Last Mile Delivery in E-commerce: Definition, Challenges & Solutions

India's online shopper count is growing and is projected to become the second largest globally by 2030, with about 500-600 million new consumers to also start their online shopping journey.

Led by constant increases in digital penetration, disposable income, consumerism, and new offerings, last-mile deliveries in India are expected to grow at a CAGR of 15-20% over the next five years.

And B2C e-commerce shipments are estimated to reach 12.3 million per day in 2024.

All these consumers expect fast, transparent, and flexible delivery options. 

But what truly defines last mile delivery, and how can you commit and fulfil your delivery promises to customers?

We’ll understand this in great detail in the coming sections.

What is Last Mile Delivery?

Last-mile delivery is the final step in the supply chain management, where orders are handed off from the distribution network to the end customer. 

It is also the most challenging and costly stage compared to the rest of the process, because it accounts for more than half of the total shipping costs.

Last-mile delivery encompasses various applications, including:

• Food delivery, which currently processes around 5 million orders daily 
• On-demand and scheduled grocery delivery
• E-commerce parcel delivery
• Quick commerce (10-15 minute deliveries)

What makes last-mile delivery stand out in the Indian context is the country's unique geographical and socioeconomic landscape.

A population of 1.4 billion people spread across 773 districts, with more than 65 cities having populations exceeding one million, and the urban city population constituting 36% of the total population.

As Aryaman Tandon, Managing Partner at Praxis Global Alliance, notes, "This scale is not even there in China, because in China the population is consolidated in key cities.”.

Challenges in Last Mile Delivery

Last mile delivery, especially in India, is still considered a growth-limiting aspect for brands of all sizes and scales. 

Urban City Congestion and Road Infrastructure Limitations

In high-density Indian cities like Mumbai, Bangalore, Delhi, etc, the absence of well-built road infrastructure and unplanned civic development makes timely deliveries of orders almost impossible.

The World Economic Forum projects that last-mile deliveries to increase by 78% globally by 2030, while the number of delivery vehicles to surge by 36% in the densest urban areas. 

This growth will likely result in a 32% increase in emissions and 21% in traffic congestion, with peak-hour commuters potentially staying stuck in traffic for an extra 11 minutes daily.

Rising Customer Expectations

Most logistics executives in the country share the same pain points, evolving customer expectations, rising costs, labour shortages, and environmental pressures affecting their last-mile operations. 

The COVID pandemic further accelerated these challenges, turning what was once considered just an advantage into a must-have customer experience expectation.

On-Ground Inefficiencies

• Variable Demand Patterns: Duty cycles vary widely by application, with vehicles currently largely dedicated to a single application, while demand varies by time of day. It leads to significant vehicle downtime and underutilisation.
  
  
• Route Optimisation Challenges: Conventional route optimisation, which was once the gold standard for delivery efficiency, now simply cannot handle the growing complexity of today's last-mile delivery.
  
  
• Rural and Remote Deliveries: Regardless of innovations like drone delivery or quick commerce, delivering to rural areas remains difficult. Environmental Impact

Technology Fatigue

Many brands use several SaaS tools, leading to inconsistent data, making standardisation and consolidation of information difficult.

For smaller scale merchants, getting used to these tools is often prohibitively expensive or complex, which causes a technological divide in the industry.

Ecosystem Complexities

Aryaman Tandon says, "India has a very distributed ecosystem... Only less than ten per cent of India's retail is organised despite a lot of e-commerce, quick commerce and modern trade. 

It makes the last mile and intracity movements extremely important in India's distribution network.”

Solutions and Innovations

The following are the must-consider last mile delivery solutions.

Electric Vehicles (EVs) Revolutionising Last Mile Logistics

EVs are becoming the new dark horse in the race to address last-mile logistics challenges. 

Although their upfront costs may sound concerning, EVs are still an intelligent long-term investment. 

Since most of the electricity used to power EVs comes from renewable sources, charging stations use India's vast solar potential.

E-commerce giants are already making a move to EV.

• Zomato has collaborated with Yulu, a light EV manufacturer, to electrify their delivery vehicles by 2030 
• Flipkart aim to add 25,000 EVs 
• Swiggy is partnering with Gogoro to add electric vans for large delivery loads
• Big Basket has announced 70% fleet electrification by 2024

The economic case for EVs is compelling. By 2025, EV adoption will likely increase in organised last-mile delivery fleets, with 20-30% adoption across two-wheelers, three-wheelers, and four-wheelers. 

Drone Technology for Remote Deliveries

The drone delivery market is projected to reach USD 0.69 billion in 2024 and USD 1.75 billion by 2029, growing at a 20.33% CAGR. 

For rural deliveries, drones can overcome the problem of poor road connectivity, making last-mile deliveries possible and faster where road vehicles may be lacking.

In November 2024, Odisha-based deep tech start-up BonV Aero launched India's first fully autonomous logistics drone, “Air Orca.”

BonV Aero became the first Indian company to set a world record by lifting a 30 kg payload at Umling La, Ladakh, which is also the highest motorable road pass at 19,024 feet.

Satyabrata Satapathy, CEO of BonV Aero, said that while the e-commerce space would eventually need drones in its logistics, the early adopters will be in remote places and hilly areas where road infrastructure is not yet available. 

AI and Data Analytics Driving Efficiency

With systems like dynamic routing algorithms that routinely recalculate optimal paths based on real-time traffic data, weather conditions, and emerging delivery constraints, you get to save fuel consumption and improve on-time delivery performance. 

CJ Darcl Logistics, for example, uses Driver Fatigue Monitoring System (DFMS), an AI-enabled device to capture video footage of the entire delivery journey. 

And this information enables them to optimise routes and identify potential hazards like poor road conditions in advance based on prior data, improving overall safety and efficiency.

Supply Chain Digitalisation

The government's recent push for digital trade facilitation has stemmed from the introduction of Bharat Trade Net (BTN), a complete digital platform aimed at making supply chain operations more efficient and minimising transit delays [Manufacturing Today India].

Improved Vehicle Utilisation Models

Data shows there is scope for up to a 50% increase in utilisation (km covered/day) by simply cross-utilising vehicles across applications to minimise downtime. 

For instance, a three-wheeler electric vehicle can be used for milk delivery in the morning, followed by grocery and e-commerce delivery later in the day. 

Collaborative Delivery Networks

The siloed approach, where each brand operates its own isolated delivery fleet, is giving way to shared e-commerce logistics ecosystems where AI orchestrates deliveries across multiple providers, vehicles, and modalities. 

This development could eliminate the inefficiency of competing delivery vehicles serving the same neighbourhoods.

In March 2024, ClickPost and Porter announced a partnership, combining ClickPost's shipment tracking and resolution workflow with Porter's tech-enabled logistics solutions. 

Naman Vijay, CEO & Co-founder of ClickPost, said that this collaboration has helped improve efficiency for their clients like Atlys and Boodmo in providing an accurate and true delivery experience to customers.

Battery Swapping Technology

Battery swapping helps increase the distance delivery can cover in a day, by allowing them to exchange depleted batteries for fully charged ones within minutes. 

It eliminates the downtime associated with conventional charging, ensuring fleet uptime and operational continuity. 

Customer Experience Innovations

Chatbots such as Pragma WhatsApp business suit help you proactively update customers about delivery status, offer rescheduling time or date options and address potential delivery issues before they occur.

And all this communication is conveyed through the most Indian customer's preferred communication channel that is “WhatsApp."

Implementing Effective Last Mile Strategies

Here's a quick guide on how to properly implement last-mile delivery solutions in your e-commerce business.

Adopt a Data-Driven Approach

Sandeep Kulkarni, COO at Allcargo Gati, suggests using data-driven route optimisation to achieve faster and more precise deliveries. 

He points out factors like traffic congestion and urban density compromise last-mile delivery and emphasises data as the solution. 

Develop a Multi-Modal Delivery Strategy

Drones could be used for quick and high-priority deliveries such as medicines or perishable goods, in metro cities, but might not be the best solution in India’s densely packed urban areas.

Here, electric bikes and scooters could prove to be more beneficial and practical for delivery. 

Similarly, autonomous ground vehicles could complement drones in creating collaboration between drones and their alternatives, each leveraging their strengths.

To figure out the right option for your delivery locations

• Match the delivery vehicle to the specific use case
• Establish clear criteria for when to use each transport mode
• Create integrated systems that can manage multiple delivery methods simultaneously

Electrify Your Delivery Fleet For Sustainable Logistics

Sustainability is becoming a central pillar, with companies advocating and adopting eco-friendly practices to limit their environmental footprint globally. 

The Union Budget 2025 also reinforce sustainable functions of logistics by introducing fresh incentives for the adoption of electric vehicles (EVs) in commercial transportation, because EVs offer 10-40% less TCO (Total Cost of Ownership).

Resulting in several logistics providers investing in electric fleets and green warehousing solutions to benefit from the latest favourable tax benefits and subsidies aimed at promoting sustainable infrastructure.

Optimise Local Inventory Management

Use AI systems to analyse historical delivery patterns, consumer behaviour, social media signals, local events, and even weather forecasts, to predict where and when delivery demand will surge. 

You can use this information to preposition vehicles, personnel, and inventory ahead of demand spikes, dramatically speeding your response times and operating costs.

Develop Strategic Partnerships

The shift to EV-driven deliveries requires a proper ecosystem approach, where logistics providers, EV manufacturers, financial institutions, charging infrastructure developers, and policymakers must work together to ensure faster adoption. 

Strategic partnerships will play a critical role in bridging infrastructure gaps and ensuring that the financial and operational viability of EVs continues to improve.

Train and Empower Delivery Personnel

To bring on-ground acceptance of EVs amongst delivery agents, you must provide them proper end-to-end driver experience by mitigating their key concerns. 

Such as establishing access to charging infrastructure, maintenance services, affordable financing options, and insurance via partnerships. 

Dedicated operational training on the technical aspects of EV driving will also help your drivers get used to it better.

To Wrap It Up

As more new shoppers emerge from India’s deep corners, your brand’s last mile delivery will be tested, because reaching consumers in urban and rural India is a completely different game.

With new methods of logistics and supply chain as outlined above, you will be able to confidently commit and fulfil delivery expectations that were not possible before.

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FAQs (Frequently Asked Questions On Last Mile Delivery)

Who pays for the last mile delivery?

In the majority of cases, the e-commerce business absorbs the cost through pricing models or subscription services. Some offer free delivery over certain amounts, while others transfer full costs to customers. Third-party logistics providers handle billing for outsourced deliveries.

What is the last mile cost?

Last-mile costs consume 50% of total shipping expenses. In India, it averages ₹100-200 per urban delivery and ₹250-400 for rural zones. Electric vehicles can reduce these costs by 10-40% compared to traditional fuel-based fleets.

Why is the last mile expensive?

Multiple factors drive up costs: poor road infrastructure, traffic congestion, frequent stops, vehicle underutilisation, and lack of standardised delivery systems. The scattered population across 773 districts adds complexity, making routing difficult and increasing operational expenses.