Last-Mile Delivery Guide 2025: Costs, Strategy & Optimization

A package is leaving your warehouse. It’s been picked, packed, and loaded onto a delivery van. So far, so good. But now comes the most important part of the process – getting that package from the local hub to your customer’s door. 

This final leg of the journey, known as ‘last-mile delivery’, often determines whether a customer is satisfied or never shops with you again. 

With the market projected to reach $288.9 billion by 2031, getting last-mile delivery right is clearly a huge priority for businesses everywhere. 

Research shows that 84% of consumers won’t purchase from a retailer again after just one negative delivery experience, so it’s very important to get it right the first time, every time. 

Last-mile delivery also accounts for some 53% of the total delivery cost, so optimising it has a large impact on your margins. 

This comprehensive guide examines what it takes to build an exceptional last-mile delivery operation – from understanding costs and service options to choosing the right technology. 

You’ll learn how leading brands are meeting rising customer expectations while keeping delivery operations efficient and profitable.

Understanding Today’s Last-Mile Challenge

Last-mile delivery represents the final journey of a product from a distribution centre or retail store to the customer’s doorstep. It’s often the only physical interaction a customer has with your brand.

When we consider today’s delivery expectations surrounding last-mile delivery, we have to mention Amazon.

Since introducing Prime in 2006, next-day and even same-day delivery is largely expected in areas well-served by delivery networks, such as towns and cities. This has created immense pressure on other retailers to match these service levels while managing costs.

The challenge, then, is to bring fulfillment up to a high level. It is possible, but there are a few key problems to overcome to do it:

The Cost-Speed Paradox

The faster the delivery, the higher the cost – yet consumers increasingly expect both speed and affordability. 

When you factor in the operational costs of maintaining competitive delivery speeds, many businesses find their margins squeezed if they don’t smartly optimise their delivery operations. 

Adding fuel to the fire, some 9/10 of buyers expect free delivery despite only 50% of retailers being able to offer it. 

Importantly for retailers, delivery quality and reliability cannot be sacrificed. According to Enterprise Times, failed deliveries alone cost businesses an average of $17.20 per order, amounting to nearly $200,000 annually – so going for the cheapest, fastest options without regard to delivery success rates and other factors is not always wise. 

Multiple Delivery Options 

Customers increasingly expect a range of delivery choices – from same-day delivery to specific time slots to collection points. Locker deliveries are a key trend here, with some 50% of shoppers now using them.

While offering more options sounds good in theory, each new delivery method adds complexity to your operation. Different carriers, varying cost structures, and multiple tracking systems must be managed without friction. 

What works well for scheduled deliveries might not work for same-day service, forcing businesses to maintain parallel delivery operations.

Urban vs Rural Complexity

While urban areas offer the density needed for efficient deliveries, they also present challenges with traffic congestion, parking, and building access. Rural deliveries might have easier access but involve longer distances between stops, making route optimisation crucial. 

Geographic disparity means businesses need different strategies for different regions – what works in central Manchester won’t work in the Scottish Highlands, what works in New York won’t in Montana, and so on.

Technology and Visibility Gaps

Despite the critical nature of last-mile delivery, many businesses still lack the necessary technology infrastructure to manage it – especially when multiple carriers are involved. 

Research shows that 55% of retailers still rely on manual, inefficient order planning and dispatch. 

Meanwhile, 68% of consumers demand complete visibility throughout the delivery process – creating a significant gap between capability and expectation.

Environmental Pressures

The growth in delivery traffic poses serious environmental challenges. Cities are implementing increasingly strict emissions regulations, forcing businesses to consider sustainable delivery options. 

However, sustainable delivery often comes at a premium, creating another balancing act between environmental responsibility and cost management. 

Keep an eye on developments here – we’ll likely see an explosion in electric vehicle (EV) delivery fleets and increasing demand for low-carbon deliveries. 

Challenges Mean Opportunity, Too

While these last-mile delivery challenges might seem like tricky terrain, they at least present opportunities for businesses willing to adapt. 

Companies that can solve the delivery puzzle – offering the right mix of speed, reliability, and choice while controlling costs – gain an advantage. 

Let’s begin by reviewing some last-mile delivery options alongside their characteristics and performance. 

Comparing Last-Mile Delivery Options

As we’ve already discussed, there is no one-size-fits-all solution for last-mile delivery. 

Different countries and regions present unique challenges and opportunities, and customer preferences vary.

Mixing different delivery options to cater to a broad audience is standard. Here’s a breakdown of the main last-mile delivery solutions:

Standard Courier Services

Standard courier services still handle the majority of last-mile deliveries. 

In the UK, carriers like Royal Mail, DPD, and Evri are popular, though there’s a wider selection of carriers than ever. The US relies heavily on UPS, FedEx, and USPS. The European market sees a mix of national postal services and international carriers like DHL and GLS.

These services typically offer delivery within 1 to 3 working days, with costs varying significantly by region:

• UK: £3 to £10 for standard delivery, with prices rising sharply for rural areas and highlands
• US: $5 to $15 depending on zones (with costs increasing when crossing multiple shipping zones)
• EU: €4 to €15 with considerable variations between countries and for cross-border shipments

The main advantage of standard courier services is their established infrastructure and reliability. 

However, they can lack flexibility and sometimes struggle with delivery time customisation – a growing issue when 72% of consumers prioritise convenient delivery slots over pure speed.

Same-Day Delivery

The fastest-growing segment of last-mile delivery, same-day services have seen explosive growth since Amazon set new consumer expectations. Coverage can be patchy, though Amazon same-day delivery now covers some 120 urban areas in the US.

While same-day delivery will become more ordinary, it currently poses some tricky obstacles:

• Dense urban areas support relatively cost-effective same-day delivery due to high order volumes and shorter distances between deliveries
• Suburban and rural areas often make same-day delivery prohibitively expensive, with costs sometimes exceeding the value of the items being delivered
• Cross-border same-day delivery remains largely impractical except in specific European regions (e.g. the Benelux countries)

Click & Collect

Click & Collect has emerged as a cost-effective alternative to home delivery. It’s hugely popular in the UK and growing rapidly in Europe. Customers collect their orders from stores, designated collection points, or partner locations.

When we look at the bigger picture, market adoption of click-and-collect varies:

• UK: At least 70% of people are aware of Click & Collect, with major networks like Collect+ making it increasingly convenient.
• Europe: Growing rapidly, especially in France, where shop collection points and ‘drives’ (drive-through collection points) are widespread.
• US: Adoption has been slower, though major retailers like Walmart and Target have helped normalise the service.

The appeal here lies in its lower cost structure and higher success rate – there’s no failed delivery attempt when customers collect their own parcels. Most click-and-collect operators claim 99.99% delivery success rates. 

Locker Systems

Locker networks are the next evolution of collection points, offering 24/7 access and automated processing. Amazon has led the way with Amazon Hub Lockers, but independent networks are proliferating:

• InPost has deployed over 8,000 lockers across the UK, and data shows that each locker can reduce carbon emissions and ensure delivery success
• Deutsche Post DHL operates over 12,500 parcel lockers in Germany alone
• The US market is still developing, though carriers like USPS are expanding their locker presence rapidly 

Lockers typically reduce delivery costs by 25 to 40% compared to home delivery due to consolidating multiple deliveries to a single point. Reducing journeys, and therefore, both costs and emissions, is a key selling point that drives locker uptake among both sellers and buyers. 

Crowd-Sourced Delivery

Crowd-sourced delivery leverages independent contractors and their personal vehicles to make deliveries, similar to how Uber transformed ride-sharing. 

This model has gained significant traction through platforms like Uber Connect, Amazon Flex, and Roadie (now owned by UPS).

Here’s how it typically works:

• Quality control varies as drivers are independent contractors
• Coverage can be unpredictable, especially in non-urban areas
• Costs can fluctuate based on driver availability and demand
• Insurance and liability issues need careful management

This model offers extreme flexibility but comes with challenges:

• It’s relatively confined to urban areas
• Quality control and consistency remain significant challenges
• Insurance and liability issues vary by region, making cross-border operations complex

Combinations Are Optimal

The key to successful last-mile delivery nearly always lies in combining several options. 

Most successful retailers now offer a mix of delivery choices, allowing customers to balance speed, convenience, and cost according to their needs. Each option is complementary. 

Some customers will pay for premium delivery services with slot choices and flexibility; others will prefer cost-effective lockers they can access on their own time. 

The Value of Working With a 3PL For Last-Mile Delivery

A third-party logistics provider (3PL) is a company that handles outsourced warehousing, fulfillment, and shipping operations. 

Working with a 3PL like us at J&J can transform your last-mile delivery operations. Beyond storing and shipping your products, we bring expertise, technology, and carrier relationships that help optimise both speed and cost.

Here’s how partnering with a 3PL adds value:

• Strategic inventory placement near your customers
• Better carrier rates through volume shipping
• Multi-carrier flexibility and automated selection
• High-accuracy fulfillment and same-day dispatch
• Real-time tracking and delivery insights
• Continuous delivery performance optimisation

Rather than managing carriers, technology, and fulfillment separately yourself, a 3PL partnership gives you a single integrated solution. This means you can focus on growing your business while your 3PL solves the puzzle of last-mile delivery largely on your behalf. 

Last-Mile Delivery Mode Comparison Table

Here’s a table to help you understand and compare the types of last-mile delivery services available today:

Category	Standard Courier Services	Same-Day Delivery	Click & Collect	Locker Systems	Crowd-Sourced Delivery
Best For	General e-commerce, predictable demand	Urgent, premium customers, urban areas	Retailers with physical stores	Secure, flexible collection	Fast, flexible, urban-focused
Speed	1-3 working days	Same-day	Same-day or next-day	Same-day or next-day	Within hours
Cost Range	£3-8 (UK), $5-15 (US), €4-15 (EU)	High premium pricing; varies by provider	Lower cost, often free for customers	25-40% cheaper than home delivery	Variable, depends on demand
Customer Expectations	Reliable, affordable, tracking available	Real-time tracking, premium service	Convenient, eliminates failed deliveries	24/7 access, secure collection	Real-time tracking, ultra-fast
Challenges	Limited flexibility, rural surcharges	High cost, difficult to scale	Requires in-store pickup infrastructure	Network expansion, customer adoption	Quality control, driver availability
Implementation Considerations	Needs bulk shipping contracts	Needs local fulfilment hubs	Store staffing, POS integration	Needs partnerships with locker providers	Requires gig platform integration
Technology & Automation	Basic tracking, manual dispatch	Advanced routing, AI dispatching	Retail POS system integration	Locker management software	Driver apps, real-time allocation
Future Scalability	Highly scalable with dense urban areas	Scalable in dense urban areas	Moderate scalability	Highly scalable, eco-friendly	Scalable in urban areas

Comparing Last-Mile Carriers

Your choice of delivery carriers can make or break your customer experience. Each brings different strengths to your operation. 

Here are some core principles to keep in mind when building a last-mile delivery network:

Service Levels and Coverage

Your choice of carriers should reflect where your customers actually are. 

If you’re primarily serving urban customers, working with select major carriers might meet your needs. However, retailers with widely distributed customer bases often need multiple carriers to maintain consistent service levels.

Beyond geographic coverage, consider what you’re shipping. Some carriers excel with standard parcels but struggle with oversized items or time-critical deliveries. Others might offer excellent service but limited tracking. 

The key is matching carrier capabilities to your specific delivery requirements and customer expectations.

Cost Structures

While base rates matter, the total cost of using a carrier includes surcharges, failed delivery fees, and peak season adjustments. 

When you work with J&J, we negotiate volume rates with carriers, passing these savings to our clients while maintaining high service levels through our carrier mix.

Our ControlPort™ fulfillment platform automatically selects the optimal carrier for each delivery, balancing cost against service requirements. You’ll get the best value for every parcel without having to broker those prices yourself. 

Tracking Capabilities

Modern customers expect total visibility of their deliveries. Leading carriers offer real-time tracking, accurate delivery windows, and automated notifications. 

However, the quality of these systems varies dramatically. Some provide detailed maps and live driver locations, others just basic milestone updates. 

Consider also the ability to reschedule deliveries, select slots, or even redirect to a different address. All in all, the standard of delivery tracking is very high today. 

At J&J, we integrate carrier tracking into ControlPort™, giving you and your customers consistent visibility regardless of which carrier handles the delivery. You’ll gain clear, reliable tracking even when using multiple carriers.

Returns Processing

Returns are incredibly important. Many delivery partners now offer convenient drop-off or collection services and rapid processing, which can be a huge asset for businesses that experience high rates of returns, e.g. fashion and apparel. 

Through ControlPort™, J&J standardises returns handling across carriers, ensuring a consistent experience for your customers while maintaining efficient back-end processing.

Analysing The Costs Of Last-Mile Delivery

The true cost of last-mile delivery can surprise retailers. While carriers advertise attractive per-package rates, the reality involves a complex web of variables that can dramatically impact bottom-line profitability. 

Here’s a review of the main factors:

Pricing Models

Carrier pricing varies widely across regions. In the US, for example, leading carriers like UPS and FedEx use zone-based pricing where costs increase with distance from shipping origin. The UK and Europe typically use weight-based pricing with geographic supplements for remote areas. 

For businesses shipping in volume, carriers offer negotiated rates based on weekly or monthly shipment levels. 

At J&J, we secure substantial discounts on standard shipping rates thanks to the volume of orders we process across our network. This means our clients benefit from better rates without needing to reach high volume thresholds themselves. 

The key lies in finding the right balance between cost and service reliability. While base rates matter, factors like consistent on-time delivery, peak season performance, and reduced failed deliveries often provide better value than simply choosing the cheapest option. 

Our platform can help optimise this balance by automatically selecting the most cost-effective carrier for each delivery while maintaining service quality.

Hidden Costs

The quoted delivery rate often represents just the tip of the iceberg as far as costs go. 

Failed deliveries, address corrections, and special handling requirements can quickly multiply the true cost per package. Expenses are particularly high during peak seasons, when carrier networks are stretched thin, and return handling becomes more frequent.

Some of the most impactful hidden costs include:

• Failed delivery attempts
• Address corrections
• Special handling fees
• Seasonal surcharges

The rule is to never take the headline rate at face value. Evaluate hidden costs and how they might fluctuate across the year for a more roundly balanced, accurate estimate of costs over time. 

Urban vs Rural Delivery

As noted, some postal services charge extra for rural delivery. The amount varies broadly, though it would be fair to say that the extra cost seldom significantly impacts overall delivery profitability. 

While these surcharges typically affect only a small percentage of orders, they shouldn’t be ignored, especially if you sell products that appeal specifically to rural customers, such as farming equipment or outdoor gear. 

Peak Season Impacts

Peak seasons, such as the Christmas period or Black Friday, put immense strain on delivery networks. Carriers can raise their prices and add surcharges, but that’s not the only concern. 

Failed deliveries tend to spike at peak times as temp staff take up the slack. Return rates can multiply as gift recipients send unwanted items back. 

It can quickly damage margins for what is often the most important time of the year, so be sure to factor cost increases into margins and implement efficient returns workflows. 

The Value Of Technology Integration

Whatever your last-mile delivery strategy, you need technology that can handle your fulfillment workflows while offering transparency and control.

ControlPort™ is an example of an intelligent fulfillment software platform that manages every aspect of the delivery process, from warehouse operations to last-mile tracking. The system combines real-time warehouse management, order processing, shipping optimisation, and delivery tracking into a single integrated platform. 

Let’s briefly explore some of ControlPort’s key features and they advantages they bring to the table:

Powerful Insights Dashboard

The Insights Dashboard gives you immediate visibility into what matters most for efficient delivery:

• Real-time inventory tracking across all locations
• Live delivery performance monitoring
• Carrier success rate comparison
• Proactive issue identification
• Cost analysis by region and service

Real-time insight into your inventory and delivery operations lets you make decisions based on data, not guesswork. ControlPort™ enables you to track stock levels, monitor expiry dates, and identify potential delivery issues before they impact customers.

Deep Platform Integration

ControlPort™ connects directly with major eCommerce platforms – Shopify, TikTok Shop, WooCommerce – building data pipelines that eliminate manual data entry and hopping from system to system. 

Every order, inventory update, and tracking change flows seamlessly through a single platform, giving you complete control over your channels.

For custom or bespoke platforms, we offer an open API for developing custom integrations. 

Building for Scale

ControlPort™ grows with your business. From handling complex multi-channel operations to expanding into new markets, the platform maintains accuracy and efficiency as volume increases. 

Whether you’re shipping hundreds of orders or hundreds of thousands, it provides the deep, granular yet intuitive insights needed to make smart decisions about your delivery operation.

Implementation Strategy

Retailers and eCommerce businesses must strategically implement their last-mile delivery operations to balance cost, speed, efficiency, and customer experience. 

A well-executed strategy ensures optimised carrier selection, reduced delivery failures, and long-term scalability – all while keeping operations profitable.

This table provides a step-by-step framework for building an effective last-mile delivery network, highlighting key decision criteria, selection considerations, and execution strategies:

Stage	Key Decision Criteria	Solution Framework	Implementation Considerations	Future Scalability
1. Cost Control & Profitability	Cost per order is a key metric for growth	Balance standardization with efficiency for cost-effective operations	Use 3PLs with volume consolidation to reduce per-unit costs	Multi-market solutions enable scalable growth and demand fluctuations
2. Delivery Speed & Service Levels	Customer expectations demand faster shipping options	Offer express delivery in key markets to remain competitive	Utilize fulfillment centers closer to demand hubs	Expand delivery options by adding fulfillment locations
3. Customer Delivery Preferences	Home delivery remains the most preferred option	Integrate BOPIS and alternative pickup locations	Balance cost and experience to match customer preferences	Allow for adapting to emerging delivery trends
4. Carrier & Logistics Integration	Carrier partnerships are critical for efficiency	Work with a diversified carrier network	Leverage 3PLs with established relationships to optimize coverage	Expand and standardize carrier partnerships across regions
5. Reverse & Returns Logistics	Streamline returns processing	Offer seamless return experiences across markets	Use 3PLs specialized in reverse logistics	Optimize returns logistics to meet sustainability goals
6. Peak Season Handling	Managing demand surges effectively	Utilize flexible warehousing solutions	Stock buffers and labor planning for peak periods	Ensure infrastructure supports capacity growth

The Future of Last-Mile Delivery is Here

Last-mile delivery presents challenges and opportunities. Seizing the opportunities despite the challenges is both an art and a science.

Success depends on finding the right balance between cost, service levels, and technology – while maintaining the flexibility to adapt as customer expectations change. The businesses that thrive will build sustainable delivery operations without compromising that vitally important customer experience.

Since 2010, we’ve been helping brands deliver on their promises across the UK, EU, US and Australia. We deliver results through:

• Strategic carrier relationships that secure better rates and service levels
• Advanced technology that optimises every delivery decision
• Global network of fulfillment centres for efficient delivery anywhere
• 99.9% picking accuracy and 98% same-day dispatch rate

Want to learn how we can help transform your delivery operations? Contact our team. Let’s talk about building a last-mile strategy that drives your business forward.

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