Circular Economy Services for Last-Mile Deliveries

How to make the last mile profitable?

Even though the rapid growth brought on by the pandemic is behind us, e-commerce is not declining in the long term. As e-commerce grows, last-mile operations are also expanding and becoming more diverse. One interesting player in the last-mile sector is Fetch, led by Tuomo Pirhonen. Fetch is part of the same group as the logistics service provider Colligx.

Fetch is a company that integrates the circular economy into last-mile deliveries. This means that customers can also send items back—for example, when receiving an online grocery order. Customers can choose from a wide variety of services offered by Fetch. Consumers can, for instance, recycle used clothing and household items, send clothes to the laundry, return deposit bottles, and even send a bicycle for maintenance.

What makes Fetch different?

“We have researched various markets and haven’t found a similar operator in Europe that combines the last mile with the circular economy. We offer customers the opportunity to choose from different services. We are constantly introducing new services and aim to develop our shop based on customer feedback,” says Pirhonen.

For e-commerce retailers, Fetch can serve a wide range of operators. The customer journey can be customized, allowing orders from different stores traveling in the same vehicle to be displayed according to each store’s own brand identity. This means that elements like logos and pricing appear unique to the customer, even if the vehicle carries products from multiple retailers. In practice, for example, grocery orders from S-Group and Kesko can be delivered in the same vehicle. This ensures competitive pricing due to volume-driven efficiency, while the customer sees either Kesko’s or S-Group’s branding depending on where they ordered from.

“I hope that in the future, we will be a major player in home logistics services internationally as well,” Pirhonen says. “I’ve envisioned Fetch as a kind of ‘Wolt for the circular economy’.” Currently, Fetch is flexibly testing various service offerings. “We want to create opportunities for small businesses to expand their reach by offering them the chance to join Fetch’s service portfolio. The customers will then decide which services stick,” Pirhonen explains. One significant opportunity lies in peer-to-peer (P2P) commerce platforms, where consumers agree on trades, but the logistics are often left to the individuals themselves.

Profitability through volume and new services

To improve last-mile profitability, it is crucial to increase both volumes and load factors (fill rates). In Fetch’s model, where goods move in both directions, vehicle load factors are higher. Online grocery shopping plays a key role in increasing volume due to its high transaction frequency. Building other services around high-volume grocery deliveries is easier, which in turn adds profitability to grocery logistics as vehicle utilization rates rise.

Another addition to profitability would be integrating various parcel services into home deliveries. The Central European online grocer Picnic has piloted delivering DHL parcels alongside grocery orders. This would be a logical next step in Finland as well. “We are actively exploring different models we could offer, and bringing parcel services to the doorstep is one of them,” Pirhonen notes.

Regarding recycling, one bottleneck in online grocery shopping is the accumulation of empty deposit bottles at home. In Norway, Oda, and in Sweden, Mathem, have for some time offered an add-on service where they take back empty bottles in addition to the customers’ old delivery crates. Fetch is expanding this concept by offering a wider range of recycling services beyond just bottle returns.

Stream-linkers like Colligx enable new types of operators

Another area of the circular economy growing in last-mile services is P2P commerce deliveries. Similar to Fetch, concepts for P2P deliveries have been developed in Norway. The media company Schibsted created the Helthjem delivery service around newspaper distribution. It allows customers to book delivery for products sold via P2P platforms. Schibsted owns Tori in Finland and its Nordic sister companies. The package is left at the front door before 11:00 PM and is picked up during the night while newspapers are being distributed.

In Finland, Colligx provides actors in the retail value chain the opportunity to consolidate cargo streams. This can mean combining grocery deliveries with general merchandise e-commerce or enabling turnkey logistics for various brands’ direct-to-consumer (DTC) channels. A third area where e-commerce can change the market is the emergence of new types of operators, such as Ruokaboksi or Fiksuruoka.

In Norway, a wide range of e-retailers has joined the Helthjem service. One interesting newcomer to the Norwegian e-commerce scene via Helthjem is an online store called Morgenlevering. Its original idea was to offer breakfast delivered overnight. The customer placed an order in the evening, and in the morning, fresh bread, juice, or croissants were waiting at the door. Since then, Morgenlevering’s selection has expanded significantly.

Both Helthjem and Fetch consolidate cargo streams, thereby enabling new types of services for customers. These innovative operators are a welcome addition to diversifying the domestic retail landscape.