Start-ups cause margin pressure in last mile

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This article is brought to you by Retail Technology Review: Start-ups cause margin pressure in last mile.

The past year has seen a particular spike in gas and diesel prices due to supply chain issues, the war in Ukraine and increasing taxation on fossil fuels, as well as chronic labour shortages. As fuel costs can contribute up to around 25% of total last mile delivery expenditures, last mile couriers are particularly affected by fluctuating prices.

The so-called ‘Amazon effect’, which has seen customers increasingly demand faster and more reliable delivery, has created space for a wealth of competitors. There has been a particular influx of last mile tech-based start-ups in recent years which claim to offer lower cost per delivery due to certain business models such as crowdsourcing drivers and limited fixed assets.

The latest report Growing margin pressures: what’s the cause? from Ti Insight – the provider of market research to the global logistics industry – shows that margin pressure is significant in the Express & Parcels market. Air and sea freight forwarders, road freight companies and 3PLs are also experiencing pressure on margins.

This report includes GSCi data collated from Ti Insight’s State of Logistics Survey, which ran between January and March 2023, and was designed to explore the reasons behind the current and anticipated margin squeeze.

Although 41.2% of respondents believe pressures will intensify over the next 12 months, 38.2% of respondents believe that pressures will ease, and margins will likely be positively impacted.

Viki Keckarovska, Ti’s Senior Research Analyst, says: “Costs for last-mile providers have been increasing across the board as record-high inflation persists. The past year has seen a particular spike in gas and diesel prices due to supply chain issues, the war in Ukraine and increasing taxation on fossil fuels, as well as chronic labour shortages. As fuel costs can contribute up to around 25% of total last mile delivery expenditures, last mile couriers are particularly affected by fluctuating prices.”

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