Japanese home-delivery service companies are faced with challenges. In a sense, e-commerce players are the same. Transaction volume has increased due to expansion of e-commerce such as Amazon, but it is difficult for home-delivery service companies to generate a good profit. The requirements of nationwide delivery, same-day or next-day delivery, and quantity discount, and also shortage of manpower have plagued the home-delivery service companies.
Sagawa Express, which once had a virtual monopoly on home-delivery service for Amazon, tried to negotiate price increase with Amazon in vain, and eventually Sagawa Express withdrew from the service for Amazon. After that, Yamato Transport has been undertaking the home-delivery service for Amazon under difficult circumstances. Yamato Transport also has negotiated price increase and quantity control of underwriting with Amazon. Eventually, on January 30 2018 it was reported that Amazon accepted it. Amazon’s transaction volume is so large that maybe Amazon couldn’t find other companies capable to undertake it. Not surprisingly, it was reported on March 1 that Amazon decided price increase for delivery service for shops on Amazon.
One of the challenges in the home-delivery service industry is low operational efficiency due to redelivery. Estimates of social loss due to redelivery which was made by the Ministry of Land, Infrastructure and Transport in 2014 are as follows.
- Approximately 20% of deliveries are re-delivered due to absence of recipients etc.
- The mileage spent for redelivery is 25% of the whole mileage.
- Annual CO2 emission by redelivery is approximately 42,000 tons.
- The annual labor force for redelivery is 90,000 people (approximately 180 million hours).
In order to reduce the cost of last mile delivery, the following solutions are implemented. These are aimed at increasing the flexibility of receiving place and time.
- Delivery locker that allows customers to receive goods even when they are away from home.
- Allow customers to receive goods at places other than home such as a station or a convenience store.
- Allow customers to specify day of the week and time of day that would suit their convenience, and also change day and time or receiving place when they receive an email to notify the delivery plan at the last minute.
In addition, although the following solutions are currently limited in use, it is expected to completely solve home-delivery manpower shortage in the future.
- Drone (Amazon, Rakuten)
It is necessary to clear safety concerns for use in densely populated areas such as Tokyo. Also it should be consider how to deliver goods to customers who live in a multi-unit apartment building.
- Self-driving car (collaboration between DeNA and Yamato Transport)
On-demand delivery service during demonstration experiment. The delivered goods are placed in a storage box provided in the car, and the customers open it with a two-dimensional code or a personal identification number. Automatic driving car delivers goods to designated location (home, working place, station, cafe etc.) and give notice immediately before arrival of goods.
Japanese e-commerce giant Rakuten reportedly announced building of its own distribution network in the results briefing on February 13 2018. It covers the first mile to the last mile, and suggests the following.
- Minimize workers in warehouse with automatic warehouse system
- Crowdsourced delivery including individuals
- Advance notice system of delivery information using SNS
The problems with distribution network are not without implications for e-commerce companies. Existing home-delivery service companies and e-commerce companies, which will control distribution platform?