[Desk Column] The Delivery War Brought by COVID-19

[Asia Economy Reporter Kwangho Lee] In the post-COVID era, all sectors are undergoing significant changes. Among them, the distribution industry is experiencing rapid transformation. After the COVID-19 pandemic, people avoided face-to-face contact offline. As a result, offline retail sales declined, while online consumption increased. Particularly, logistics services have seen many changes, with the "last mile" emerging as a key issue.

The term "last mile" originally referred to "the last walk a death row inmate takes to the execution chamber," but in logistics, it means "the final distance before a product or service is delivered to the customer," that is, the last stage. It is the closest point of contact with the customer and the first stage where user experience is formed. Therefore, customer satisfaction varies depending on the delivery service provided. Even if customers like the product, poor delivery service reduces satisfaction with the product, whereas good delivery service enhances positive feelings toward the product. This also influences the company’s brand image.

Another reason companies focus on the last mile is to secure "consumer big data" for future growth. Detailed needs such as the time and place consumers want deliveries include personal preferences and trends. Companies can provide customized delivery services based on data and establish a virtuous cycle of business by developing new services.

Global distribution companies have already recognized the importance of the last mile and are fiercely competing for dominance. A representative company is Amazon in the United States. Since 2006, Amazon has introduced the Prime membership system offering free shipping. Since then, it has evolved services such as same-day delivery, instant delivery, and dawn delivery, achieving economies of scale. Currently, Amazon holds a 50% market share in the online retail market.

Walmart, like Amazon, has broadened the concept of delivery by offering an "in-home" delivery service for customers who are absent. This service defines the last mile not just as the doorstep but as inside the refrigerator. When an order is placed, Walmart employees, with the customer's consent, stock items inside the refrigerator. Delivery staff wear wearable cameras, allowing customers to check the situation in real time through the camera, ensuring safety.

Additionally, Germany’s Gorillas delivers within 10 minutes from order to arrival. Japan’s Aeon Group MaxValu offers 10-minute delivery within a 1.5 km radius of its dark stores. London’s Dija provides a bold service of three months of free delivery if delivery exceeds 10 minutes.

In South Korea, last mile delivery competition intensified with the launch of Coupang’s Rocket Delivery and Market Kurly’s dawn delivery. Existing offline retailers such as Shinsegae’s SSG Delivery and Lotte’s Baro Delivery have also started last mile delivery, deepening competition. Recently, GS Retail has strengthened platform and delivery rider supplier acquisitions and investments, while CJ Olive Young plans to open additional urban logistics hubs.

The domestic quick commerce market size was 350 billion KRW in 2020, and the industry expects it to grow to 5 trillion KRW by 2025. The global market is projected to reach approximately 508 billion USD (about 600 trillion KRW) by 2030. Accordingly, competition among companies will intensify, and a consensus is expected that companies excelling in last mile services will survive. However, if last mile itself becomes overly competitive, a timing for returning to an appropriate level may come. Companies must not overlook essential competitiveness such as product sourcing, pricing, and private brands (PB).

This content was produced with the assistance of AI translation services.