[Viewpoint] The Last Mile Revolution

Seo Yonggu, Professor of Business Administration, Sookmyung Women's University

The last 1.6 km of delivery to the consumer’s doorstep is called the ‘last mile.’ Over the past 5 to 6 years, as the next-day delivery e-commerce market has rapidly grown, the complexity and importance of the last mile delivery process have increased tremendously. Soccer field-sized logistics centers are in operation, and almost all shopping is possible through simple smartphone payments. Multi-item small-quantity deliveries have become common, and shopping has evolved into a contactless service. Accordingly, last mile delivery has become the only point where consumers and suppliers meet, and the quality of last mile service determines customer satisfaction. From the supplier’s perspective, the highest transportation costs occur in the last mile. Since it accounts for more than 50% of total logistics costs, improving and innovating last mile services has become the greatest competitive advantage for distribution companies. Currently, a last mile service revolution is underway in major cities around the world. To provide the shortest delivery times where consumers live, not only large logistics centers but also small logistics centers are being established, all transforming into fulfillment centers.

Especially over the past two years, as e-commerce has evolved into quick commerce, a dark store boom has swept major cities worldwide. A dark store is a delivery-specialized store that does not serve general customers but only allows delivery personnel to enter, and it is called a micro-fulfillment service. Dark stores have now become a term representing the last mile logistics service revolution. Consumers in major cities around the world have begun to experience the amazing customer experience provided by quick commerce, which delivers the groceries and daily necessities they need to their doorstep within 10 to 15 minutes.

Currently, logistics innovation companies such as Baedal Minjok’s B Mart, Yogiyo’s Y Mart, and Coupang Eats Mart are providing services mainly in Gangnam, Seoul, and some metropolitan areas. Existing large marts like Lotte Mart, E-Mart, and Homeplus are also operating semi-dark stores by converting parts of their stores or parking lots into dark stores to quickly deliver online orders. As convenience stores and neighborhood supermarkets, so-called alley markets, are rapidly encroached upon, ethical issues regarding the infringement of small and medium-sized commercial districts are expected to arise again.

The introduction of quick commerce is a global trend. In the United States, retail stores that closed due to the demise of offline retail have been reborn as dark stores, creating new opportunities. Amazon’s Whole Foods stores in New York have been converted into dark stores that only accept online orders, and Walmart already operates dark stores in more than 2,500 locations across the U.S. Gorillas, founded in Germany in May 2020, is famous for its 10-minute delivery. Gorillas is a quick commerce specialist company known as the fastest unicorn in capitalist history and operates dark stores in 60 European cities. In London, Dija launched a dark store and offers a groundbreaking service of free delivery for three months if delivery exceeds 10 minutes. In August last year, the OniGO service, operated by Japan’s Aeon Group Maxvalu, was launched in Shibuya, Tokyo. OniGO, a service that runs like a ghost, provides 10-minute delivery within a 1.5 km radius of its dark store locations.

The last mile service revolution offers a utopian shopping experience not only to consumers but also raises dystopian fears about the future of the traditional retail service industry, which has already transformed into an aging image.