The Unit Economics Dilemma of Last-Mile Delivery: 200x1 or 1x200?

28. February 2024

The unit economics of door-to-door delivery pose a persistent challenge and serve as an existential cost pitfall for many emerging business ventures. The conventional "man in a van" delivery model incurs a simplified cost of €30 per hour.
30€ per hour for a "man in a van"
The critical factor lies in whether one can only manage 5 deliveries per hour due to minimal volumes and sparse stop density, resulting in a cost of €6 per package. Alternatively, large package delivery companies achieve an average of 20 deliveries per hour, equating to €1.50 per package. It is not getting any cheaper.
Cost efficiency remains elusive unless one deviates from the traditional home delivery approach and embraces the existing alternative of out-of-home (OOH) pick-up points, such as package shops or parcel locker stations. This approach proves to be more economical.
Consolidation reduces delivery costs
By reducing delivery addresses while maintaining package volumes, package flows can be consolidated. By delivering 1 x 200 packages to 1 delivery address instead of 200 x 1 packages to 200 delivery addresses, the direct delivery costs can be reduced to just a few cents per packages.