Collaboration to Reconcile ECommerce Demand, Sustainability

While e-commerce consumer demand was apparently heading towards market correction after COVID-19 restrictions were lifted, demand and accompanying delivery expectations are expected to pick-up and continue growing incrementally. This poses an important challenge for stakeholders attempting to augment repurchase rates and magnify their logistical delivery capacity while attempting to curb carbon emissions. To accomplish these seemingly contradicting objectives, industry stakeholders stand to benefit from a collaborative approach, according to industry leaders. 

“Reconciling seemingly exponential demand with sustainability objectives requires collaboration between the industry stakeholders,” said Andres Archilla, Co-Founder and COO, Melonn. “Moreover, the government has an important role to support the continued growth of this industry through the development of incentives,” he added. 

Restrictions imposed by the COVID-19 pandemic forced even the most reluctant Mexican consumers to recur to e-commerce and marketplace platforms, shortening the projected growth of this industry sector by years. Even after this initial industry jolt, e-commerce adoption is expected to remain at 69 percent with an average purchase ticket of over MX$1,500 (US$76.6), according to Forbes Mexico. Moreover, to keep up with growing customer demand and the fast pace at which the market is evolving, companies are adopting new technologies and experimental supply chain models to improve fulfillment processes. Nowadays, consumers demand fast and cost-effective delivery options, which are now key to retaining customer loyalty to online stores. However, last-mile delivery processes continue to present problems for the retail industry given their relevance and continuous need to grow.  

Same-day deliveries, management of damaged products and route optimization are some of the few ways retailers and online businesses are trying to optimize their systems to cater to their customers. According to Statista, “more than 61 percent of logistics companies said last-mile delivery is the most inefficient part of their entire supply chain. If customers are unsatisfied with the shipping service, almost 56 percent of customers will not buy from that brand again.” In this sense, customer satisfaction can be linked to speed, timely delivery and accuracy. As stated by a Capgemini Report, 63 percent of consumers prefer online deliveries over physical stores due to overcrowded spaces. The challenge appears to be correlated to high levels of competitiveness and consumers’ high expectations in this regard. Modern customers prefer e-commerce and retail stores that fit their lifestyle. 

This understanding has actually moved companies like Mercado Libre, Coppel and Amazon to eat delivery costs and cut into their profits to gain a greater market share–and it has worked. However, this is not a model that every business can put into practice, begging the question: “At what point do companies choose to take on delivery costs between choosing to pass it on to end consumers,” asks Antonio Arranz, General Manager, DHL Express Mexico.

Additionally, from the business perspective, last-mile problems are usually caused by inefficient delivery methods or logistics, including limited visibility and missed delivery times. Solving these issues requires innovative transportation methods, route optimization and strategies to get goods from distribution centers to their final destination as quickly and efficiently as possible. 

“Data analysis has already played an important role helping organizations develop and choose among more efficient delivery routes; however, networking between platforms stands to expedite this process,” said Daniel Colunga, General Manager, Uber Eats Mexico. Other innovations include the development of micro-fulfillment centers as a means of physically getting closer to end-consumers. These centers are accompanied by challenges of their own but could help retailers move from shipping to from-store delivery, he added. In the meantime, companies can turn to pricing options that can serve to help companies monetize and help abate demand volumes, suggested Archilla.

As the deadline to meet net-zero objectives approaches, companies must also consider the lack of EV infrastructure in Mexico which has been largely neglected by the federal government, observed Edvard Pettersen, Country Manager, Pickit Mexico.