Last-mile delivery now accounts for 53% of total shipping costs, making it the supply chain’s most expensive, damage-prone segment. Three connected metrics erode margins: cost-to-serve, packaging damage, and first-attempt success. They compound each other, so optimizing one in isolation backfires. The most effective fix is integrated, not piecemeal.
Last mile delivery now accounts for 53% of total shipping costs, and that number continues climbing. Here’s what the data says about how last mile execution shapes cost-to-serve, packaging damage, and first-attempt delivery success.
If you’re in logistics, retail, or e-commerce, you already know that last mile delivery is hard. But that doesn’t fully capture what the data is revealing: last mile delivery has quietly become the most expensive, damage-prone, and failure-susceptible segment of the entire supply chain, and most businesses are still underestimating its impact on profitability.
In this blog post, we’ll break down the three dimensions of final mile performance that are directly eating into your margins: cost-to-serve, packaging damage rates, and first-attempt delivery success. We’ll also look at what the numbers say as to why these aren’t just operational metrics anymore.
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How Last Mile Delivery Shapes Cost-to-Serve, Damage Rates, and First-Attempt Success
What Is Last Mile Delivery (and Why Does It Matter So Much Now)?
Last mile delivery refers to the last leg of the supply chain, from a distribution center or local warehouse to the customer’s doorstep. It sounds simple, but in practice, it’s the most logistically complex step in the entire journey.
The reason it matters more than ever comes down to volume and expectation. E-commerce has exploded in the past few years, and consumers now expect faster, cheaper, and more reliable deliveries than ever before. Eighty percent of consumers consider same-day delivery a standard expectation. Ninety-two percent say free shipping influences their purchase decisions.
Last Mile Costs Continue to Grow
Last mile delivery now accounts for 53% of total shipping costs. That’s up from 41% in 2018—a 29% increase in just six years, and a figure that has now surpassed warehousing, middle-mile freight, and inventory management combined.
What’s driving it?
- Labor costs: Labor represents well over half of total last mile operating expenses.
- Fuel inefficiency: Delivery vehicles average just 6.5 miles per gallon and consume nearly one gallon per hour while idling in urban traffic.
- Failed delivery penalties: Every failed attempt re-runs the entire cost of a delivery often two or three times for a single shipment.
- Returns and reverse logistics: Undeliverable packages create a full reverse supply chain loop, with warehousing, processing, and restocking costs that compound the original expense.
The financial stakes are clear: businesses that fail to optimize their last mile could see profits decline by up to 26% over three years, according to Capgemini research. A 2024 CNBC survey found that 85% of shippers in retail named “reducing cost-per-order” as their single biggest last-mile priority.
Packaging Damage: The Last-Mile Problem Nobody Talks About Enough
Damage in shipping gets blamed on middle-mile freight: rough transit, inadequate palletization, warehouse mishandling. But last mile damage is both significant and distinctly different, and it’s getting worse as the demand for speed accelerates.
The Scale Is Bigger Than Most Realize
Recent logistics studies estimate that 3–4% of all U.S. shipped packages arrive damaged, translating to more than 85 million parcels in 2025 alone. About 45% of online shoppers report having received at least one damaged package in the past year.
When you look at customer complaints in last-mile delivery, damage is the third most common issue, cited in 20.9% of all complaints (behind delayed deliveries at 24.8% and missing items at 22.4%). Together, these three categories account for 65% of all last-mile customer complaints — and damage is the most brand-damaging of the three, because customers see it happen in person.
The projected financial impact? U.S. retailers and carriers are expected to lose over $4 billion annually due to damaged goods, replacements, and return processing.
Speed Is Making It Worse
Here’s a counterintuitive finding that supply chain leaders need to sit with: packages delivered via ultra-fast services have a 27% higher chance of arriving damaged compared to standard logistics services. Same-day and 2-hour delivery models, which often rely on crowdsourced gig delivery workers with minimal handling training, introduce mishandling risks that traditional professional fleet operations manage much more tightly.
The push for speed and the push for quality are in direct tension — and right now, speed is winning at the expense of condition. The good news: damage rates are not inevitable.
Best-in-class last mile operators — especially those specializing in big and bulky products like large appliances, furniture, and high-value goods — demonstrate that with the right carrier standards, processes, and technology, damage-free delivery rates up to 99.97% are achievable.
How These Three Metrics Are Connected and Why That Matters
Cost-to-serve, damage, and first-attempt success aren’t independent problems. They’re symptoms of the same root causes, and they compound each other.
A failed delivery doubles or triples the per-shipment cost. Speed pressure, deployed to reduce delivery timelines (and theoretically cost), increases damage rates. Damaged packages that are refused by customers count as failed first-attempt deliveries. Failed deliveries drive customer service load and churn that erode future revenue. Each variable amplifies the others.
This is why businesses that optimize only one dimension — e.g. driving down fuel costs by rushing routes — often find their overall cost-to-serve increases because damage claims and re-delivery costs spike to compensate.
The most cost-effective path to final mile improvement is integrated: route intelligence, carrier quality standards, customer communication, and delivery infrastructure working together.
What Best-in-Class Final Mile Operations Look Like
The businesses outperforming on all three metrics share a common set of practices:
Route Optimization and AI: By utilizing artificial intelligence and route optimization, companies can cut down on inefficiencies and optimize vehicle and fuel usage in the moment.
Proactive Customer Communication: SMS delivery alerts achieve open rates approaching 99%, allowing customers to prepare for delivery or reschedule in advance. Reducing missed deliveries through better communication is the single highest-ROI investment most last mile operators can make.
Carrier Qualification and Performance Accountability: Not all carriers perform equally in the final mile. Businesses that rigorously measure carrier-level damage rates, FADR, and on-time performance outperform those that treat carrier selection as a cost-per-package calculation.
The Brand Stakes: Why Last Mile Is Now a Customer Retention Issue
The financial impact of last mile performance is significant. The brand impact is existential.
- 84% of consumers will not purchase from a retailer again after just one negative delivery experience.
- 98% of consumers say delivery experience directly impacts their brand loyalty.
Optimized last mile delivery doesn’t just reduce costs. Not only does worth-of-mouth matter for brand reputation, but repeat customers also often bring in a good portion of revenue down the line, not just with their first purchase.
Last Mile Delivery is a Strategy
Last mile delivery consumes the most cost, produces the most damage, and determines whether customers come back.
Businesses investing now in route intelligence, carrier quality, communication infrastructure, and delivery flexibility are building a compounding advantage. Those treating last mile as a commodity line item are accumulating a compounding liability.
The question isn’t whether last mile performance affects your business. It’s how much it’s already costing you and what you’re doing about it.
Frequently Asked Questions
What is driving last-mile delivery costs higher?
Four main factors: labor, which represents well over half of total last-mile operating expenses; fuel inefficiency, with delivery vehicles averaging just 6.5 miles per gallon; failed-delivery penalties, where each failed attempt re-runs the full cost two or three times; and returns and reverse logistics, which create a complete reverse supply chain loop with compounding warehousing, processing, and restocking costs.
Does faster delivery increase damage rates?
Yes. Packages delivered via ultra-fast services have a 27% higher chance of arriving damaged compared to standard logistics. Same-day and 2-hour models often rely on crowdsourced gig workers with minimal handling training, introducing mishandling risks that professional fleet operations manage more tightly. The push for speed and the push for quality are in direct tension.
Can damage-free delivery rates actually be achieved?
Yes. Damage is not inevitable. Best-in-class last-mile operators—especially those specializing in big and bulky products like large appliances, furniture, and high-value goods—demonstrate that with the right carrier standards, processes, and technology, damage-free delivery rates up to 99.97% are achievable.
How does last-mile delivery affect customer retention?
The brand impact is significant: 84% of consumers will not purchase from a retailer again after just one negative delivery experience, and 98% say the delivery experience directly impacts their brand loyalty. Because repeat customers drive a large share of future revenue, optimized last-mile delivery is now a customer retention issue, not just a cost concern.
Why should the three last-mile metrics be addressed together?
Cost-to-serve, damage, and first-attempt success share the same root causes and compound each other. A failed delivery doubles or triples per-shipment cost; speed pressure raises damage; damaged packages refused by customers count as failed attempts; and failed deliveries drive service load and churn. Optimizing one dimension in isolation often raises overall cost, so the most effective approach is integrated.
About CDS Logistics: Experts in Big and Bulky Last Mile Delivery
CDS Logistics is one of the largest providers of last mile delivery and fulfillment solutions in the United States. CDS’s headquarters is in Baltimore, Maryland, with 182 hubs nationwide. Over the past three decades, CDS has built expertise to make the company an industry leader specializing in big and bulky products. CDS’s proprietary, in-house technology and hands-on operational expertise provide results that are consistent, reliable, and proven to drive outstanding customer experiences.
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