How smart lockers can resolve last mile challenges for logistics providers

Author: Candice Yuan, General Manager, Logistics Technology Business, Cainiao Group, Europe and Southeast Asia

Asia Pacific’s eCommerce revenue is expected to grow by 11.64 percent CAGR between 2023 to 2027, with significant projected market volume of over USD 2.8 trillion by 2027, according to latest figures by Statista. This surge is nothing short of transformative in the dynamic eCommerce sector, enabling merchants to provide a diverse range of goods and services to satiate a multitude of consumer needs, all accessible at the touch of a button.

However, this eCommerce boom comes with its share of headwinds, especially for last mile logistics. The abundance of goods and services options also meant that logistics companies are more stringently measured by their ability to offer greater consumer convenience and flexibility. This is especially pertinent in today’s climate that is characterized by lack of last mile delivery timeliness or visibility, and limited pool of courier personnel. This confluence of factors has culminated in uncertainty and instability for merchants, consumers, and logistics providers. One thing is for sure — service diversity is the norm, not the exception.

In the face of these challenges, we are seeing an uptick in adoption of smart lockers as a more viable, cost-efficient and reliable last mile solution. These technologically enabled storage units are fast emerging as a crucial component to streamline and enhance the delivery process, especially for last-mile delivery. So, one key question emerges: What are smart lockers, and how will they help address some of these challenges?

Operationalizing Smart Lockers to Fulfil Last Mile Delivery Needs

Last-mile delivery, the final stage of delivering goods from a local warehouse or distribution center to the consumer’s end-destination, is often seen as a crucial part of the eCommerce logistics value chain as it determines the success or failure of the entire process. It is also noted as the most expensive component of the delivery process, accounting for 53 percent of the total delivery cost. Cost attributions include fluctuating fuel prices, free shipping, remote or inaccessible end-destinations, changing consumer expectations, etc.

To combat this, logistics companies have become increasingly receptive to technologically led solutions such as smart lockers to optimize delivery speeds and accessibility to reduce operational costs.

In essence, smart lockers are automated mailboxes that allow consumers to pick up and drop off parcels themselves any time of the day. These lockers consist of three key elements:

· Hardware: The physical components such as ARM machines, screens, scanners, network antenna, surveillance cameras, POS machines, and audio equipment.

· User Software: The user interface that enables couriers and consumers to execute tasks such as logging in, sending and receiving parcels, making payments, and even operating the lockers remotely.

· Management Software: This is the backend system tasked with locker and parcel management. It also handles essential business needs such as network routing and analysis of locker usage rates.

Smart lockers meet the diverse needs and considerations of consumers by providing them the added convenience and flexibility of pick up and deliveries, with an additional peace of mind that their parcels are delivered in a more environmentally sustainable manner.

As for businesses and merchants, having smart lockers at strategic locations such as residential areas and office buildings is beneficial in supporting a full range of business scenarios including the convenient and accessible courier and/or consumer pick-ups and drop-offs, parcel mailing, good returns, and more.

In a recent joint study by Deloitte and Cainiao, the shift towards smart lockers have already seen productive returns as it grows to become an integral component of smart last-mile logistics. In China, consumers have a high acceptance rate of picking up goods through such lockers, citing the ease of accessibility, up-to-date delivery updates, and high parcel collection efficiency. On the other hand, in Singapore, there is indication that the market will see smart lockers as an effective way to improve last mile logistics, with the Singapore government championing the way with the nationwide roll-out of smart lockers.

Navigating Challenges in Smart Locker Integration for Last-Mile Success

Embracing the future of last-mile logistics through smart lockers undoubtably unlocks immense potential for consumers, merchants, and logistics providers but the implementation process does come with its own unique set of challenges. These hurdles, while significant, can be easily overcome with the right support and guidance.

For a start, having strong in-market awareness is imperative when driving smart locker implementation. For instance, the usage of smart lockers in Singapore stands only at 10 percent — lagging behind the impressive 40 percent seen in China. While doorstep deliveries still lead the way in Singapore, the key to bridging this gap lies in expanding the coverage of the existing 1,600 lockers across the island to further improve the accessibility and convenience of such customer touchpoints.

For merchants and traditional logistics providers, the prospect of adopting smart lockers can be a daunting one, with concerns about the initial financial outlay, a lack of technical know-how, as well as potential ROI looming large. This is where the expertise of a trusted partner like Cainiao comes into play. Our team is well-positioned to provide comprehensive consultative support in integrating smart lockers with existing eCommerce infrastructure, minimizing disruptions and keeping operating costs in check.

In addition, Cainiao’s proprietary smart lockers imbue our partners with a wealth of data-driven insights such as such as daily parcel volume, usage rates and consumer behavior, supporting them in achieving their business goals through data-backed business decision-making and continuous process refinement. This optimization also enables them to pass on cost savings to their customers and establish a stronger competitive advantage in the dynamic eCommerce market.

Governments can also play a pivotal role in driving adoption. Public education initiatives can spotlight the myriad benefits of smart lockers, fostering widespread awareness and acceptance. This can be further supplemented by providing subsidies to merchants to provide them with the impetus needed to digitize and integrate the solution into their operations.

Redesigning the Future of Last-Mile Logistics

Looking ahead, the last-mile logistics landscape is poised for a transformative shift towards prioritizing user experience, cost efficiency, and technological advancements across various delivery scenarios. Digitalization has emerged as a key differentiator and growth catalyst for logistics and eCommerce players throughout the value chain, with AI-driven insights set to play a pivotal role in informing and refining business decisions.

In this regard, the introduction of smart lockers represents a significant milestone in redefining the last-mile delivery experience. These innovative solutions will not only enhance safety and security but also offer a level of convenience that sets a new standard for parcel delivery. Beyond convenience, they hold the potential to significantly reduce operational costs, providing a platform for businesses to expand their revenue streams, as well as contribute to environmental sustainability by mitigating carbon emissions associated with traditional parcel deliveries.

Considering all factors, it is evident that smart lockers are poised to become the future of the logistics industry.

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