Is It Time To Invest In ‘Last Mile’ Deliveries?

Over the past few weeks, we’ve published two articles that inspired this topic. The first, from the second half of May covered Amazon’s lead on a new £459 million raise by Deliveroo, the UK-based food delivery app. The second, from earlier this week, reported the news that U.S.-based Blackstone Group, the asset manager, has sealed the biggest ever private real estate deal in history. Blackstone paid $18.7 billion for a portfolio of U.S. based warehouses all located in proximity to urban centres. The single biggest tenant of the portfolio is Amazon.

Two big deals which are, on the face of it, very different in nature. One an investment in a food delivery app and ‘last mile’ delivery service. The other in warehouses. But a closer glance shows both are part of the same upwardly trending market – the deliveries sector. And more specifically, the ‘last mile’ stage of the deliveries process.

Amazon’s investment stake in Deliveroo, and wider recent interest in food delivery apps, is thought to be more motivated by the desire to build up know-how and capacity in the last mile of deliveries generally than getting a slice of the restaurant takeaway market. Amazon Restaurants, the tech giant’s own foray into the same market as Deliveroo and Amazon Eats operate in, wasn’t a success and has been rolled back to just 20-odd large cities in the USA.

But Amazon understands that the market, one it itself has had arguably more influence than any company in creating, is moving towards ever greater consumer demand for the instant gratification of super-speedy deliveries. One-day delivery for most consumer goods is the target. Amazon obviously believes it can learn from the most successful systems managing the especially pressing delivery timescales takeaway orders involve. And quite possibly make use of the same infrastructure and processes for the last mile of its own current and future delivery needs.

Last mile delivery is one of the fastest growing markets in the contemporary economy. A recent report by market researchers Technavio estimated CAGR of 13% for the market over the period between 2018 and 2022. Another report on the sector researched by Market Insights, puts CAGR at 9.3% between 2019 and 2024 with the overall last mile delivery market value in North America reaching $4.7 billion over 5 years from $3.2 billion this year.

McKinsey estimates the overall parcel delivery market value at a global €70 billion with last-mile the fastest growing part of it. Driven by the still high growth rates in e-commerce, the overall deliveries market is still growing by 7%-10% annually in mature markets like the USA, UK, Germany and China. In emerging markets growth rates are as high as 100% per annum. For companies operating in ecommerce, increasing the efficiency of last-mile deliveries is seen as a key differentiator and competitive advantage.

And customers are increasingly willing to pay a premium for faster delivery. McKinsey’s report into the sector showed 23% of surveyed consumers would be willing to pay extra for same-day delivery.

Source: McKinsey & Company

Transmetric, the ‘predictive optimisation’ logistics company comments in its blog:

“Quick delivery direct to door is no longer something that is ‘nice to have’, it is a customer expectation. But meeting such expectations has become an expensive operation with last-mile delivery comprising more than 50 percent of total shipping costs. People want their goods and they want them now”.

McKinsey estimates that same-day and instant delivery will account for between 20% and 25% of the parcel delivery market by 2025 with significant further growth from that level in the years after 2025. Three models are expected to dominate last-mile delivery logistics:

  • Autonomous Vehicles
  • Traditional Delivery
  • Bike Couriers

It is forecast that within 10-15 years, autonomous vehicles will make 80% of last-mile parcel deliveries. In more densely populated urban areas these will be autonomous ground vehicles with lockers and drones will service rural and less densely populated regions. Around 2% of deliveries, those that count as ‘instant’ – within an hour or two of the order being placed, are expected to be carried out by couriers riding bikes or other small, convenient vehicles that are cheap to run. Finally, the remainder of same-day deliveries, around 18%, will still use more traditional methods and be dropped off by couriers in trucks. It is expected that traditional methods will be predominantly B2B deliveries.

It’s undoubtedly a quickly growing market with significant potential over coming years. As an investor what options are available to you to gain exposure to it?

Investing In The Last Mile

What are the options available for investors seeking exposure to the last-mile logistics market?

Stock Market-Listed Logistics Companies

It’s not a market with a host of obvious stock market-listed investment options. Companies which are already public and which have last mile exposure tend to be either general logistics companies such as UPS, DHL or Royal Mail or ecommerce companies such as Amazon.

Companies such as newly-floated Uber, through the Uber Eats food and parcel delivery and even Ocado, the warehouse technology company, on the London Stock Exchange also offer exposure to the market, though at varying degrees of dilution.

The list of freight and logistics stocks above is compiled by online stock picking data and news resource TheStreet. This particular list is U.S.-focused but any investor could scour for stocks on the UK or other international stock exchanges in the logistics sector using other lists or stock screening tools then burrow down into individual companies to assess their last-mile exposure and overall merit.


ETFs are another option for built-in diversification. There is no ETF that is entirely focused on last mile or even general courier companies but there are ETFs, one example of which is the iShares Transportation ETF, that offer good exposure to the logistics market and the last mile as one part of that. The pie chart below of the iShares ETF’s holding shows that approximately 30% of the assets it invests in, which track the Dow Jones Transportation index, are air freight and logistics providers.

Source: iShares

Logistics-Focused REITs

At the outset of this article we mentioned the Blackstone Group’s mega-deal for a huge portfolio of warehouse properties. Blackstone is the largest alternative investments company in the world and is heavily invested in infrastructure and logistics assets. Investing in its funds is open to individual investors but as it operates a private equity/hedge fund business model the minimum entry level is high and would be a practical option only for high net worth individuals and family offices.

However, there are a number of REITs, units of which can be bought through a stock broker like any other publically-listed company, that specialise in logistics properties such as warehouses. There are now even UK-based and focused REITs that have been specifically set up to concentrate on real estate for the courier sector.
Those include the AIM-listed Urban Logistics REIT. It describes its strategy as:

“We focus on a specialist sub-sector of the UK real estate market, investing in industrial and logistics properties that enable businesses to operate essential modern distribution networks capable of responding to the challenges created by e-commerce and evolving infrastructure demands”.

Another option is the aptly named Warehouse REIT, whose investment strategy is ‘focused on UK urban warehouses’.

Private Investment/EIS

A final option would be for investors to dig out promising private investment opportunities in start-ups focused on the last-mile deliveries niche. These could be companies developing delivery drones, autonomous wheeled robots or larger courier vehicles. Another part of last mile deliveries that is rich in promising start-ups is software. There are companies developing software to manage route optimisation for multiple deliveries and others to better manage resources more broadly.

The best will either become successful companies in their own right or be acquired by some of the big players in the industry.

Investing in start-ups is of course higher risk as only a minority will go on to succeed to the kind of level that will give early investors a significant pay day. But schemes like the UK government-backed EIS that encourages private investment in promising start-ups with a focus on innovation offer significant tax breaks that can help reduce that risk to an acceptable level – especially if spread across several companies.

A successful EIS investment entails plenty of research both into the intricacies of last mile deliveries and where start-ups can make a real difference as well as doing due diligence on particular start-ups. IT company BCG has an insightful blog post on how it sees digital innovation disrupting the express deliveries industry and spending some time reading a range of content on the topic should be a priority for any investor considering the private investment route.


Last mile deliveries will undoubtedly grow significantly as a market over the next decade and more. That means there is certainly money to be made by investors. The trick is making the right investment choices to capitalise on the trend. For the average investor that will almost certainly mean taking a diversified approach and looking at liquid options such as ETFs or REITs with significant exposure to the market. And perhaps adding in a few well-researched individual stocks to the mix for those ready to take on a little more risk.

Finally, wealthier investors able and willing to take a higher risk approach to investment exposure of the last mile sector might consider private investment in promising start-ups. For those that make it the rewards would be expected to be significant.

Risk Warning:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

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