Speaking to an audience at the Consumer Electronics Show, the massive technology conference taking place in Las Vegas this week, the chief marketing officers for FedEx (NYSE: FDX) and Walgreens (NASDAQ: WBA) shared stories about their last-mile delivery innovations as e-commerce continues to upend traditional retail and logistics business models.
Fifty percent of FedEx deliveries are now made to households, said Brie Carere, executive vice president and chief marketing officer. In 2019, 50 million packages were delivered by all companies every day in the U.S.; by 2026, that will increase to 100 million, with 93% of that growth driven by e-commerce.
Among the challenges for logistics companies is that consumer delivery is a much more expensive proposition than business-to-business fulfillment, largely because last-mile delivery networks aren’t nearly as dense.
“So we have a lot more innovating to do,” Carere said.
Joining the CES panel discussion, held Jan. 6, was one of those innovations: Roxo, a battery-operated last-mile delivery robot. FedEx has been field testing Roxo this past year, according to Carere, and by this summer hopes to partner with retailers on commercial pilots.
“It’s far more efficient to deliver a single pizza delivery with Roxo than in a one-ton vehicle,” she said as Roxo clambered onto the stage, disgorging a small package housed inside its 100-pound frame. “Roxo,” Carere emphasized, is “the most efficient and sustainable way to meet the demands of point-to-point e-commerce.”
Disrupting a legacy retailer
Vineet Mehra, global chief marketing officer for Walgreens Boots Alliance, ticked off several statistics related to the retailer’s seemingly ubiquitous presence in the United States.
The health, wellness and beauty chain has 9,277 stores in all 50 states, and employs 88,000 healthcare service providers. Seventy-eight percent of all Americans live within five miles of a Walgreens, and the average shopping trip lasts only eight minutes.
Enviable market share notwithstanding, Walgreens’ challenge is that physical proximity no longer determines convenience, even as convenience remains the No. 1 factor driving consumer brand loyalty.
Brick-and-mortar stores are still “a critical asset,” Mehra said, but they are “no longer the sole differentiator in frictionless shopping. That’s why we need to evolve into a last-mile retailer.”
This past October, Walgreens took a giant leap in that direction, when it became the first retailer in the U.S. to make a household drone delivery. The company has partnered with Wing, a subsidiary of Alphabet, on a limited drone delivery service for select residents of Christiansburg, Virginia.
Customers can choose from among 100 items, order them via app and have them delivered within eight minutes,” Mehra said. Since the average in-store shopping experience is eight minutes, the drone delivery service had to beat that time — and it did. “The bar was high,” he said.
Walgreens’ approach to e-commerce is to provide a portfolio of last-mile solutions. That means rolling out an array of services, including in-store pickup, delivery lockers and a partnership that has put FedEx counters in 8,800 stores. Another innovation saw Walgreens launching a delivery pilot in New York City with the on-demand platform, Postmates. Orders have grown 17-fold since October 2019, Mehra said.
Crowdsourcing logistics and data
In addition to same day shipping, real time tracking and visibility is becoming the norm on all manner of shipments. To meet that demand, FedEx is rolling out a inexpensive new sensor on premium shipments, according to Carere. The device, which has yet to be named — holding the sensor in her hand, Carere referred to it as a “Chiclet” — runs on Bluetooth low energy and connects to a series of nodes FedEx is installing on all its vehicles and stations.
“This is a great application for last mile,” said Carere. The sensor, costing only a few dollars to manufacture, updates the company’s famed tracking technology by providing real-time custodial control of shipments, extending visibility and control even beyond FedEx.
For example, a hospital could install a node that would allow a surgeon to see where in the hospital a given pharmaceutical shipment has traveled.
Amalgamating data generated by shipments is a critical part of the last-mile tool kit, Carere said, point out that among other benefits, data sharing can help build out density in e-commerce networks.
So if retailers collaborate on their routing data, consumers can start to make choices based on that data — e.g., deciding to get a delivery on a day when other shoppers in the neighborhood are getting deliveries. “So for me the data is really profound, and we’re just beginning to scratch the surface,” Carere said.
The end game
All the technology is the world won’t matter if customers don’t buy into the new fixes, Mehra and Carere said.
As consumer skepticism around the safety of autonomous technology lingers, and by some accounts grows, FedEx and Walgreens, along with other companies and startups, are investing heavily in research to make sure people embrace the new offerings.
“The idea of experience is critical,” said Mehra. “If Roxo or the drone doesn’t portray an emotional connection to the brand, it’s a lost cause,” he said.