If urban planners and retailers fail to stay one step ahead of consumer trends – if they misread the tealeaves of future shopping habits – it is not just they who suffer, but whole communities.
There is a precedent for such scenarios. Think back to the rapid shift to online shopping in the first decade of the 21st Century, which saw high street stores close at alarming rates and many municipal centers become empty ghost towns as footfall plummeted.[1]
Now, urban logistics finds itself at another fork in the road, and the stakes for our collective quality of life are just as high. The latest trends in goods distribution – ad hoc single-item purchases, reverse logistics, more complex regulations – have combined to make the business of uniting consumers with their purchases more complex than ever. Failing to prepare for this new retail reality risks further economic decline and environmental degradation in the very heart of our communities.
Air pollution is an especially potent threat, with children in urban areas more likely to suffer from asthma or other respiratory conditions.[2] Freight transport, by some estimates accounting for half of all emissions in urban areas, is the culprit hiding in plain sight.[3]
Quality of life in our neighborhoods is also compromised by the visual impacts of roads and their accompanying noise pollution.[4] These problems are only likely to deepen in the coming years.
Without remedial action, emissions from urban freight could grow a further 60% by 2030[5], heralding crises both global (accelerated temperature rises) and hyper-local (an increase in toxic airborne chemicals).
So, what is changing about our buying behaviors to drive this new paradigm? The answer might well lie within our own browser histories.
What’s driving the changes in urban logistics?
Gone are the days of strolling down to the local high street once a week to stock up on all the food and household goods we need. Today’s time-pressed consumer doesn’t have time to wait. When they decide to purchase something, they expect it immediately. We might want replacement toothbrush heads on Monday, a new batch of cat food on Tuesday, and by Wednesday be eyeing that new blockbuster novel in hardback. Conveniently for us, thanks to the always-on storefronts of the internet, we can summon such goods at the press of a few buttons. As for actually getting the goods to our doorsteps in super-quick time – that’s for somebody else to worry about.
That ‘somebody’ being retailers and logistics operators, for whom these new trends have real-world implications. The traditional model, of freight-laden HGVs criss-crossing our national highways and making mass deposits at retail epicenters, is fast becoming outdated. In the 2020s and beyond, we need nationwide delivery systems that are more flexible, responsive and, crucially, door-to-door.
Other social shifts bring their own unique challenges. The coining of the term ‘reverse logistics’ acknowledges that the flow of goods is increasingly a two-way arrangement. If we buy more goods sight unseen, more products will inevitably be returned because they fail to match our expectations. By some estimates, 30% of all products ordered online are returned, dwarfing the 8.89% return rate of items bought from physical stores.[6] When it comes to clothing, up to half of all purchases end up being sent back to the manufacturer or retailer.[7] In all these cases, a one-way delivery becomes a two-way round-trip, doubling the logistical burden.
Simultaneously, logistics operators are busy navigating the raft of new regulations introduced by national and local governments to counteract the environmental impacts of all this additional traffic.
One favored tactic to limit inner-city pollution is charging a toll to road users, often calculated based on vehicle weight or level of pollutants emitted. The congestion charge in central London, UK, for example, issues a levy on most motor vehicles being driven within a designated area during peak daytime hours.
In 2024, the EU adopted its upgraded Ambient Air Quality Directive (AAQD), setting tough new limits for particulate matter pollution (PM2.5) and nitrogen dioxide (NO2) levels within member states. Throughout Europe, more than 300 cities have now introduced low emission zones (LEZ) to restrict the use of older, typically dirtier vehicles.[8] City-wide LEZ policies can include outright bans on internal combustion engine (ICE) vehicles, fees for entering particular areas, or waivers for vehicles fitted with emission control devices, such as diesel particulate filters.
It hurts, but it works. The impact of London’s Ultra Low Emission Zone (ULEZ) is encouraging, helping to reduce NO2 concentrations by 21% in outer London, 53% in central London and 24% in inner London.[9]
Beyond Europe, progressive cities are taking the idea to the next level by introducing even more stringent zero emission zones (ZEZ). These ban ICE vehicles entirely in favor of battery, hybrid or hydrogen alternatives. Rotterdam and Amsterdam in the Netherlands, Brussels in Belgium, Santa Monica in the United States, Oslo in Norway and Shenzhen in China are among cities spearheading the ZEZ movement globally.
Further complicating the picture for last-mile logistics are low traffic neighborhoods and localized pedestrian zones, the latter aiming to prohibit access for all motorists, even delivery vehicles.
Amid such a complex legislative web, how can we foster a culture of sustainable and efficient micro deliveries in our towns and cities without stifling the retail industry altogether?
Which tech innovations are reshaping the future of logistics?
It is perhaps tempting, particularly for those of us with an interest in technology and science fiction, to close our eyes and mentally leap forward a generation or two. We might imagine cityscapes buzzing with autonomous delivery bots and aerial drones, seamlessly distributing goods to the front doors of happy customers everywhere.
Are these viable scenarios or mere daydreams? While the true parameters have yet to emerge, it is true that ambitious investments and technological breakthroughs have brought such concepts close to reality.
At ground level, examples of last-mile robots-on-rollers are plentiful.[10] See Starship Technologies’ temperature-controlled delivery pods, for example, which operate at Level 4 AI autonomy and have already clocked up more than 7 million deliveries across a hundred cities, campuses and industrial sites.[11] Or the Robomart, an innovative shop-on-wheels which comes straight to your location and claims to fulfil deliveries at 80% less cost than human couriers.[12]
For an aerial equivalent look no further than online retail giant Amazon, which has already conducted trials of flying drone deliveries in the United States, and is targeting similar tests in Italy and the UK.[13]
However, despite significant investment of money and personnel, the world is still awaiting the widespread deployment of automated drone or pod services in urban environments. In the meantime, there must be a better solution than flooding our ring-roads and roundabouts with more ever more delivery vans, electric or otherwise.
One of the more realistic solutions for a sustainable delivery ecosystem, at least in the short term, might be something altogether more prosaic: urban logistics hubs (ULH).
How can urban logistics hubs revitalize brownfield sites?
ULH, strategically located on the outskirts of population centers, connect global supply chains with local distribution networks, and attempt to segregate heavy freight vehicles from lighter urban traffic. Typically, ULH receive and manage goods from manufacturers, wholesalers or importers, before dispatching them on the nominal ‘last mile’ of their journey via an array of smaller, environmentally-friendly vehicles.
Depending on the size of the urban market, various sub-categories of ULH make better economic and environmental sense.
- ‘Logistics hotels’, for instance, are medium/large hubs used for storage and cross-docking (transferring goods directly from an incoming shipment to an outgoing shipment) that can serve a wider urban area.
- ‘Micro depots’, smaller hubs of less than 2,000m2, serve specific zones within an urban mass.
- ‘Fast delivery hubs’, meanwhile, are ultra-compact facilities for rapidly fulfilling orders within smaller urban districts.
Whichever option is selected, ULH are designed to mitigate the ‘social costs’ of freight. They condense supply chains, reduce cargo mileage, cut air pollution and congestion, and more effectively engage local stakeholders.[14]
ULHs need not be purpose built. Often, they can inject new life into brownfield sites or be adapted from existing high-rise or underground infrastructure. Such schemes epitomize the benefits of close public/private sector collaboration. Local authorities have the power to approve and regulate the facilities, while their counterparts in the commercial realm have the experience to construct and operate them economically. If properly planned, ULH can become versatile assets.
- Paris, for example, has insisted on 12-year leases for its ULH. They must be carefully designed for easy decommissioning/repurposing if the needs of the local community change over time.[15]
- In Tokyo, where demand for parcel deliveries has soared 46% in a decade, the government has begun designating land for logistics facilities in traditional port areas and industrial zones. These facilities feed smaller delivery stations which disseminate goods door-to-door using cargo bikes or even traditional hand-carts.
- In Brazil, where 85% of the 200 million-strong population live in urban areas, e-commerce is expected to account for 25% of all trade within five years.[16] With planning permission for new ULH causing delays of up to 36 months in some Brazilian cities, Sao Paulo has begun converting existing facilities into ready-made distribution hubs. By early 2024, Sao Paulo already had 0.3 million m2 of retrofitted buildings and was anticipating an additional 0.5 million m2 by the year’s end.
- Post-covid London has become a honeypot for ULH. Parcel firm DPD’s new eco-sortation center in Docklands, using a fleet of 500 electric delivery vans to serve London’s north and south circular areas, is a notable example. However, London is also emerging as a hotspot for another new delivery concept: Dark kitchens. These mega-kitchens (also known as ‘ghost’ or ‘virtual’ kitchens) are often based in warehouses and provide a delivery-only service to customers ordering online. Chefs pass prepared meals to couriers from third-party delivery apps such as Uber Eats or Deliveroo, who convey the food to doorsteps by cycle or e-bike. There are believed to be more than a hundred dark kitchens in London alone and more than 750 across the UK, with more sites emerging all the time.[17]
With a range of ULH established, attention then turns to those all-important last-mile deliveries. How can innovations in the private sector help make this final stage of the journey greener and more efficient – and how can new technologies supplement this radical redesign of urban logistics?
How is technological innovation underpinning the green solution?
Recent developments suggest the private sector is in prime position to energize this nascent last-mile sector. Abdul Latif Jameel is just one of many businesses investing in clean, compact vehicles tailor-made for the niche demands of urban logistics.
In September last year, Jameel Motors (international) part of Abdul Latif Jameel, announced a distribution partnership with China’s Geely Farizon New Energy Commercial Vehicles across more than 10 countries, including the UAE, UK and Australia. It’s electric SuperVAN (SV) was designed specifically to meet the needs of European fleets and incorporates several advanced technologies and world-first innovations in the light commercial vehicle market. The SV has undergone a rigorous one-million-mile testing and development program and it meets or exceeds every European standard, including in durability, safety and sustainability.
The vehicle is built on a bespoke ‘born electric’ modular platform which offers benefits in cargo space, range, handling and safety. Highlights include cell-to-pack technology which increases battery capacity by 10%, reduces weight by 4% and improves body rigidity by 20%. The SV also introduces the first ever dual-redundancy drive-by-wire platform in the global van market, reducing stopping distance by 10%, increasing range by 5% and steering response by 300%. Crucially, it also helps increase load capacity and results in an extra-low loading height.
California-based Rivian, in which Abdul Latif Jameel was a major early investor, is also capitalizing on the potential of urban logistics. Rivian has rolled out thousands of its custom electric delivery vans across Europe and the US, helping to keep neighborhoods free from the toxins of fossil fuel alternatives. A 2023 deal with Amazon, king of the domestic delivery, provided more than 300 electric vans for doorstep drop-offs in Munich, Berlin, and Dusseldorf. Rivian aims to supply Amazon with at least 100,000 electric vans by 2030, helping to save millions of metric tons of carbon per year.
Greaves Electric Mobility, the Indian EV pioneer (in which Abdul Latif Jameel was a significant pre-IPO investor), recently unveiled a new range of electric two-and three-wheelers for release across India. India is the world’s third-largest market for light vehicles, with two- and three-wheelers (the preferred option for last-mile cargo deliveries) accounting for at least 80% of all vehicle sales.[18]
These innovations indicate that far from representing a crisis-in-the-making, urban logistics can help inspire the next generation of emerging technologies.
In 2025, for example, Amazon is set to launch 1,000 new Rivian electric vans equipped with new AI-powered Vision-Assisted Package Retrieval (VAPR) software. Amazon drivers can make in excess of a hundred deliveries a day and must ordinarily waste time sifting through packages to find the right item at each destination. VAPR automatically detects the van’s location and projects green ‘O’ symbols onto correct packages for each location and red ‘X’s onto the remainder, generally cutting a five minute job down to under a minute.
With billions being invested annually in AI and other smart technologies, it is easy to envision a not-too distant future in which urban logistics is widely regarded as fast, clean and seamless.
Imagine fleets of compact, self-driving (AI Level 5) delivery vehicles gliding along our sidewalks, up and down our driveways, and occasionally purring through the skies above our heads, all these journeys streamlined by the traffic-sensitive oversight of an interconnected Smart City.
These autonomous delivery bots could also be connected to the Internet of Things (IoT), the concept whereby a network of everyday objects (vehicles, appliances, even people) are connected online and routinely monitored by sensors. Your favorite grocery retailer might realize before you do that your icebox is running low on frozen vegetables, and dispatch a fresh batch in a temperature-controlled cargo-bot direct to your doorstep with the minimum of noise, pollution or expense.
With a template for green and affordable urban logistics firmly in place, what steps should regulators and businesses start taking to ensure this bold new vision comes to pass?
Why are sustainable logistics essential for a greener future?
The World Economic Forum outlines key actions public and private sectors can undertake immediately to help maximize the opportunities of a reimagined urban logistics ecosystem – as well as some steps which will require an overlapping of skills.[19]
- Public sector: Urban planners should begin factoring domestic delivery arrangements into citywide strategies and laying the foundations through Sustainable Urban Logistics Plans (SULP). They must also start standardizing regulations governing how AI-infused delivery vehicles will interact with the existing physical landscape: Roads, signage and other infrastructure. Practices deemed safe and sustainable could be incentivized through grants and subsidies.
- Private sector: Private sector stakeholders must start laying the groundwork for operational efficiencies, collaborating on new technologies and operating models such as pick-up and drop-off (PUDO) networks. They can also encourage the more rapid adoption of eco-delivery fleets by replacing ICE equivalents and designing innovative financing models for EVs. The private sector can also spur support from consumers, by educating customers on the benefits of sustainable deliveries and rewarding their patronage with ‘green’ discounts.
- Public/private collaborations: Together, businesses and local authorities must consider how best to exploit mutual infrastructure and assets such as micro-hubs and parcel lockers. They must share data on consumer habits and traffic patterns to financially validate the inevitable transition. Case studies of early successes can demonstrate that respecting the natural environment does not necessarily mean curtailing the business environment.
The commercial argument should be easy to make, with more than 70% of shoppers now indicating that sustainable delivery options help motivate their purchasing decisions.[20]
We must not repeat the errors of the past and miss the clues showing that shopping habits are changing. People are indulging in greater numbers of small-scale transactions and want the convenience of rapid, regular deliveries straight to their homes – all without jeopardizing the safety of cleanliness of their neighborhoods. A joined-up approach to urban logistics can both enhance the overall offering of the retail realm while also protecting the places we cherish as our homes.
[1] https://internetretailing.net/how-online-growth-has-reshaped-the-uks-high-streets-and-the-effect-on-retail-jobs-24430/
[2] https://pmc.ncbi.nlm.nih.gov/articles/PMC9288815/
[3] https://www.itf-oecd.org/urban-logistics-hubs
[4] https://www.itf-oecd.org/urban-logistics-hubs
[5] https://reports.weforum.org/docs/WEF_Transforming_Urban_Logistics_2024.pdf
[6] https://www.invespcro.com/blog/ecommerce-product-return-rate-statistics/
[7] https://www.theguardian.com/business/2023/nov/10/many-unhappy-returns-uk-retailers-count-the-costly-growth-in-sent-back-items
[8] https://dieselnet.com/standards/eu/lez.php
[9] https://tfl.gov.uk/corporate/about-tfl/air-quality
[10] https://evmagazine.com/top10/top-10-autonomous-delivery-innovators-you-didnt-know-about
[11] https://www.starship.xyz/
[13] https://www.aboutamazon.com/news/operations/amazon-prime-air-drone-delivery-updates
[14] https://www.itf-oecd.org/sites/default/files/docs/final-frontier-urban-logistics.pdf
[15] https://urban-mobility-observatory.transport.ec.europa.eu/news-events/news/new-guide-urban-logistics-hubs-aims-deliver-sustainable-freight-transport-cities-2024-08-09_en
[16] https://www.itf-oecd.org/sites/default/files/urban-logistics-six-case-studies.pdf
[17] https://www.twobirds.com/en/insights/2021/uk/use-of-dark-kitchens-in-franchised-systems
[18] https://alj.com/en/perspective/advancing-indias-ev-market/
[19] https://reports.weforum.org/docs/WEF_Transforming_Urban_Logistics_2024.pdf
[20] https://reports.weforum.org/docs/WEF_Transforming_Urban_Logistics_2024.pdf
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