Transforming last-mile delivery in Saudi Arabia: From cost burden to competitive advantage

For customers, the last mile defines the experience: delivery speed, reliability, transparency, and ease of returns. For organisations, it determines cost-to-serve, cash flow velocity, sustainability performance, and ultimately margin resilience.

In Saudi Arabia, the importance of last-mile delivery has increased materially. Demographic dynamics, particularly the Kingdom’s young, digitally native population, have driven rapid growth in e-commerce, on-demand services, and omni-channel retail. Data from the General Authority for Statistics indicates that the largest population cohort is aged 30–34, a segment with high expectations for speed, convenience, and digital interaction.

As Vision 2030 accelerates digitalisation, private-sector growth, and investment in logistics infrastructure, last-mile performance has moved from an operational concern to a strategic business issue.

The impact on Saudi businesses: beyond logistics

Despite its strategic importance, last-mile delivery remains the most challenging and expensive element of logistics, often accounting for up to 50% of total logistics costs. However, the true impact extends well beyond delivery expense alone.

For Saudi businesses, last-mile inefficiency directly affects:

• Profitability, through high cost per drop, failed deliveries, and returns
• Working capital, particularly where Cash on Delivery (COD) remains dominant
• Customer lifetime value, driven by delivery experience and reliability
• Scalability, as networks struggle to expand beyond major urban centres
• Sustainability performance, as delivery miles and emissions increase

As a result, last-mile performance increasingly shapes competitiveness, particularly in sectors such as retail, e-commerce, consumer goods, healthcare, and food delivery.

Structural challenges reshaping the last mile in KSA

Our work across the Kingdom consistently highlights a set of structural challenges that collectively redefine last-mile economics:

• High delivery costs, driven by long travel distances, low drop density, and labour-intensive delivery models
• Cash-on-Delivery dependency, resulting in failed deliveries, higher return rates, and working capital pressure
• Reverse logistics complexity, as customers expect free, fast, and frictionless returns
• Rising customer expectations, including same-day delivery, narrow delivery windows, and real-time tracking
• Network coverage gaps, with approximately 40% of demand originating outside major urban centres
• Sustainability pressures, as emissions and delivery miles, rise in parallel with volume growth

Individually, these challenges are manageable. Combined, they expose the limits of traditional delivery models and highlight the need for structural change.

From tactical fixes to integrated transformation

Leading organisations in Saudi Arabia are moving beyond short-term cost controls and tactical fixes. Instead, they are adopting integrated last-mile transformation programmes that treat delivery as a core component of commercial strategy.

These programmes typically focus on four strategic levers:

1. Cost and network optimisation

Organisations are deploying AI-driven routing, demand-led network design, micro-fulfilment models, and hybrid fleet structures to reduce cost per delivery while improving reach and resilience.

2. Digital payments and COD reduction

Prepaid incentives, Buy Now Pay Later (BNPL) solutions, and predictive COD risk analytics are being used to lower failed delivery rates, improve cash conversion cycles, and reduce return volumes.

3. Customer experience differentiation

Real-time visibility, flexible delivery options, parcel lockers, and performance-based courier service-level agreements are becoming critical to retention, trust, and brand differentiation.

4. Sustainable last-mile operations

Electric vehicles, green routing, delivery consolidation, and carbon tracking are increasingly embedded into last-mile strategies, aligning operational efficiency with environmental and regulatory expectations.

The impact of these transformations is tangible: lower cost-to-serve, improved service levels, faster cash cycles, and measurable sustainability gains.

The real value of last-mile transformation

For Saudi organisations, last-mile delivery is no longer simply a logistics challenge. It is a strategic lever that influences growth, margin, customer loyalty, and long-term resilience.

Those that successfully align technology, network design, and customer experience with Vision 2030 priorities are turning last-mile complexity into a source of competitive advantage. This requires cross-functional leadership that combines operations, technology, finance, and customer strategy, rather than treating the last mile as a standalone logistics function.

As delivery volumes continue to scale, traditional approaches focused on incremental efficiency gains are increasingly constrained. Organisations that proactively review network design, payment models, customer experience, and sustainability considerations are better positioned to maintain control over cost, service levels, and cash flow as the market evolves.

This is particularly relevant in the Saudi context, where rapid digital adoption, geographic scale, and changing customer expectations are reshaping last-mile economics. Early, structured intervention allows organisations to adapt ahead of cost escalation and service complexity, rather than responding reactively as pressures intensify.

At Grant Thornton, we support organisations across Saudi Arabia in re-designing last-mile networks and fulfilment models that balance cost efficiency, service excellence, and scalability. 

Our advisory work spans network design, route optimisation, and fulfilment strategy, from micro-fulfilment and hub-and-spoke models to data-driven routing, fleet optimisation, and delivery model selection. By combining advanced analytics, operational insight, and deep market understanding, we help clients translate last-mile challenges into practical, implementable solutions aligned with growth ambitions and priorities.