How Last-Mile Delivery Costs Are Being Reduced — and What It Means for Georgia

Last-mile delivery — the final stage of getting a product to the customer — has become one of the most expensive and complex components of modern logistics. As highlighted in the MIT Sloan Management Review article “Cutting Last-Mile Delivery Costs”, this stage can account for more than half of total transportation expenses and directly impacts customer satisfaction and loyalty. The authors note that traditional strategies, such as offering free or ultra-fast delivery, often inflate costs without significantly improving consumer retention.

The article outlines that the core challenge lies in operational inefficiency: companies frequently send small orders separately, use poorly optimized routes, and fail to reach economies of scale. Leading global retailers are tackling these issues through approaches like minimum order values (MOV), scheduled and grouped deliveries, data-driven route optimization, and multi-company pooling, where deliveries from different brands are combined on shared routes. In some European markets, such methods have already reduced average delivery costs by up to 18%.

These global trends are increasingly relevant for Georgia, where e-commerce is growing rapidly but the logistics network remains underdeveloped. According to TBC Capital’s 2024 report, the average delivery time in Tbilisi is one day, while regional deliveries take three to five days. Cash-on-delivery remains dominant — used by over two-thirds of customers — which raises both financial and operational costs. Only about 30% of online shoppers trust digital payments, forcing courier companies to handle cash manually, lengthening settlement times and increasing risk.

Technological and operational integration has become essential. In recent years, innovative Georgian logistics providers have emerged, adapting global models to local realities. Companies like Delivo, Trackings.ge, and Westore rely on micro-warehouses, automated order distribution, and 35-minute express delivery in Tbilisi. Their main challenge remains low delivery density and dispersed demand, which limit scale efficiency, especially outside major cities.

To counter this, local firms are introducing internationally tested methods — such as geographic pooling, which clusters deliveries within a neighborhood, and time-slot scheduling, allowing customers to choose specific delivery windows. These approaches help reduce fuel usage, optimize routes, and improve reliability.

Another key factor is the promotion of digital payments and the development of regional logistics hubs. Coordinated efforts between the private sector and government could establish small-scale fulfillment centers in cities like Telavi, Zugdidi, and Akhaltsikhe. This would allow regional order aggregation and reduce the need for daily shipments from Tbilisi, improving both cost efficiency and delivery speed.

In the long term, Georgia’s logistics sector will benefit from data-driven route optimization, eco-friendly transportation (electric scooters, small EVs), and predictive analytics for consumer behavior. Collaboration between universities such as BTU and private companies can accelerate this transition by introducing AI-driven logistics systems, training specialists, and enabling knowledge transfer that boosts productivity and service quality.

Enhancing last-mile efficiency in Georgia will not only lower delivery costs but also strengthen consumer trust and advance the country’s digital economy.
This article is based on the MIT Sloan Management Review article “Cutting Last-Mile Delivery Costs” and BTUAI research on Georgia’s e-commerce and logistics market.