deal with purchase orders and invoices.

However, there is a lot of capacity available – Amazon has already onboarded more than 100,000 drivers to its Amazon Flex network.

There are other options in the works, including exotic solutions like last-mile delivery robots and drones. Chinese company SF Express is already testing drone delivery in that country, and hopes to deploy even larger drones as early as next year.

According to Frost & Sullivan, the push to reduce costs during last-mile delivery will spur further investment in artificial intelligence, telematics solutions and other technologies.

"As logistics service providers (LSPs) shift from mere outsourced logistics to more non-asset-based and end-to-end, integrated, demand-driven logistics, with an extensive e-business focus on all logistics operations, technologies such as real-time data, sensorization and intelligent autonomous machines, will accelerate the transformation of the logistics and supply chain industry,” says Krishna Chaithanya Bathala, senior mobility analyst at Frost & Sullivan.

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