Weak housing market hurts big and bulky last-mile delivery

Growth in last-mile delivery for big and bulky e-commerce items has slowed by half because stagnant home sales mean people are ordering fewer large-ticket discretionary items like furniture and appliances, cutting into profit margins, according to a report from Armstrong & Associates and the National Home Delivery Association.

Armstrong & Associates estimated the $10. 6 billion market for residential delivery of oversized and heavyweight items will grow at a 5. 1% compound annual rate through 2027, down from 10. 6% over the past eight years, reaching an estimated value of $12. 3 billion.

Winning service providers will be those that can best execute core, commoditized services such as white-glove delivery, time-definite, returns and in-home assembly.

The expansion continues to be driven by major retailers and e-commerce platforms, including Amazon, Wayfair, Home Depot and Lowe’s, which have made large-format products central to their online offerings.

Many third-party logistics providers (3PLs) support them, primarily utilizing independent contractors and freight brokerage operations, but the work is more complex and cost-intensive than for final-mile couriers in parcel networks who simply drop off packages at doorsteps, or in mailboxes.

As more consumers purchase cumbersome products online, carriers face growing pressure to provide not just transportation to the curb, but a premium, in-home delivery experience that may include setup, installation, and even haul-away services, while keeping costs under control, the report said.

Demand for exercise equipment, mattresses, furniture and other large items is closely tied to switches in living locations. When people and businesses move, they tend to upgrade items, or add new ones to fill larger spaces. Housing turnover hit a 30-year low last year, according to real estate brokerage Redfin, dampening consumer demand.

Only 28 homes out of every 1,000 changed hands, a 38% drop from the 2021 frenzy, when 44 per 1,000 homes sold, and 44% below the pre-pandemic pace.

Two factors are behind the plunge in home sales: soaring prices, which are tied to limited supply and rising material costs that make homes too expensive for most people; and homeowners with sub-5% mortgage rates who are reluctant to move because the average 30-year fixed mortgage rate is in the mid-to-high 6% range.

(Source: Armstrong & Associates/National Home Delivery Association) The Trump administration’s tariffs on aluminum and steel imports have also raised the cost of appliances and acted as a further drag on demand. While housing-correlated demand is soft, carriers are seeing solid growth in delivery of construction materials to small contractors.

Profit compression Transportation from a distribution or fulfillment center to a customer’s doorstep can account for 30% to 40% of total transportation costs. Revenue per shipment in this segment typically falls below traditional less-than-truckload averages, with less than $90 per shipment being common, the authors said.

However, total revenue varies significantly based on service level. High-touch deliveries, such as full-room setup with installation, can generate up to $250 per shipment, while basic curbside or threshold deliveries may yield as little as $50. Those figures are the same as cited in the 2024 version of the report.

Delivering oversize goods presents distinct logistical challenges requiring specialized solutions. These items typically require two-person delivery teams, specialized equipment such as lift gates, dollies, or ramps, and longer delivery times at each stop, contributing to significantly higher operational costs.

Additional complexities arise from issues such as missed delivery windows, item damage, and access constraints, including narrow staircases or multi-story buildings, further complicating the delivery process. The spike in the price of diesel fuel since the Iran war is also eating into the bottom line.

Carriers surveyed by Armstrong & Associates also cited cost concerns from the rising cost of cargo insurance and less-than-truckload capacity scarcity in the middle-mile to warehouses.

The biggest long-term worry, by far, is labor availability because rising wages in other industries, like construction and hospitality, pull away similar workers while the federal enforcement on unauthorized commercial license holders is forcing many drivers to exit the industry.

The shortage of independent contractors and the decline of new entrants continues to drive reliance on freight brokerage to secure last-mile capacity. (Source: Armstrong & Associates/National Home Delivery Association) Gross margins in big and bulky delivery have dipped from 28. 9% in 2022 to 27. 5% last year, the report said.

Big and bulky 3PLs are responding to profit pressures by increasing prices, using technology like dynamic scheduling systems and routing software and computer-vision damage assessment to improve efficiencies, expanding networks and investing in ware