The Shipping Point

It’s never been easier to shop online, and consumers know it. E-commerce has skyrocketed in recent years, experiencing 10 years of growth during the first three months of the pandemic and soaring from there.¹ Retail e-commerce sales exceeded $300 billion in the US alone in the third quarter of 2024—a staggering 7.4 percent increase from the previous year.²

Further fueling that explosion is the introduction of two-day (or less) shipping by the world’s largest online retailer, Amazon. It’s turned into “the land of yes” for online consumers, but it’s never been harder on the companies and people working to get those packages to doorsteps. Last-mile delivery—that final e-commerce step where a package is physically loaded from warehouse to truck and driven to its destination—is an industry struggling to deliver.

Consumer expectations have shifted from the standard 3–7 business-day delivery window to two-day, next-day, or even same-day delivery. This accelerated timeline, combined with increasing delivery costs (last-mile now accounts for more than half of total shipping costs),³ means that retailers, and particularly their last-mile delivery companies, are feeling the crunch.

“In the industry, they call it the Amazon effect—the idea that delivery should be really fast, and it should be free,” says Scott Webb, a teaching professor in BYU Marriott’s Department of Marketing and Global Supply Chain. “Customers absolutely love it, but the truth is, it’s always been an unsuccessful business model.”

The result is that last-mile delivery is at a tipping point. Unable to absorb the massive losses like Amazon can, more last-mile delivery companies are struggling to break even, keep up with staffing needs, and deliver packages on time, ultimately leading to more dissatisfied customers. And while all this is happening, the global economy is ballooning, and the demand for last-mile delivery services is increasing exponentially.

Webb and other BYU Marriott faculty and alums aren’t simply watching the chaos unfold with a bowl of popcorn in hand. They are some of the forces researching, innovating, and shaping the future of last-mile delivery, providing the wisdom and experience needed to help guide both consumers and companies through the speed bumps ahead.

First-Class Frustrations

FedEx is one of the few last-mile delivery companies that can keep up with Amazon, but its business model is changing fast to stave off rising industry costs. In a major shake-up in June 2024, the company merged two of their three subentities, FedEx Ground and FedEx Express, in a $4 billion cost-cutting initiative.

The shift is about to hit home for Grant Rasband, a BYU Marriott graduate and FedEx Ground subcontractor who owns two last-mile delivery companies in northern Delaware. Between Rasband’s companies, he has the rights to all FedEx Ground deliveries and pickups for several zip codes in the state. As he puts it, if you live in Wilmington, Delaware, and you order a table from IKEA, his company will be delivering it to you.

Right now, Rasband is dispatching 16 of his 20 trucks daily and generating about $2 million in annual revenue. That level of revenue doesn’t translate into much profit after factoring in rising fuel, vehicle, and labor costs, not to mention failed deliveries. “Two million sounds great, but margins are razor thin in the last-mile delivery industry,” he says.

Rasband says it’s been a rough couple of years for FedEx contractors, but he’s hopeful that the merger will play out in his favor. The integration of the FedEx Express unit into FedEx Ground will provide more delivery opportunities for FedEx subcontractors, which will translate into more revenue. But Rasband’s companies will now also have to grapple with the pressures and logistical challenges that come with the precise delivery-time windows FedEx Express offers.

“Contractors that can handle timed delivery should make out pretty well,” says Rasband, who—together with his brothers, Neil and Paul, as well as his mother, Cecily—has owned and operated last-mile companies Mudd City Inc. and Jordan River Logistics Inc. for three years. “I’m excited by FedEx’s response to changes in the industry,” he notes, “but this will be a real challenge.”

FedEx, UPS, and the United States Postal Service all still outrank Amazon in revenue, but just like Rasband’s smaller companies, they’re all navigating the effects of Amazon’s movements in the last-mile world. So are big-box retailers like Target and Walmart, which have each beefed up delivery services in recent years to keep up with consumer expectations.

Some of those last-mile adjustments are becoming more manageable with new technology—more on that later—while other approaches are already causing some rethinking from retailers. The overarching challenge is twofold: First, consumers expect to receive products immediately, and second, they expect those products to have free shipping. According to surveys, the number-one reason online shopping carts are abandoned is that there is no free shipping.⁴

But the numbers don’t lie: Instant delivery with free shipping is simply unsustainable.

The Amazon Effect

Even Amazon is being forced to adjust to the Amazon effect. Shoppers who don’t subscribe to Amazon Prime are often prodded to spend at least $50 to qualify for free shipping—in addition to being pressured to sign up for Prime. Throwing in a candle seems like no big deal to get free shipping, so most customers do it. But what they don’t know is that the “free shipping” is really just shipping costs baked into the cost of the products they’re buying.

It’s a tiny psychological manipulation with a significant impact on consumer behavior in the e-commerce landscape—something that seemed worth studying to BYU Marriott Assistant Professor Bekki Brau. Her expertise is primarily in the impact of human-machine collaborations (think analytics and AI) on supply-chain dynamics, but a few years ago she teamed up with a colleague to study the impact of shipping charges on the last mile.

Brau along with Jordan Barker, now an assistant professor at Michigan State University, tested how people would feel about a late package if they had to pay for shipping versus getting “free shipping.” Brau and Barker’s lab experiments showed conclusive results. If there is going to be a delivery disruption—an increasingly common experience—it is better to consolidate all the costs into one price, leaving the consumer feeling that they didn’t have to pay extra for shipping.

“When you introduce this partitioning and show consumers they’re paying this much for shipping, they have an expectation that the shipping will go well,” Brau says. “It’s far better to consolidate and have the upfront price all in one and then offer ‘free shipping’ in name. People tend to give retailers a little more grace when they feel like they didn’t have to pony up extra for shipping.”

The driving factor behind the research is the reality that disruptions are happening more and more often in last-mile delivery, leading to an increase in failed deliveries. In some ways, the last-mile delivery industry has been backed into a corner, fueled by an impossible conflict between consumer expectations of lightning-fast delivery and a host of other factors that can be outside of deliverers’ control.

Miles of Obstacles

Depending on who you ask, first-delivery attempts of packages fail anywhere between 10 percent and 40 percent of the time. In 2015 one last-mile company founder told TechCrunch that 20 percent of package deliveries fail on the first attempt in urban areas, and some zip codes see failures as high as 50 percent.⁵ A survey from UK-based software company Loqate found that a quarter of companies admit first-attempt failure on more than 10 percent of deliveries.⁶ That’s a massive number of items not making it to doorsteps, considering that package deliveries are projected to surpass 100 million a day by 2026.⁷

According to a Harvard Business Review analysis by Michigan State researcher Stanley Lim, there are three major reasons deliveries fail: poor urban planning, fluctuations in driver motivation, and stressful working conditions with related safety concerns.

“When drivers venture into certain areas, they worry about the security of the packages, their vehicles, and themselves,” Lim writes. “Speed is of the essence, and it’s easy to make mistakes when you’re in a rush. When you don’t have health insurance, when your vehicle is owned by your company—or it’s your only major asset—and you’re carrying thousands of dollars’ worth of products, being robbed is a real concern.”⁸

Rasband estimates that each of his drivers delivers between 180 and 200 packages on a typical day, making between 130 and 150 stops. Drivers dispatch around 9 a.m. and log an average of 55 miles on what he describes as very urban and dense routes before returning to the dispatch terminal between 3 p.m. and 6 p.m. Rasband mentions that these routes cover fewer miles than those of competitors, yet each driver is using upward of nine gallons of fuel per day in trucks that get roughly six to eight miles per gallon.

Fortunately, Rasband’s delivery-failure rate remains low, but—thanks to the merger—the rollout of timed delivery stops for FedEx contractors looms large.

“For the drivers, it’s going to be a big adjustment, and I do foresee turnover when we fully implement it,” Rasband says. “But it’s just the way things are going, and we’re going to have to figure it out. Unfortunately, there’s not really any other option.”

Brau agrees that the road ahead for the last-mile delivery industry will likely be a bumpy ride. While more and more companies like Rasband’s will be compelled to handle next-day shipping or even same-day shipping, Brau foresees larger challenges that will impact everyone in the industry: breakdowns in supply chains, booming e-commerce demands in locations with poor urban planning, unreasonable conditions for drivers to meet those demands, and volatile fuel costs.

“When consumers order something and say they need it now, what if there are no other people in that neighborhood to batch items?” Brau asks. “What happens when deliverers have to change all of their routing to meet these expectations? All of this flexibility and quick adaptability for what a consumer is asking for is expensive, inefficient, and demanding.”

Brau also believes that as more and more consumers go online for items previously purchased in brick-and-mortar locations, anticipating consumer needs will be paramount. With current supply chains being global and the worldwide economy being so interconnected, natural disasters bring significant disruptions that prevent last-mile deliverers from getting products to consumers on time.

“The supply chain is only as strong as its weakest link. What happens when a hurricane or an earthquake hits the East Coast and products are not in a warehouse close by?” Brau says. “When items are housed offshore in China, Vietnam, or Europe, you’re facing extreme logistical tests.”

The rethinking of warehouse operations further complicates the matter. Before the e-commerce revolution, most warehouses operated in a business-to-business context in which it was relatively easy to forecast product needs for existing business clients. Now warehouses are shifting to serve heightened business-to-consumer demands—an exponentially more challenging logistical operation with widely varying product orders. All of this amounts to a perfect storm for the organizations trying to find solutions for last-mile delivery and for the people who actually drive the trucks. But there is hope.

Robots to the Rescue?

Webb, Brau’s colleague and coauthor on several publications, says robots are coming to the rescue. More specifically, companies are taking advantage of more sophisticated robotics to help automate the process of sorting products at business-to-consumer warehouses. Webb also says routing software is rapidly improving. According to Verified Market Research, the routing software industry was valued at $2.3 billion in 2023 and is projected to reach $3.5 billion by 2030.⁹

But all the routing software and warehouse robotics in the world can’t solve the physical and mental strain on truck drivers who still have to get packages on doorsteps—unless robots do the delivery part too.

The world’s first robot package-delivery system, Starship Technologies, launched in early 2018 in Milton Keynes, England, a city about 50 miles outside of London. Later that year, Starship rolled out its services to select California locations. Since then, Starship’s stroller-sized delivery robots have driven (mostly on sidewalks) more than 8 million miles and completed 7 million deliveries of groceries, take-out food, and industrial supplies to 100 cities, campuses, and industrial sites. Other companies, such as Clevon and Nuro, have shifted from delivery robots to larger-scale autonomous, driverless vehicles. But the major players in last-mile delivery have struggled to establish autonomous delivery at the largest scale.

Amazon announced an autonomous robot delivery unit, Scout, back in January 2019 but shelved the service in October 2022. UPS started a partnership with autonomous vehicle company Waymo for package delivery in 2020 but ended the partnership in August 2023. FedEx announced its last-mile delivery robot, Roxo, in 2019 before pulling the plug in the fall of 2022. And the biggest last-mile deliverer of all, the Postal Service, tested autonomous trucks for delivery back in 2019 but never moved beyond trials.

Even experts in the last-mile industry can’t agree on the future of autonomous vehicle delivery. Webb thinks it’s just a matter of time before the technology becomes reliable enough to be used on a mass scale, while Rasband just can’t see a future filled with unmanned aerial vehicles (UAVs) dropping off pizzas.

“I don’t think Americans are going to want drones flying around suburbs,” Rasband says. “I don’t foresee that happening any time soon.”

Even though Amazon, FedEx, and DHL continue to test drone delivery, Brau isn’t convinced that UAVs are the answer to what ails the last-mile delivery industry. In her opinion, the biggest change that needs to happen is an adjustment in consumer behavior.

Being a Better Consumer

Thanks to free return policies, regular e-commerce shoppers often buy several different sizes of the same item, knowing they’ll only keep one. Consumers might also purchase an item they will only use once and then return it when they are done with it. These practices—while seemingly harmless to consumers—further strain truck drivers and also create financial loss for retailers who foot the bill.

Return costs have grown so exorbitant—17.6 percent of $247 billion in online merchandise was returned in 2023¹⁰—that it’s often cheaper for companies to throw the product away than to process the return. Or, in the case of inexpensive items, retailers might simply send the money back to the consumer and tell them to keep the unwanted product. According to a survey from ReturnPro in 2023, nearly 60 percent of retailers, including Amazon and Target, offered “keep it” policies.¹¹

While this practice helps cut down on last-mile delivery strains, Brau says it’s pretty terrible for sustainability.

“From a consumer’s perspective, you need to be a smart shopper; the cost is so much higher than the product you purchase,” Brau says. “We can’t have this culture of consuming, consuming, consuming. We should stop and think, ‘What impact am I having on the planet and on future generations?’”

Brau says that now last-mile delivery is so easy on the consumer—it takes only one click of a button—shoppers think they need a lot more stuff than they actually do. Consumers are ultimately the ones who are creating the demand, and businesses are responding to that demand. “If, collectively, we have a reawakening on how much we buy, there can be a lot of good that can take place,” she says. “Consumers hold a lot of power.”

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by Todd Hollingshead
Illustrations by Gwen Keraval

About the Author
Todd Hollingshead is a media relations manager in BYU’s University Communications office, where he primarily writes about faculty research. He and his wife, Natalie (a fellow BYU grad), live in Springville, Utah, with their four children. His last order from Amazon was a pair of noise-canceling headphones for Natalie. He didn’t return them!

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Notes

1. See “Five Fifty: The Quickening,” McKinsey Quarterly, July 28, 2020, mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/five-fifty-the-quickening.
2. “Quarterly Retail E-commerce Sales, 3rd Quarter 2024,” US Census Bureau News, November 19, 2024, https://www2.census.gov/retail/releases/historical/ecomm/24q3.pdf.
3. See Stanley Frederick W.T. Lim, “Cutting Last-Mile Delivery Costs,” MIT Sloan Management Review 66, no. 2 (Winter 2025): 15. See also “Last Mile Statistics 2023: Insights, Innovations, and Trends,” Wise Systems, blog, September 28, 2023, wisesystems.com/blog/last-mile-statistics-2023-insights-innovations-trends/.
4. “49 Cart Abandonment Rate Statistics 2025,” E-Commerce Checkout Usability study, Baymard Institute, 2024, baymard.com/lists/cart-abandonment-rate.
5. Zander Adell in Sarah Perez, “Doorman, A Startup Eliminating Missed Package Deliveries, Comes to Chicago and, Soon, New York,” Tech Crunch, October 23, 2015, techcrunch.com/2015/10/23/doorman-a-startup-eliminating-missed-package-deliveries-comes-to-chicago-and-soon-new-york/.
6. See Fixing Failed Deliveries, Loqate, March 1, 2021, loqate.com/en-gb/ebooks-and-reports/fixing-failed-deliveries/.
7. Brie Carere in Rimma Kats, “How Ecommerce Is Transforming FedEx’s Logistics and Last-Mile Delivery: A Q&A with Executive Vice President Brie Carere,” Emarketer, April 12, 2020, emarketer.com/content/how-ecommerce-is-transforming-fedex-s-logistics-and-last-mile-delivery.
8. Stanley Frederik W.T. Lim, “Research: Why So Many Packages Don’t Get Delivered,” Business Management, Harvard Business Review, November 28, 2023, hbr.org/2023/11/research-why-so-many-packages-dont-get-delivered.
9. See “Last Mile Delivery Software Market Size and Forecast,” in Global Last Mile Delivery Software Market Size by Route Optimization Software, By Delivery Tracking and Management Software, By Fleet Management Software, By Geographic Scope and Forecast, Verified Market Research, report 22485, February 2024, verifiedmarketresearch.com/product/last-mile-delivery-software-market/.
10. 2023 Consumer Returns in the Retail Industry, National Retail Federation and Appriss Retail, December 2023, 2, 4.
11. See Returns Report: 2023 Holiday Predictions, goTRG, 2023, 4; see also Dominick Reuter, “Why Companies Like Amazon, Walmart, and Target Will Let You Keep Some Products You Want to Return—but Issue You a Refund Anyway,” Business Insider, updated January 9, 2024, businessinsider.com/amazon-walmart-and-target-let-customers-keep-some-returns-2021-1.