What exactly is "last-mile delivery"?

Last-mile delivery refers to the final step of the delivery process, where a product travels from a distribution center or transportation hub to its final destination (typically a customer's home or business). It's called the "last mile" even though the actual distance varies. This final leg is often the most expensive and complex part of shipping, accounting for up to 53% of total delivery costs, due to inefficiencies like multiple stops, traffic congestion, and failed delivery attempts.

Why is last-mile delivery considered a growth area?

Last-mile delivery is growing rapidly primarily because of the explosive rise in e-commerce. As more consumers shop online and expect faster deliveries (same-day or next-day), companies must invest heavily in optimizing this final delivery step. The COVID-19 pandemic accelerated this trend significantly. Additionally, technological innovations like route optimization software, automated fulfillment centers, and even drone delivery are creating new opportunities to solve these complex logistical challenges more efficiently.

What does "less-than-truckload" (LTL) mean?

Less-than-truckload (LTL) shipping refers to the transportation of relatively small freight that doesn't require the entire space of a full truck. Instead of dedicating an entire truck to one shipment, LTL carriers combine multiple shipments from various customers on a single truck. This makes shipping more cost-effective for businesses that don't have enough goods to fill an entire truck. Several companies in this stock group (like ODFL and SAIA) specialize in LTL services, which are an important part of the supply chain that leads to last-mile delivery.

How do dividend yields relate to these delivery stocks?

Dividend yield represents the annual dividend payment divided by the stock's current price, expressed as a percentage. For delivery and logistics companies, dividend policies vary widely. More established players like UPS and FDX often pay regular dividends, reflecting their stable cash flows, while growth-focused newer entrants might reinvest profits instead of paying dividends. When considering these stocks, dividend yield is one factor that can indicate a company's maturity and management's confidence in stable future cash flows.

What are the main risks associated with investing in last-mile delivery stocks?

Key risks include intense competition (both from established players and new entrants like Amazon developing their own delivery networks), rising fuel and labor costs which can squeeze margins, regulatory challenges around emissions and worker classification, and technological disruption from innovations like autonomous vehicles or drone delivery. Additionally, last-mile delivery companies are sensitive to economic cycles, as consumer spending impacts shipping volumes, and to seasonal fluctuations (with peaks during holiday seasons).

15 handpicked stocks

Last-Mile Delivery

Tap into the companies mastering the final step of e-commerce. These carefully selected stocks represent businesses solving the complex challenge of getting products from distribution centers to customers' doorsteps, a critical growth frontier in our digital economy.

Han Tan | Market Analyst

Updated 2 days ago | Published at जून 17