The Last Mile: Why Delivery to Your Door Is Expensive

Why the final stretch from a depot to a customer's door is often the most expensive part of shipping, and how companies try to cut the cost.

A container of goods might cross an ocean for a surprisingly low cost per item. Yet getting a single parcel from a local depot to your door can cost far more. This final stage is called the last mile, and industry studies often estimate it at around half of total shipping costs for parcels.

Why the last mile is costly

Several features make the last mile expensive:

Low volumes per stop: a container ship carries thousands of boxes on one voyage, but a delivery van drops one or two parcels at each stop.
Many stops: drivers must navigate traffic, find addresses, park and walk to doors.
Failed deliveries: when no one is home, the driver must return or the parcel must be collected elsewhere.
Customer expectations: next-day or same-day delivery requires more vehicles and staff.

Density matters

The key economic factor is delivery density: how many parcels can be delivered in a small area. In a dense city, a driver might make many drops on one street. In rural areas, drivers travel long distances between stops, raising the cost per parcel. This is why delivery to remote places often costs more or takes longer.

Two delivery routes

A driver in a dense city block delivers 120 parcels in a shift, with stops a few metres apart. A driver in a rural area covers 150 kilometres and delivers 40 parcels. The rural route uses more fuel and time per parcel, so each delivery costs several times as much, even though the parcels themselves are similar.

Cutting costs

Companies experiment with many ways to reduce last-mile costs:

Parcel lockers and pickup points, where customers collect their own parcels, eliminating failed deliveries.
Route optimisation software that plans the most efficient order of stops.
Delivery windows that let customers choose a time, reducing missed deliveries.
Bicycles and small electric vehicles in crowded city centres.
Local warehouses closer to customers, used by quick-commerce services that promise delivery in minutes.

Who pays

“Free delivery” is not really free. Its cost is built into product prices or membership fees. Retailers also face high costs from returns, which require a reverse journey through the same expensive last mile.

Thinking delivery is cheap because it is often free

Retailers often absorb delivery costs to win customers, but these costs are real and large. They are covered through higher prices, subscription fees or thinner profits. Frequent small orders with free delivery are among the most expensive for retailers to serve.

Key takeaways

The last mile from depot to door is often the most expensive part of parcel shipping.
Low volumes per stop, many stops and failed deliveries drive costs up.
Delivery density is key: dense areas are far cheaper to serve than rural ones.
Lockers, route software and local warehouses help reduce last-mile costs.