Last‑mile still leaking value
Industry voices say rising demand from smaller cities is bumping into last‑mile delivery weaknesses, creating a persistent value leak for brands — and some operators are looking to AI to improve routing and fulfilment. Padmaja Ruparel and others highlighted that last‑mile friction, while local manufacturing hubs face separate cost and labor pressures. (x.com)
Demand from India’s smaller cities is rising faster than the delivery networks serving them, and brands say the gap is still eating into sales and margins. (storyboard18.com) Velocity Shipping said on April 7 that AI voice calls, automated order and address checks, and shifting some cash-on-delivery orders to prepaid improved delivery completion rates by 11% for digital-first brands in Tier-2 and smaller cities. Its analysis covered more than 40 lakh orders. (storyboard18.com) The same analysis found that Tier-2 and smaller cities generated more than 67% of shipments, but only about 60% were successfully delivered, versus 73% in metro markets. Velocity said inconsistent addresses, weaker courier coverage, wider delivery geographies, and heavy use of cash on delivery were the main causes. (storyboard18.com) That strain is building on top of a broader shift in Indian online retail. Bain & Company said three in five new online shoppers since 2020 came from Tier-3 cities or smaller, and 60% of new sellers since 2021 came from Tier-2 cities or smaller. (bain.com) McKinsey & Company said in February 2026 that India’s e-commerce market could grow from $70 billion-$80 billion in 2024 to $180 billion-$200 billion by 2030, with direct-to-consumer sales reaching $55 billion-$60 billion. More orders are moving outside the biggest cities just as brands are trying to sell without marketplace intermediaries. (mckinsey.com) The delivery problem is expensive even before it reaches India-specific bottlenecks. Accenture said last-mile delivery accounts for 53% of total shipping cost, making the handoff from local hub to doorstep the costliest part of the trip. (accenture.com) India’s logistics system is also in the middle of a policy push to get cheaper and more predictable. A September 2025 study prepared by the National Council of Applied Economic Research for the Department for Promotion of Industry and Internal Trade put national logistics cost at 7.97% of gross domestic product in 2023-24 and said the data would guide targeted interventions. (master-dpiit.digifootprint.gov.in) Industry reports show the network is expanding beyond the biggest metros, but unevenly. Savills said India’s industrial and logistics market stayed active through the first half of 2025, while Redseer estimated the overall logistics market at ₹20-21 trillion in fiscal year 2024 and said digitization and infrastructure programs were improving efficiency. (savills.in) (redseer.com) That leaves brands and logistics operators trying to fix a local street-level problem with better data. The immediate test is whether tools that verify addresses, predict failed deliveries, and reroute shipments can narrow the gap between where India’s new customers live and where reliable fulfilment already exists. (storyboard18.com)
