Last-mile delivery, the final leg of a product's journey from warehouse to customer doorstep, has become a critical competitive differentiator for retailers. As ecommerce volumes grow and consumer expectations for speed intensify, the last mile now represents both the most expensive and most strategically important phase of fulfillment. The global last-mile delivery market is valued at approximately $201 billion in 2025 and is projected to grow at a 12% compound annual rate through 2029. For retailers competing with Amazon's delivery dominance, mastering last-mile logistics is no longer optional.

What is last-mile delivery?

Last-mile delivery is the final phase of the shipping process, moving products from a distribution center or local fulfillment hub to the customer's doorstep. This step typically represents the shortest distance in the supply chain but carries the highest per-package cost due to the inefficiencies of individual residential deliveries.

The last mile accounts for 53% of total shipping costs. This cost concentration stems from the challenge of delivering single packages across dispersed locations rather than consolidated shipments to centralized facilities. For retailers, last-mile performance directly affects customer satisfaction, repeat purchase rates, and overall profitability.

What is last-mile logistics?

Last-mile logistics encompasses the systems, processes, and infrastructure required to execute final-stage deliveries. This includes route optimization software, local fulfillment centers, delivery fleet management, and coordination with third-party carriers or gig-economy drivers.

Retailers approach last-mile logistics through several models:

• In-house delivery networks. Amazon, Walmart, and Costco have invested billions in proprietary delivery infrastructure. Amazon is investing $4 billion to triple its rural delivery network, while Costco now handles 85% of its US ecommerce shipments internally.
• Third-party partnerships. Instacart, DoorDash, and Shipt provide same-day delivery capabilities to retailers lacking their own networks.
• Hybrid approaches. Many retailers combine owned delivery for high-volume routes with third-party partners for extended reach.

Why is last-mile delivery a competitive advantage for retailers?

Last-mile delivery performance directly influences where consumers choose to shop. Some 68% of consumers expect free shipping on online purchases below $50, per Capital One Shopping research.

Amazon's delivery speeds set the benchmark. The retailer's average click-to-door time remains under two days sitewide, more than twice as fast as the industry average, per NielsenIQ analysis cited by EMARKETER. This advantage is reinforced by Prime membership, which provides free expedited shipping to over 200 million members globally.

For competitors, closing this gap requires either substantial infrastructure investment or strategic partnerships with delivery intermediaries. Retailers that cannot offer competitive delivery speeds risk losing share in fast-growing categories like grocery and health products.

How is last-mile delivery evolving?

Last-mile delivery is shifting from a cost center to a strategic battleground as retailers deploy new technologies and business models to accelerate fulfillment.

• Automation investment. Walmart is investing in automation throughout its fulfillment network to improve speed and efficiency. The retailer's ecommerce business is expected to account for over 10% of US online sales for the first time in 2026.
• Drone expansion. Walmart now offers drone delivery in five states (Arkansas, Florida, Georgia, North Carolina, and Texas), with over 150,000 successful deliveries since 2021. Amazon continues developing its Prime Air program despite operational setbacks.
• AI optimization. Retailers are deploying AI for route planning, demand forecasting, and delivery window predictions. Amazon's Rufus AI assistant has been used by 250 million customers.

What challenges do retailers face with last-mile delivery?

Despite its strategic importance, last-mile delivery presents persistent operational and financial obstacles.

• Rising costs. Nearly 84% of ecommerce businesses experienced last-mile cost increases in the past year, with some reporting increases up to 90%, per DS Smith research. Labor, fuel, and real estate costs continue to pressure margins.
• Urban and rural inefficiencies. Dense urban areas face traffic congestion and parking constraints. Rural deliveries involve long distances between stops with few packages per route, making per-delivery costs substantially higher.
• Customer expectations gap. While 80% of consumers expect same-day delivery options, 81% avoid using same-day services because they find them too expensive, creating tension between speed and price sensitivity.
• Third-party tradeoffs. Delivery intermediaries charge commissions and compete for customer loyalty, subscription revenue, and retail media dollars.

Who are the major last-mile delivery players?

The last-mile delivery landscape includes retailers with proprietary networks, delivery intermediaries, and traditional carriers adapting to ecommerce demands.

Retailers with owned delivery:

• Amazon operates Amazon Logistics, which delivers the majority of its US packages and is expanding same- and next-day delivery to over 4,000 smaller cities.
• Walmart uses its Spark Driver platform for delivery and offers Walmart+ members free delivery from stores. The retailer also operates GoLocal, providing delivery services to other businesses.
• Target acquired Shipt and Grand Junction to build ship-from-store capabilities.

Delivery intermediaries:

• Instacart will control approximately 65.2% of the third-party US grocery delivery market in 2026, per EMARKETER.

How are retailers using automation to improve last-mile delivery?

Retailers are deploying drones, autonomous vehicles, and robotic systems to reduce last-mile costs and accelerate delivery times.

Drone delivery is scaling beyond pilot programs. Walmart's partnership with Zipline and Wing enables deliveries within 30 minutes for customers within a six-mile radius of participating stores. The delivery drones market is projected to grow from $1.08 billion in 2025 to $4.40 billion by 2030.

Autonomous ground vehicles are moving from experimental to operational. Companies like Nuro and Starship Technologies operate delivery robots in select markets, while Amazon and Walmart test autonomous vehicles for middle-mile and last-mile routes.

Micro-fulfillment centers position inventory closer to customers. These automated facilities within or adjacent to stores enable same-day fulfillment for online orders without requiring deliveries from distant warehouses.

What role does crowdsourced delivery play in last-mile fulfillment?

Crowdsourced delivery uses gig-economy drivers to fulfill last-mile shipments, offering retailers flexibility and rapid scaling without fixed infrastructure costs.

The model works similarly to ride-sharing: contracted couriers use personal vehicles to complete deliveries, typically from retail stores rather than distribution centers. Amazon Flex, Walmart's Spark Driver, and Shipt all operate crowdsourced networks that can expand capacity during peak demand.

Benefits include lower fixed costs and the ability to offer same-day delivery without building proprietary fleets. Retailers pay per delivery or shift rather than maintaining full-time driver payrolls. The approach also enables delivery scheduling options that reduce failed delivery attempts.

However, crowdsourced delivery creates less control over customer experience and requires careful quality management. Delivery platforms compete directly with retailers for driver availability during high-demand periods.

How should retailers optimize last-mile delivery strategy in 2026?

Retailers evaluating last-mile investments should assess four areas:

1. Audience alignment. Match delivery capabilities to customer expectations. Grocery and convenience shoppers prioritize speed; apparel and home goods buyers often accept longer windows for free shipping.
2. Build vs. partner decisions. Retailers with sufficient volume and geographic density benefit from owned delivery networks. Others should evaluate Instacart, DoorDash, or carrier partnerships based on commission structures and data-sharing terms.
3. Technology investment. AI-powered route optimization, demand forecasting, and real-time tracking have become table stakes. Retailers should also evaluate drone and autonomous delivery pilots for specific use cases.
4. Measurement infrastructure. Track delivery costs per order, on-time rates, and customer satisfaction by fulfillment method. Use incrementality testing to measure whether faster delivery drives repeat purchases.

The retailers best positioned for 2026 will balance speed, cost, and customer experience rather than pursuing delivery speed at any price.

We prepared this article with the assistance of generative AI tools and stand behind its accuracy, quality, and originality.

EMARKETER forecast data was current at publication and may have changed. EMARKETER clients have access to up-to-date forecast data. To explore EMARKETER solutions, click here.