Going the Extra Mile Urban Last-Mile Delivery of Large Goods

DEGREE PROJECT IN THE FIELD OF TECHNOLOGY INDUSTRIAL ENGINEERING AND MANAGEMENT AND THE MAIN FIELD OF STUDY INDUSTRIAL MANAGEMENT, SECOND CYCLE, 30 CREDITS STOCKHOLM, SWEDEN 2021

EMELIE SUNDSTRÖM

EMMA SÖDERGREN

KTH ROYAL INSTITUTE OF TECHNOLOGY SCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT

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Going the Extra Mile Urban Last-Mile Delivery of Large Goods

Emelie Sundström Emma Södergren

Master of Science Thesis TRITA-ITM-EX 2021:125 KTH Industrial Engineering and Management Industrial Management SE-100 44 STOCKHOLM

Gå den extra milen Urban sista-milen-leverans av stort gods

Emelie Sundström Emma Södergren

Master of Science Thesis TRITA-ITM-EX 2021:125 KTH Industrial Engineering and Management Industrial Management SE-100 44 STOCKHOLM

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Master of Science Thesis TRITA-ITM-EX 2021:125

Going the Extra Mile: Urban Delivery of Large Goods

Emelie Sundström Emma Södergren

Approved Examiner Supervisor 2021-05-26 Kristina Nyström Martin Vendel Commissioner Contact person IKEA Samina Jamil

Abstract In light of the growing e-commerce and rising population in cities, along with the ongoing climate crisis, the efforts to improve transportation options are intensifying. Thus, the field of last-mile delivery, i.e., the last stretch of transportation to an end customer, is becoming an increasingly researched topic. Innovative delivery solutions, leveraging novel technology or business concepts, are quickly becoming a necessity to retain customer satisfaction while performing sustainable and cost-efficient deliveries. Facing the challenges associated with the last mile is especially arduous in the context of large goods, i.e., packages which are significantly larger than parcels that would fit in a regular mail or post box, and may include furniture, home appliances and other bulky tools. Despite that large goods delivery comprises a large market, there is limited research on how novel last-mile delivery innovations, mainly discussed for application on parcels, can be deployed for larger items. This thesis is an explorative and qualitative study which starts in a background of important trends in transportation, and moves on to provide an analysis of three cities (Barcelona, San Francisco and Seoul), as well as a fourth city (Stockholm) that is both analyzed and considered for implementation. This is done in the form of a case study where data is collected from a literature review as well as interviews with representatives from the company IKEA. Various last-mile delivery concepts are explained and analyzed with Rogers’ diffusion of innovation framework. The research generated insights on how a mixture of different solutions have emerged on the studied markets, mainly based on social, technological and regulatory factors. Although most of them would be theoretically usable for medium to large goods in the future, there are different obstacles to a commercial-scale adoption today, with technological and regulatory maturity being main hurdles. Parcel deliveries play a part in driving customer expectations forward, forcing large goods retailers to evolve their deliveries in order to not lose business. Ecosystems of delivery solutions are likely to emerge in the future, catering to customers’ flexibility demands. In terms of concrete solutions, e-cargo bikes, pick-up points and neighbourhood deliveries are identified as appropriate for the current market state of Stockholm and related third party agreements, physical properties and platforms are discussed in the context of implementation. Additionally, suggestions for future research is to consider further models for generalizing implementation requirements, along with deepening the analysis of last-mile delivery ecosystems by looking into actors for the suggested solutions.

Keywords: Last-mile delivery, large goods, delivery of large goods, transportation, transportation innovation, PESTLE, Rogers’ diffusion of innovations

Examensarbete TRITA-ITM-EX 2021:125

Gå den extra milen: Urban sista-milen-leverans av stort gods

Emelie Sundström Emma Södergren Godkänt Examinator Handledare 2021-05-26 Kristina Nyström Martin Vendel Uppdragsgivare Kontaktperson IKEA Samina Jamil

Sammanfattning I och med ökande e-handel och stigande befolkning i städer, i kombination med en pågående klimatkris, intensifieras ansträngningar för att förbättra existerande transportalternativ. Därmed ökar mängden av forskning som fokuserar på last-mile delivery (ungefär sista milen-leverans), med andra ord den sista biten av en transportsträcka innan en vara når slutkunden. Innovativa leveranslösningar, som drar nytta av ny teknik eller nya affärsmodeller, håller snabbt på att bli en nödvändighet för att upprätthålla kundnöjdhet, samtidigt som leveransers kostnadseffektivitet och hållbarhet måste säkerställas.Utmaningarna som är associerade med sista milen är särskilt svårlösta när det kommer till stort gods, vilket är kollin som är signifikant större än vanliga paket som skulle få plats i en brevlåda eller postbox, och inkluderar bland annat möbler, vitvaror och andra skrymmande varor. Trots att leverans av stort gods utgör en omfattande marknad så är den befintliga forskningen begränsad vad gäller hur nya last-mile-innovationer kan användas för stort gods; detta diskuteras framförallt i samband med vanliga paket. Denna uppsats är en explorativ och kvalitativ studie som tar avstamp i en bakgrund som beskriver viktiga transporttrender och vidare analyserar tre städer (Barcelona, San Francisco och Seoul), samt en fjärde stad (Stockholm) som både analyseras och diskuteras för potentiell implementation. Detta utförs i form av en fallstudie där datan inkluderar en litteraturstudie samt intervjuer med representanter från företaget IKEA. Flertalet last-mile-leveranskoncept förklaras och analyseras med Rogers’ teori för innovationers spridning. Studien gav insikter om hur en blandning av olika lösningar har uppkommit på de undersökta marknaderna, i huvudsak beroende av sociala, tekniska och legala faktorer. Fastän de flesta i teorin skulle kunna appliceras på medelstort till stort gods i framtiden så finns det idag olika svårigheter som bromsar införandet av dessa på en kommersiell skala; teknisk och legal mognad verkar vara de huvudsakliga hindren. Paketleveranser spelar en viktig roll i att driva på kundernas förväntningar, vilket tvingar försäljare av stora varor att utveckla sina leveranser för att inte tappa sin omsättning. Ekosystem av leveranslösningar kommer troligen att utvecklas i framtiden för att möta kundernas krav på flexibilitet. Vad gäller konkreta lösningar identifieras elektriska lastcyklar, upphämtningsställen och grannskapsleveranser som passande för dagens Stockholm, och följande tredjepartsavtal, fysiska egenskaper och plattformar diskuteras i implementationssammanhang. Fortsatt föreslås framtida studier att överväga ytterligare modeller för att vidareutveckla och generalisera implementationskrav, samt att fördjupa analysen av ekosystem relaterade till last-mile-leveranser genom att undersöka involverade aktörer för de föreslagna lösningarna.

Table of Contents List of Figures ...... 4 List of Tables ...... 5 Abbreviations & Glossary ...... 6 Foreword ...... 7 1. Introduction ...... 8 1.1 Background ...... 8 1.2 Problem Statement ...... 9 1.3 Case Company ...... 10 1.4 Purpose ...... 11 1.5 Delimitations ...... 11 1.6 Sustainability...... 12 1.7 Disposition ...... 15 2. Literature Review ...... 16 2.1 Last-Mile Delivery ...... 16 2.2 Last-Mile Delivery of Large Goods ...... 17 2.3 Urban Mobility ...... 18 2.4 Platforms and Business Models ...... 19 3. Theoretical Framework ...... 21 3.1 ESTER ...... 22 3.2 Rogers’ Diffusion of Innovations Theory ...... 24 4. Methodology ...... 27 4.1 Overview and Motivation ...... 27 4.2 Research Design ...... 28 Case Studies ...... 30 4.3 Data Collection ...... 30 Notes on the Interviews...... 34 4.4 Coding ...... 35 4.5 Secondary Literature Review ...... 35 4.6 Research Quality and Rigour ...... 35 4.7 Research Ethics ...... 37

5. Empirical Findings and Analysis ...... 39 5.1 ESTER-Analysis of Cities ...... 39 Economy ...... 39 Social...... 40 Technology ...... 42 Environment ...... 44 Regulations ...... 45 5.2 Solutions ...... 47 Integrated Ride-Hailing Platform ...... 49 Authority to Leave - Tracking & Digital Signatures ...... 49 Consolidation Centers with Charging Stations ...... 50 Route Planning with EV ...... 51 Delivery Truck Parking and Lanes ...... 51 Autonomous Ground Deliveries ...... 52 Drones ...... 55 Underground Tunnel Deliveries ...... 59 E-cargo Bikes ...... 62 Pick-Up Points ...... 65 Neighbourhood Delivery...... 67 6. Discussion ...... 72 6.1 Implementation and Key Requirements ...... 72 6.2 Discussion of Results ...... 74 7. Conclusion ...... 77 7.1 Answering Research Questions ...... 77 7.2 Contributions to Research ...... 78 7.3 Implications and Recommendations for Case Company ...... 78 7.4 Implications for Industry ...... 79 7.5 Recommendations for Policy Makers ...... 80 7.6 Limitations and Recommendations for Future Studies ...... 80 References ...... 82 Appendices ...... 107 Appendix A) Interview Guide ...... 107 Appendix B) Full City Literature Reviews ...... 108

Seoul ...... 108 San Francisco ...... 112 Barcelona ...... 115 Stockholm ...... 119

List of Figures Figure 1: The Three Dimensions of Sustainability Figure 2: Visualization of Theoretical Framework Figure 3: Methodology Timeline and Overview

List of Tables Table 1: Abbreviations & Glossary Table 2: Factors of ESTER-analysis Table 3: Summary of interviews with investigated markets Table 4: Summary of interviews for solution discussions Table 5: ESTER Analysis - Economic overview Table 6: ESTER Analysis - Social overview Table 7: ESTER Analysis - Technology overview Table 8: ESTER Analysis - Environment overview Table 9: ESTER Analysis - Regulations overview Table 10: Overview of LMD-solutions Table 11: Autonomous ground deliveries - Summary of Rogers’ analysis Table 12: Drones - Summary of Rogers’ analysis Table 13: Underground tunnel deliveries - Summary of Rogers’ analysis Table 14: E-cargo bikes - Summary of Rogers’ analysis Table 15: Pick-up points - Summary of Rogers’ analysis Table 16: Neighbourhood delivery - Summary of Rogers’ analysis

Abbreviations & Glossary

Table 1: Abbreviations & Glossary B2B Business to business

B2C Business to consumer

Cash and carry Term used for IKEA store purchases where the customer transports the goods home themselves

Consumer End-customer

Customer End-customer if nothing else is specified

Customer The process from a customer’s fulfilment order until the goods are received by the customer.

EV Electric vehicle

IKEA The furniture company Ikea, short for Ingvar Kamprad Elmtaryd Agunnaryd

LMD Last-mile delivery, written by some as last mile delivery or final mile delivery

UCC Urban consolidation center

TOL Truck-only lanes

TSP Transport Service Provider

Foreword This report is the result of a master thesis conducted in the final part of the authors civil engineering education within industrial engineering and management. The work was conducted during the spring of 2021 at the institute of industrial engineering and management at the Royal institute of Technology (KTH). In this section, the authors would like to send thanks to all the brilliant people who have assisted us in this thesis.

Firstly, we are grateful to all the IKEA employees who cooperated with us, and especially so to Samina Jamil who guided us through the thesis with valuable advice, data, contacts and insights, as well as assisted us in establishing contacts within the organization. We would also like to thank all interviewees that have made time for our discussions and provide us with data and insights from the exploration markets.

Secondly, a sincere thank you to Martin Vendel, our university supervisor, who continuously challenged us and provided insightful academic feedback that was used to shape the thesis. Throughout the whole process with the thesis, Vendel has given valuable advice on the structure and methodology, and been available to answer any questions that the authors might have had.

Thirdly, we want to thank our examiner Kristina for holding seminars that gradually helped us to develop our thesis further, and to our peer-reviewers for reading through early drafts and providing constructive feedback and inspiration.

Emelie Sundström & Emma Södergren

Stockholm, May 2021

1. Introduction This chapter provides a background of the recent years’ increase in e-commerce and the challenges that this development has created for last-mile delivery (LMD) of large goods. The research questions, purpose and delimitations of the study are presented. Finally, a discussion of how the thesis relates to economic, social and environmental sustainability is layed out.

1.1 Background In recent years, the e-commerce sector has experienced an up-swing due to advanced technologies and a changing customer behavior. This development has been especially prominent during the year of 2020, as no other previous event has caused e-commerce to grow as strongly as the global covid-19 pandemic (Mikalsen, 2020). Due to this, in combination with the increasing urbanization in cities world-wide, last-mile delivery (LMD) has become one of the largest challenges in Business-to-Customer (B2C) e-commerce. The recent years’ development has changed the dynamics of the B2C value chain, rendering the final stages of the customer value chain, mainly the LMD, increasingly important for the customers’ satisfaction. For instance, the online retailer Amazon’s users state a fast and free delivery experience as the top reason for shopping online in 2020 (E-marketer, 2020). Furthermore, a smooth and satisfactory LMD experience engages and retains the customers, with three-quarters of consumers stating that they are willing to spend more if they are satisfied with the delivery services (Jacobs et al., 2019). With the increasing volume of purchases made online, retailers are under pressure to provide fast and high-quality product deliveries to the customers (Lowe & Rigby, 2014). At the same time, the last mile poses several efficiency challenges for retail companies, with Gevaers et al. providing estimates of up to 75% of the total supply chain costs being associated with the LMD (2009) and more conservative estimates landing on around 40% of the supply chain cost and over 50% of the total transportation cost (Jacobs et al., 2019). As a result, managing the final stages of the value chain in an efficient way is one of the key aspects of achieving cost effectiveness.

Although parcel deliveries are significantly more numerous, the development within large goods delivery, in terms of e-commerce and consequent delivery growth, is similar. This includes e.g. furniture, home appliances and other physically large goods. XPO Logistics, a large logistics company focused on heavy goods deliveries, claims to be the largest player on the North American market with over 10 million deliveries annually (XPO Logistics, 2019). A report written in 2017 on online shopping and home delivery in the UK estimated the annual online retail of so-called “non-food large items” to be £4.3 billion in 2015/2016, making up about 8% of the whole £51.4 billion market (Allen et al., 2017). Note that this was when the online retail market made up around 14% of the total retail. In 2020, the online retail value had grown to more than twice that size, with an estimated size of £113 billion or 28% of total retail in the UK (Retail Economics, 2020). Moreover, an estimate from 2018 claims the global market of “bulky goods” deliveries to be $9 billion (Black, 2019). With a large, growing market as well as sustainability issues (see chapter

1.6 for an in-depth description) becoming increasingly essential to address, examining ways to improve efficiency on this market is highly relevant.

Given the urgency and impact of the LMD-issue, there are a plethora of attempts to address the challenges in order to improve efficiency and customer satisfaction. Trends within automation, electrification and gig economy platforms are potential ways of providing the customers with a high degree of service while keeping costs and emissions low (Joerss et al., 2016). Although e- commerce replacing in-store shopping generates an increase of home delivery, other solution concepts focus on consolidating to certain points, leveraging already existent movement in, for instance, shopping areas or post offices (Cohen-Blankshtain & Rotem-Mindali, 2016).

1.2 Problem Statement There are many papers dedicated to outlining the efficiency gains associated with novel transportation concepts and technologies, as well as classifying and evaluating different solutions (Tadic & Veljovic, 2020). However, a large portion of the research on transportation focuses either on long-haul freight deliveries or, in the case of the last mile, parcel deliveries. There is significantly less research on the delivery of larger items in a city center context. Although some of the more general articles point out difficulties in such deliveries (Tadic & Veljovic, 2020), and others apply mathematical models to niche delivery problems (Bazaras et al., 2013), there seems to be nearly no qualitative research on the applicability of new technological solutions, that are often developed with parcel deliveries in mind, on large goods deliveries. The authors identify two possible reasons for this; firstly, large goods deliveries only make up a smaller portion of all performed deliveries, with niche companies specializing in such deliveries, and secondly, new technologies has caused the landscape shift rapidly in recent years, and even more so during the global covid-19 pandemic, thus causing the research to lag behind within this area. A seemingly important distinction to make is that between goods that are large but would have been transported home in regular car if bought in store and very large goods, such as an assembled couch, a kitchen table or an entire kitchen, which would have been ordered, delivered and installed in a customers’ home even before the time of e-commerce (Visser et al., 2014). It is mainly in the first category where significant change is occurring. According to a study by logistics provider Fidelitone, 88% of 50 responding furniture retailers predicted that their sales share generated by e-commerce would increase in the next 5 years (Fidelitone, 2021). However, as customer attitudes to delivery seem to be fueled by the development in the parcel sector, the expectations on all deliveries are becoming higher; fast, inexpensive and transparent deliveries are the baseline (Straight, 2019). Thus, streamlining and meeting customer expectations in delivery of bulky goods becomes a crucial issue to solve.

This thesis project will therefore examine both existing LMD-solutions and urban mobility, as well as new innovations that are being worked on to address the transportation needs of tomorrow. This

will later be narrowed down to ideas that are likely to be feasible for large goods specifically. The main research question that the thesis aims to answer is:

RQ: How can the last mile delivery issue be handled for large goods in city centers?

With two subquestions intended to guide the research being:

SQ1: What are the salient technological and platform solutions to the last mile delivery issue in city centers?

SQ2: Which of these solutions are appropriate for large goods retailers to implement on the Swedish market and what are the keys to successful implementation?

1.3 Case Company The topics of this study will be evaluated in the context of a case based on IKEA. As a global company with 217,000 employees and over 500 sales locations, IKEA comprises a suitable case to study since the main part of their sales consists of large goods in the form of furniture and home interior (IKEA, 2021). Moreover, as part of a collaboration, IKEA has provided the authors with rich data in the form of interviews, intended to facilitate the research on LMD of larger items. As a result of the aforementioned changing shopping habits of consumers, as well as the rise of enabling technology, IKEA is branching out from their hitherto successful concept, that consists of placing large stores in suburban or outskirt areas of cities (Milne, 2019), to establish presence in city centers to better cater to changing customer demands. IKEA’s vision is “to create a better everyday life for the many people'' (IKEA, n.d.). A notable part of this vision is the last four words, essentially highlighting accessibility as a key feature of their business idea. They strive towards this vision by following their values of Sustainability, Low cost, Form, Function and Quality (IKEA, n.d.). One of the core assumptions in IKEA’s business model has been that the customer has access to a car to transport the purchased furniture from the collectable stock to their home. Given the decreasing car usage in the cities along with increasing expectations on deliveries, IKEA’s traditional business model, where the customer is part of the value chain by transporting the furniture to their home, are facing novel challenges. Thus, there seems to be a need for new, innovative business models that are well-adapted to the lifestyle of the urban customers as well as aligned with the values of IKEA. The delivery issue is made increasingly relevant given the changing nature of customer shopping behaviour, moving towards online rather than physical shopping, a trend that has been further accelerated by the covid-19 pandemic (Koetsier, 2020; Bhatti et al., 2020). This trend is also visible in the Swedish context, in which this thesis will evaluate LMD solutions, with e-commerce increasing to a yearly growth of 40% during the pandemic (E-barometern, 2020. p.1). Additionally, the Swedish customers have high expectations on flexibility, transparency, and sustainability (E-barometern, 2020. p.41, p.44). Although the study will be conducted with IKEA as a focusing lense, adding constraints in the form of their

values and vision, the aim of the study is to provide insights that are generalizable to other retailers of large goods that offer delivery in city center areas.

1.4 Purpose The thesis is aimed at exploring potential technologies and delivery concepts that can be integrated into large goods retailers’ value chain in order to meet the demands of the city center customer while maintaining convenience and cost-effective value propositions. This purpose will be fulfilled by outlining innovative LMD-solutions that are currently being tested and implemented on leading markets in Europe, North America and Asia and gaining an understanding of what market dynamics influence the feasibility of LMD-technologies on these markets. Additionally, it will include a detailed description of factors influencing the context of the studied markets, research on LMD-solutions that are currently being developed on these markets and an evaluation of the solutions’ feasibility on the Swedish market.

The aim of the study is to maintain a strong focus on large goods. When overviewing the current literature landscape on the LMD-process in a city center setting, it was prominent that the challenges posed by large goods are often overlooked when developing new LMD-solutions. Consequently, there are few solutions available that allow for transportation of large goods. Furthermore, the success rate of an LMD-solution is highly context-dependent, as social, legal, and technological features on the local market influence the adoption rate of an LMD-innovation. Since there are few studies examining this for large goods, this thesis will take a gap-filling approach with the goal of contributing to current research on LMD-solutions for large goods in a city center context. As mentioned in section 1.2, although there are articles pointing out general issues associated with large goods deliveries, as well as research outlining solutions for parcel deliveries, there is a lack of studies done on which of todays and the future’s solutions could be appropriate for larger items. This also has practical implications for the industry; the solutions and technologies used on today’s market are often presumed to be tailored for parcel deliveries. Thus, the thesis may therefore provide value not only for researchers, but also for retailers of large goods when selecting LMD-solutions in specific contexts. Moreover, the thesis process in itself can be viewed as a proposition on how to investigate and evaluate the feasibility of LMD-technologies in the context of large goods retail, although this may be relevant chiefly for industry practitioners.

1.5 Delimitations This study is delimited to include three exploration markets and one implementation market. Thus, the overview of technologies and trends within the field of LMD will be somewhat limited in its scope. However, as the chosen exploration markets are considered to be on the forefront of LMD, a comprehensive overview of topical technologies can still be achieved. Moreover, the study considers large cities and focuses on the opportunity and challenges posed by city center settings. Thus, the context analysis is carried out on the city center of each of the explored markets. The

city center settings are also present in the discussion of the proposed LMD-solutions, as these are evaluated based on their feasibility on a city center market. Finally, although LMD is discussed in a general sense, the solutions will be narrowed down to focus on delivery of large goods, since analysis related to these types of deliveries are presumed to be more valuable to research, particularly because there are notably prominent challenges related to delivering large items and less literature dedicated to solving those challenges. Worth noting is that large goods, in the sense that the concept will be treated in this research, does not have a specific dimension. Rather, it will be used as a descriptor of bulky items, such as furniture or appliances, significantly larger than a parcel, and of which some may be too large to transport in a regular private car. The main focus of this research will be on the type of large goods that would have been transportable in a regular private car if bought in store, which is now often bought online and delivered by the retailer to the customer’s location.

1.6 Sustainability The primary definition of sustainability is “the quality of being able to continue over a period of time”, according to the Cambridge dictionary (2021). The secondary definition furthers this to an environmental perspective so that it expresses the ability of “causing little or no damage to the environment and therefore able to continue for a long time” (Cambridge dictionary, 2021). From a scholarly perspective, there are a plethora of articles attempting to provide a clear-cut definition of sustainability. Another frequently used definition of sustainable development is that of the World Commission as presented in the report Our Common Future and reads: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (The World Commission, 1987). In other words, long-term maintenance, achieved by avoiding excessive consumption or doing irreversible harm, is what makes a practice sustainable. This is applicable to not only the environmental dimension of sustainability, but the economic and social as well. The economic sustainability could apply to individual companies; activities that are performed at a loss, with lacking productivity or without taking available resources into account, are not economically sustainable (Basiago, 1999). When it comes to social sustainability fairness and social equity are key factors (Dempsey et al., 2011). In a company context, this is often associated with corporate social responsibility, i.e., contributing positively to stakeholders like employees, consumers and society in general (Cruz, 2006; Seuring, 2012). In terms of this thesis, even if sustainability is not explicitly mentioned in the research questions, all of the dimensions are important to factor in when it comes to the research of LMD.

Figure 1: The Three Dimensions of Sustainability

Starting with environmental sustainability; in 2018 the transportation sector was responsible for 25 % of the greenhouse gas emissions in urban areas in the European Union (Lozzi et al., 2018). The numbers are similar for the US during the same year, with a 28% share of their greenhouse emissions being related to the transportation sector (US EPA, 2020). Despite efforts to reduce the emissions from individual vehicles through the use of more efficient technology and electrification, the sector is growing and therefore the emissions that are connected to transportation are expected to increase in the coming years. Although several studies have concluded that e-commerce with home delivery generates lower emissions compared to individuals taking their own cars to a shopping location, faster delivery options, such as same-day or 1-hour deliveries, are likely less environmentally sustainable due to the lower consolidation rates (Jaller & Pahwa, 2020). Moreover, delivery into cities is related to challenges with congestion, difficulties with parking and consequent inefficient use of fuel. Moving away from the traditional means of road transport, towards a system including different modes, replacements for combustion engines and other innovative solutions may minimize the negative impact on environmental sustainability generated by LMD-operations in urban areas (Ranieri et al., 2019).

The productivity loss that comes from today’s LMD in dense urban areas also affects the economic sustainability. Since up to 75% of the total supply chain costs can be associated with the LMD, it is difficult for companies to retain margins (Gevaers et al., 2009). Thus, restructuring the delivery system towards new solutions may result in a more solid economic sustainability in the future.

In terms of social sustainability as defined above, a delivery supply chain often involves several different actors and thus maintaining fair working conditions in all parts of the network is a vital part of achieving social sustainability. As will be outlined in following sections, a threat to these efforts is the growing dependence on gig workers in the transportation sector. Although there have

been improvements in the last year, gig workers are still considered financially vulnerable, with few chances of access to healthcare and other employee benefits (McNulty, 2020; Katta et al., 2020). In order to achieve social sustainability, companies should strive to ensure sustainable practice throughout their whole supply chain. This can be done through a variety of different methods, with decision analysis and life cycle analysis being two available tools (D’Eusanio et al., 2019). Regardless of which sustainability dimension is concerned, the main issues are to carefully select suppliers and continuously review adherence to target indicators.

1.7 Disposition

❖ Introduction: The first chapter gives an introduction to the research, presenting the research questions, its relevance, background and a scope for the problems that will be examined. Emphasis is placed on large goods and how novel technologies can address the present issues associated with LMD.

❖ Literature Review: The second chapter outlines literature that is relevant to the research questions, with the purpose of providing the reader with an overview and a general understanding of LMD, urban mobility and the gig economy.

❖ Theoretical Framework: Chapter three describes the theoretical framework that has been used to structure the research results. The motivation behind the two models is explained, along with an outline of the author’s modifications and different factors that each model takes into account.

❖ Methodology: Chapter four contains a methodology description, outlining the research design and procedure. The literature, selection processes and interview material is described in detail, and the rationale behind decisions and ways of ensuring research quality are elaborated on.

❖ Empirical Findings & Analysis: Chapter five consists of two main parts; results from the data collection of examined cities, as well as results and an analysis of possible LMD- solutions. The former provides a context for the LMD issue, while the latter aims to suggest ways in which the issue can be addressed.

❖ Discussion: Chapter six discusses three LMD-solutions and their respective key requirements in the context of implementation for the case company. Additionally, a discussion of general themes identified during the research is presented.

❖ Conclusion: The final chapter concludes the research by briefly summarizing answers to the research questions. Moreover, contributions to research, implications and recommendations for the case company, industry and policy makers are deliberated. Finally, based on the limitations of this study, topics for future research are suggested.

2. Literature Review The conducted literature review outlines the current state of relevant research on three main topics. The first part regards last mile delivery and thus how goods move through urban areas, going from a general description of the last mile to a specific focus on large goods. Secondly, urban mobility is outlined in an attempt to describe how people travel in cities. Finally, literature on the most prominent business model trends that are believed to impact the aforementioned will be reviewed, focusing on the gig economy as a driver of change in transportation.

2.1 Last-Mile Delivery In an urban environment, LMD can be defined as the last stretch of a B2C parcel delivery to the final consignee who has to take reception of the goods at home or at a collection point”. While LMD has been a present subject within management research since the 1980s, the field has received increasing attention in recent years as the rise of online and mobile shopping has led to an increase in both the volumes and the costs associated with the LMD (Slabinac, 2015). According to Gevaers et al. (2009), up to 75% of the total supply chain costs can be associated with the LMD. A more recent report also estimates that a significant share of the overall supply chain cost is accounted for by LMD, namely 41%, which makes up 53% of the total transportation cost (Jacobs et al., 2019). Thus, managing the final stages of the value chain in an efficient way is one of the key aspects of achieving cost effectiveness.

There are many alternatives for LMD-solutions, including attended home delivery, reception box and collection-and-delivery points (Wang et al., 2014). With attended home delivery, couriers deliver goods to the customer’s doorstep, receive their signature and then leave for the next one. While meeting the customers face to face can create a closer customer relationship, the method may also lead to low operation efficiency and high costs as the number of orders increases. Moreover, the unproductive time and energy spent on a truck stuck in traffic or with absent customers contribute to a negative impact on both a city’s congestion and environment (Boysen et al., 2018). The second option, reception boxes, the courier delivers the goods to a box and the customers pick up the goods at any time using a messaged password. The reception box can either be in direct connection to the customer’s home or to a shared reception. This method allows the couriers to improve their delivery efficiency as they are no longer limited to deliver a certain package at a certain time, and studies show that there can be up to a 60% cost reduction by using reception boxes compared to attended home delivery (Wang et al., 2014). However, the method requires either a large up-front investment in reception boxes and thus a large volume of packages are required in order to achieve a profitable operation. Alternatively, the company must rely on a third party to provide the boxes. Finally, the collection-and-delivery point consists of convenience stores and other express companies where customers come to pick up ordered goods. By placing the stores in areas that are normally trafficked by the locals, this delivery method does not require

any additional travel by consumers and thus tends to lead to a high customer satisfaction. Furthermore, this method tends to reduce customer mileage as it avoids failed first-time home shopping deliveries (Wang et al., 2014).

In recent years, various solutions to the LMD-dilemma have been developed, being enabled by new technology, such as autonomous (Marshall, 2020) and electric vehicles (Caggiani et al., 2020). This includes for instance drone deliveries (Park & Kim, 2018) and e-cargo bikes (Caggiani et al., 2020), which have potential to reduce costs, environmental impact and congestion while improving efficiency. Innovative efforts and legislation (Carpenter Wellington PLLC, 2020) allowing for unmanned flight deliveries are in progress in many large cities, with food and medicine delivery being the most employed usage areas today. There are several ways to operate a drone delivery network being discussed, including launching from delivery trucks (Chang & Lee, 2018), landing on rooftops (Kim et al., 2020) or jumping between public transport vehicles (Choudhury et al., 2020). Unmanned deliveries are also being innovated in the forms of delivery robots (Yu et al., 2020), with the development being further accelerated by the covid-19 pandemic (Marr, 2020). Although there have been legislative obstacles, they are in operation in, for instance, parts of Southern California (Templeton, 2021) and in South Korea (Jung, 2020). In terms of e- cargo bikes, the aim is to neither affect nor be significantly delayed by traffic while keeping the ability to carry larger goods in comparison with regular bike deliveries (Blazeejewski et al., 2020). A pilot project using e-cargo deliveries was carried out in Barcelona, with seemingly satisfactory results, identifying large initial investments and the necessity of large volumes in order to secure profitability, therefore suggesting partnership with large distributors (GrowSmarter, 2020).

Regardless of the underlying technological features, the logistic system of LMDs in a city setting must be designed taking the heterogeneity of the involved stakeholders’ behaviour and objectives into account. According to Taniguchi et al., there are four key stakeholders involved in the LMD- model that are all striving towards different goals. These are the shippers, the freight carriers, the consumers and the administrators (Taniguchi et al., 2001). While all of the mentioned stakeholders strive to minimize the costs, the value chain faces challenges as the stakeholders might prioritize other important factors related to the consumer price, the time management and the environmental impact differently (Taniguchi et al., 2001).

2.2 Last-Mile Delivery of Large Goods Worth noting is that the challenges of LMD differ between parcels and larger goods, such as furniture. In general, large goods often require a more complex delivery process with several challenges occurring along the way (Macioszek, 2017). Finding a parking space near the delivery address and lugging the package from the delivery vehicle to a building’s entrance, or even up a flight of stairs, may be time-consuming and cost-inefficient (Siegfried & Zhang, 2021). Large bulky items are also more likely to be damaged in the delivery process than other e-commerce goods, and thus the process requires the delivery personnel to take extra caution (Beckwith, 2019).

The question of responsibility adds yet another layer of complexity to the delivery of large goods. As the risk of damage increases with the delivery of large goods, the question of who bears the responsibility for the furniture during the delivery stages becomes increasingly important (Luo et al., 2018). Although delivery of large goods is facing larger challenges than that of small parcels, the customers have grown to expect a similar service level and quick deliveries, regardless of the size of the ordered items (Siegfried & Zhang, 2021; IKEA, 2021). Thus, current delivery processes of large goods are causing frustration among many customers, as they miss the speed, transparency and flexibility that they are used to with small packages delivery (Zwahlen, 2018).

When it comes to home delivery of large goods, there are usually four main delivery options for the customer. These are threshold delivery, curbside, room of choice and white glove. In short, threshold delivery means that the goods are delivered over the threshold and into the first room at the delivery location, while a curbside delivery only is made to the first dry area outside of the delivery location. Room of choice and white glove delivery can be considered premium options as they include delivery to a room of choice in the first case, and assistance with unpacking, assembly and trash removal in the latter (Fidelitone, 2020). These options also differ as the delivery company remains responsible for the goods for a longer amount of time with white glove delivery compared to threshold or curbside delivery. Combined with the fact that large goods are more likely to be damaged in the delivery process (Beckwith, 2019), this means that the two latter options also pose large challenges for the delivery company.

Another common approach within the field of delivery of large goods is taking on a multimodal transportation method that combines several different delivery technologies for a single delivery. Because of the variation of size and weight of large goods, the deliveries are usually evaluated and designed individually, and what combination of delivery technologies is to be considered the most suitable solution is much dependent on the situation. This poses a challenge for carriers of large goods, as the costs associated with maintaining a functioning road transport infrastructure are high. One instrument that can be used to tackle this challenge is a criteria system that allows for evaluation of sections of the route in an existing road network in order to objectively choose the most suitable sections for heavyweight and oversize deliveries (Bazaras et al., 2013).

2.3 Urban Mobility Another relevant area of research is that of urban mobility, i.e. how people move in urban areas (Lyons, 2018). Generally, customers have been involved in IKEA’s transportation process by picking up their goods from physical stores using cars. With the newly intensified effort to establish urban presence in combination with car usage becoming increasingly obsolete in city centers, due to issues regarding e.g. parking opportunities and congestion, the question of how people move in urban areas comes into play.

Among today’s young adults in the cities of Western Europe, the trend towards diminishing automobile miles driven is clear (Delbosc et al., 2019). In contrast, the use of public transportation,

measured in terms of distance travelled, seems to increase (Delbosc et al., 2019; Kuhminoff et al., 2011).

Looking at future possibilities and challenges, some of the main aims when planning for urban mobility is to create a connectivity that is efficient and sustainable (Lyons, 2018). The sustainability part mainly regards environmental issues, such as minimizing air pollution, be it greenhouse gas emission or particles directly harmful for human health (Lam & Head, 2012). This can be achieved through a plethora of different means, including electrified and/or autonomous vehicles and shared transportation solutions.

One emerging trend is car sharing (Rodenbach et al., 2018), a service offering customers to rent passenger cars on a per trip basis. This trend has extended into other means of transportation, such as bikes, e-bikes and e-scooters, as well (Campbell et al., 2016). Thus, the transportation shifts from ownership to service use (Ferrerro et al., 2018). The global market for car-sharing is expanding rapidly, and in 2016 Frost and Sullivan predicted the number of car-sharing users to grow from 10 million to 36 million by 2025 (Frost & Sullivan, 2016). Reasons for using a car- sharing service often include environmental consideration, economic benefits as well as overall convenience. As the fixed costs of car-ownership are generally quite high, the usage of car-sharing services can be financially beneficial for people who do not travel by car that often (Lerro, 2015).

In short, the urban mobility trend is moving towards increasingly smart means of transportation, highly dependent on data collection and usage (Jan et al., 2019). The concept of smart transportation is based on using modern technology both as units of transportation and as a means to ensure automation and connectivity throughout the urban areas, possibly requiring support of mechanisms such as smart planning (i.e. facilitating legislation and structures) and sharing economy adoption (Yan et al., 2020).

2.4 Platforms and Business Models Regardless of if one aims to move people or freight, there are a few trends to consider when it comes to platforms and business models that can either enable or hinder future success. There are two concepts that are particularly interesting to discuss in relation to the research question: the gig economy and/or the sharing economy. While many differentiate the gig-economy and the sharing economy by defining the former as earning income by completing “gigs” or small contracted work, and the latter by sharing a physical asset for a limited amount of time, there seems to be a lack of consensus in the literature, with many using the concepts interchangeably (Ravenelle, 2017). The most prominent example of this new business model is Uber, which has incited a change in the transportation sector (Sanders & Pattinson, 2016).

One identified opportunity within the field of the gig-economy to explore the opportunity of crowd logistics, a business where a task, in this case delivering the furniture to the customer, is outsourced to a crowd of gig-workers (Devari et al., 2017). The gig-economy business model consists of three

main actors: the gig workers, the requesters and the intermediary platform (Keegan et al., 2019). By centering the business model around multi-party interactions, the company attempts to maintain the control over the service in terms of prices and working conditions while at the same time distancing themselves from the responsibility of the actual delivery (Healy et al, 2017). This gig- work model allows for a flexible laboring strategy where the employer can adapt the size of their labor force to a fluctuating demand and are thus able to contain a lucrative LMD-strategy while assuring high quality delivery services to the customers (Healy et al, 2017). However, the gig- economy also introduces several challenges to the company, with one of the major critiques being the ambiguous employment status of the gig-workers. Another issue often raised is the one of effective planning and use of resources within the gig-economy. The gig-economy model can be described as an interdependent ecosystem where multilateral exchanges take place among the actors. With this comes a need to control and coordinate the actors’ efforts in order to achieve an effective value chain. This creates pressure on the companies as activities such as workforce planning, recruitment and performance management become critical parts of the business model (Keegan et al., 2019).

Mainly discussed within the sharing economy sphere, peer-to-peer (P2P) platform solutions are on the rise as well. In terms of challenges faced by this market, both efficiency and the issue of perception of security (Furuhata et al., 2013) has recently started being addressed by blockchain technology, building on the principles of peer consensus to verify activity in a decentralized online ledger, providing new levels of traceability (Nofer et al, 2017). One example of this is Massive Vehicle Ledger, a blockchain-based application that connects transportation service providers and users, as well as mechanics and private drivers, consisting of an incentive system where points are awarded for e.g. safe driving, reviewing chauffeurs and car maintenance (Mvl, 2021).

Moreover, there are ongoing efforts to introduce a holistic view on trips with the concept of Mobility as a Service, often concatenated to MaaS (Steering et al., 2018). The idea with MaaS is to provide a single platform where all parts of a journey can be booked, bringing together all the available means of transport, be it e-bike, taxi or commuter train, based on the customer’s preferences regarding cost, time etc. Most of the companies providing MaaS do it in the form of a mobile application, however, the payment varies from monthly subscriptions, like UbiGo in Sweden and Whim in Finland provide, to a pay-per-trip system, which is used by “Go Denver'' in the US. The requirements for MaaS to work in a city include an open data approach, that is, a collaboration between the companies operating the transportation and the third party that supplies the platform (Li, 2017), which may be difficult to achieve in some cities due to regulations (Polydoropoulou et al., 2019).

3. Theoretical Framework Chapter 3 provides a motivation for and description of the selected frameworks, namely ESTER and Rogers’ diffusion of innovation theory. The different factors comprising each model are explained and an illustrative figure presented.

The theoretical framework used in this research mainly consists of two analytical models: a PESTLE-analysis and Rogers’ diffusion of innovation theory. The aim of combining the two models is both to capture the context of the studied market through a modified PESTLE analysis and to evaluate the feasibility of the suggested innovations on the Swedish market through the usage of Rogers’ diffusion of innovations theory. The model presented in this work consists of a modified PESTLE-analysis that has been given the acronym ESTER.

When researching existing frameworks for innovations in a market-specific context, there was a lack of models that considered both market-specific and innovation-specific factors. Since the aim of this thesis is to gain an understanding of technologies and delivery concepts that are being used on the exploration markets as well as to analyze how these market dynamics influence the adoption rate of LMD-innovations, it was deemed important to find a theoretical framework that combines these two perspectives into one coherent analysis. Thus, a theoretical framework consisting of both the ESTER-analysis and Rogers’ diffusion of innovations theory was developed.

The following figure displays an overview of the developed framework. In short, the figure displays the five factors of Rogers’ diffusion of innovation theory surrounded by the ESTER- factors. The aim is to illustrate how the diffusion factors and market factors interact and affect one another, and that they all together make up the analytical landscape used in this thesis.

Figure 2: Visualization of Theoretical Framework

When developing this framework, several other models were considered, including among others Porter’s five forces and SWOT-analysis. The reason for not including Porter’s five forces in the theoretical framework is that this model is mainly aimed at describing a specific product or company, and thus cannot capture a holistic view of the studied markets. When it comes to the SWOT-analysis, this model was discarded as Rogers’ diffusion of innovations theory has a clearer focus on the diffusion of innovations and is therefore more suitable for the studied business case.

3.1 ESTER The analysis of the selected cities was conducted based upon a framework called ESTER, which is a moderated version of the more commonly used framework PESTLE. The aim of using the ESTER framework in this particular case is to generate a holistic description of the studied markets that can serve as a basis for understanding what key factors determine the success of LMD technologies on these markets. In its essence, the original model PESTLE is a strategic framework that can be used to evaluate an external environment of phenomena by describing it based on six factors: political, economic, social, technological, legal and environmental. The framework was first developed by Francis Angular in the 1960s, and in its original form only four of the attributes were included. Since then, the model has been moderated in several stages before taking the form it has today (Aguliar, 1967).

To fit the purpose of the thesis, the PESTLE framework has been moderated by merging the political and legal factors into one single factor. The reasoning behind the moderation is that since these factors are tightly related to one another, the combining of the factors will lead to a more in- depth discussion of the political/legal climate on the markets, and that such a depth would be harder to achieve if keeping the factors separate. Furthermore, the order of the factors has been changed with the aim of creating a more coherent analysis, resulting in the ESTER-acronym. With factors

that somewhat overlap each other closer together in the model, a common thread is created throughout the analysis that makes it easier for the reader to follow the overall reasoning.

Table 2: Factors of the ESTER-analysis Economical Social Technological - Economic growth - Customer behavior - Level of innovation - Population density - Transportation habits - Technology adoption - Unemployment rates - Relevant Technologies

Environmental Regulations - Sustainability goals/agendas - Government & local regulations - Environmental awareness - Employment laws

From an economical perspective, there are three main factors that will be considered within the researched cities: economic growth, disposable income and unemployment rates. These factors will be analyzed with the aim of describing the economical dynamics of the studied markets. This perspective will cover both an individual perspective, describing the economic situation of the average inhabitant, and an aggregated perspective covering the overall economic development of the cities. This includes urbanization rate and the density of the city center.

The social factor will focus on the culture in the studied cities, describing the lifestyles and habits of the citizens. The analysis of the social climate in the cities will be based upon two main factors: the consumer behavior and the transportation habits of the citizens. Thus, the perspective will cover the population’s attitudes towards e-commerce and their habits when it comes to transportation within the studied cities. This factor will also cover the technological awareness of the population and to what degree new technologies are being adapted by the population.

The technological perspective will mainly consist of a description of current LMD-solutions within the studied cities. The aim is to map the trends within this field in order to gain a detailed understanding of the technological climate. However, the technological factor will not be limited to LMD-technologies, but also include initiatives and technologies that enable a highly innovative business climate within the studied cities.

The analysis will cover an environmental perspective including the development of sustainability policies and agendas within the studied cities. Since the LMD is closely connected to the sustainable aspects of the business model, the environmental perspective will be used in order to gain insights into the cities’ sustainability work and agendas. This factor will also include the environmental awareness of the population in the studied cities in order to investigate how a potential solution should be shaped in order to be compatible with the populations’ view on sustainability.

The final perspective will cover regulations and policies affecting the urban transportation possibilities in the researched cities. This will include, for instance, traffic regulations, delivery regulations and employment laws. By investigating how these factors have evolved during recent years, the aim is to gain an understanding of how the legal climate is likely to develop during the next decade and what effect such a development will have on the emergence of new LMD- technologies within these cities, as well as what solutions are feasible in today’s legal climate.

3.2 Rogers’ Diffusion of Innovations Theory Rogers’ diffusion of innovations theory defines five factors that influence the adoption rate of an innovation. The defined factors are (1) Relative advantages, (2) Compatibility, (3) Complexity, (4) Trialability and (5) Observability. The aim of the theory is to examine how the five factors influence the adoption rate of an innovation and thus gain an overall understanding of an innovation’s diffusion. According to Rogers, the factors were selected with the aim of maximizing the generality and succinctness of the theory (Rogers, 1995).

Worth noting is that Rogers’ diffusion of innovation framework is commonly presented as a way of gauging the adoption rate in a situation where the user of the innovation is a consumer, and the provider of the innovation is a business. This is especially true when the innovation characteristics are combined with the rate of adoption curve, illustrating how different groups gradually adopt an innovation (Schilling, 2017). In the case of this essay, this perspective will be taken into account, since it is important to ensure that a LMD solution will be accepted and used by consumers. However, the focus of the framework will be placed on evaluating the potential of diffusion within the case company, meaning that each of the factors will be seen from a B2B perspective as well as B2C. The factors will have the same general meaning, although seen from another angle.

The relative advantages of an innovation are determined by the degree to which the innovation is perceived as superior to the product it replaces. The reasoning of the theory is that an innovation that has substantial advantages compared to competitive alternatives will be adopted by the society at a higher pace than an innovation that lacks such advantages. Examples of factors that can be considered as relative advantages are quality, functionality or product design. This factor of analysis requires a nuanced perspective as the question of what factors can be viewed as relative advantages can differ depending on the individual perceptions and needs of the user group. For example, a user group consisting of students might view an affordable price as a relative advantage to a larger extent than a user group consisting of full-time employees due to different economical situations. Based on the case company, relative advantage can be described as a compound of different factors, which will be elaborated in the final paragraph of the section. Any new solution must be evaluated by taking all of these parts into account (Rogers, 1995).

The compatibility of an innovation refers to how consistent the innovation is with the values, experiences and needs of potential adopters. According to Rogers’ theory, an innovation that is well aligned with the values of potential users will be adopted at a higher rate than an innovation that is not. This is because an innovation with high compatibility to potential users’ lifestyles will require less of a commitment for the users to adopt compared to an innovation that differs radically from existing values. Furthermore, an innovation that is technologically compatible with existing technologies is likely to display a rapid adoption rate as it provides a more congruent experience for the user. In terms of compatibility, a solution’s adherence to the company values is crucial. Thus, with the organization in mind, a solution should fit into the organization’s value chain and existing network of suppliers and collaborative partners in order to be feasible and attractive (Rogers, 1995).

The third factor, complexity, describes how difficult it is for potential users to understand and use the innovation. This factor affects the adaptability of an innovation as an innovation that is complex to use most probably will not be incorporated into the users’ everyday lives to the same degree as an innovation that is intuitive and easy to use. As with the factor regarding relative advantages, the complexity of an innovation can differ depending on what user group one has in mind. When it comes to technology advanced innovations, the complexity of the innovation is often perceived as higher by user groups with lacking experience of technology, compared to user groups with extensive technological experience. Thus, this factor must be evaluated keeping the differences between relevant user groups in mind. Adding the perspective of a business-centered solution, the perceived complexity remains important. Stakeholders in the organisation must understand the solution well in order to advocate its implementation (Rogers, 1995).

When it comes to the trialability factor, Rogers’ diffusion of innovations theory claims that an innovation is more likely to be widely adapted if potential users have the opportunity to test and experiment with the innovation before actually making the commitment to adopt the innovation. This can for example be achieved by offering potential users a chance to try a demo or beta of a new innovation. That way, the users can experience the benefits of the product first-hand before making any investment and thus they will be more likely to actually adopt the innovation. In terms of having a company as the user, the trialability factor will depend on how feasible it is for a company to implement small scale pilots, i.e., how much can be tested without substantial up-front investments. In short, a lower threshold towards implementation will likely mean a higher likelihood of adoption (Rogers, 1995).

Lastly, the factor observability refers to the extent to which the benefits of an innovation are visible to the adopters. According to the theory, the general adopter is not willing to commit to a new innovation before they have observed the benefit that an innovation brings through observing early adopters using the innovation. It is not until they have clearly seen the benefits of the adoption that they will be willing to adapt to the innovation themselves. This holds for B2B cases as well;

evidence of successful prior implementations will likely contribute to a higher willingness to support adoption (Rogers, 1995). This is a well-established and difficult trade-off for companies; on one hand, being among the first to test a new technology means an opportunity to outperform competition. On the other hand, testing an unproven solution comes with a higher risk. Such factors are often referred to as early-mover advantages and disadvantages, showcasing what benefits and risks that come with being first with introducing a new technological solution on the market. Among the most common early-mover advantages are opportunities to build brand loyalty, higher switching costs for consumers and control of strategic resources. Thus, an actor can gain a lot by being first with introducing a new technology on the market. However, there are also several disadvantages with being an early-mover, including lacking complementary assets needed to commercialize the product or betting on an uncertain technology (Schilling, 2017).

As mentioned, the relative advantage can be considered an umbrella term, with a highly situation dependent division into concrete factors. When it comes to the case company, relative advantages can be divided into cost efficiency, quality, lead times and sustainability. This also ties into the compatibility with their core values. If a solution is quick and works well from a service standpoint, but costs substantially more than today’s solutions, it will likely not be adopted.

4. Methodology This section includes an overview of the methodology that was used, as well as detailed descriptions of the research design, the data collection - with an in-depth description of conducted interviews - and subsequent coding of the collected material. Following that, the methodological quality and rigour is discussed, along with matters regarding the research ethics of the paper.

4.1 Overview and Motivation In short, the conducted research has followed an abductive approach, consisting of several stages of data collection with subsequent theoretical analysis, which has been used to generate models that are applied on a real-world case. The first phase included explorative research and a literature review with the aim of gaining insight into the current state of the cities being considered for the choice of exploration markets. This was followed by a selection of exploration markets, with specific information from a deeper literature review and interviews with the selected regions being structured in the form of a LMD-trends in different areas of the world, to ensure a holistic representation, as well as a more in-depth description of certain markets in order to identify context-dependent factors that render some delivery options more viable than others. Both academic and “grey” literature was incorporated in the literature review in order to have up-to- date information on fast-paced industry while establishing a solid academic base for the following parts of the research. The interviews with each region’s representatives, including Stockholm, were intended to complement the literature with descriptions of market needs, future plans and evaluating why or why not current solutions, or solutions tried in the past, succeed.

Based on the review, potential solutions that were either discussed in interviews or present in literature on the exploration cities were listed and researched. Six of the initial eleven solutions were deemed to be feasible and constructive in a Swedish context, keeping the ESTER factors in mind, and were thus analyzed with Rogers’ diffusion of innovations framework. The analysis provided the foundation for selecting three solutions to plan for the implementation of, as well as two solutions mentioned as relevant for future research. The further interviews with representatives from IKEA Sweden were intended to lay out the implementation process in order to provide a relevant summary of requirements for selected solutions. The reason for keeping the majority of the solutions for description and analysis, to the extent that time allowed, was to provide a starting point for research on other markets as well. Even if a solution cannot currently be implemented in a Swedish context, it may be feasible in other cities or in a future scenario.

Although the main parts of the different phases were conducted sequentially, there has been some overlap and iterative work. The initial phase generated some of the ideas for solutions to the LMD- challenges that were considered in the final selection. Some aspects of the legal framework of Sweden in the ESTER-analysis were added during phase three as it was deemed necessary in order to provide an accurate analysis of the solutions.

Figure 3: Methodology Timeline and Overview

4.2 Research Design The intended methodology was to mainly apply a qualitative method, and incorporate some quantitative elements, in order to achieve the research aim (Libguides, 2021). The rationale behind choosing this method was mainly complementarity, in other words, providing partly overlapping perspectives on the same phenomenon in an attempt to yield a more profound understanding (Greene et al, 1989). The intention of combining the methods in this manner was to identify and explore constructs through qualitative methods and then assess the magnitude and the potential impact of the constructs through quantitative methods. In this case, quantitative factors were taken into account during the initial exploration phase as well, in order to assess the suitability of the studied cities. Moreover, the research question encompasses a phenomenon that seems highly context dependent and may not only vary with tangible transportation conditions but also depend on the population’s attitudes and habits. Although the study does not intend to elaborate on the underlying motives behind choosing to use different transportation methods or platforms, a solely quantitative approach would likely not provide the depth of understanding needed to sufficiently analyze the current situation and extrapolate future scenarios.

As for the research design; the project began with an exploratory literature study where delivery technologies, mobility patterns and trends of the selected cities were mapped. 16 cities in Europe, Asia and North America were broadly explored, with the intention of choosing one in each

geographical region. A list of the top choices from each region was thereafter decided upon. This list was based on four groups of factors that were specified beforehand: urbanization and population density, environmental regulations and initiatives, e-commerce behaviour and technological adoption. For instance, a high degree of smartphone adoption and online shopping, as well as specific, innovative solutions regarding delivery or mobility, were deemed as more interesting to look further into. When the final choice of one city from each top list was made, another factor that was taken into account was the availability of contacts in the different cities, otherwise known as convenience sampling. Although such sampling should not be used to prove statistical relations, it is a time- and cost-efficient approach. Moreover, non-probability sampling is considered especially appropriate in explorative studies (Galloway, 2005), which is the case for this research project. Thus, the possibility of establishing contacts to interview in respective cities was discussed with supervisors from both the case company and the university, and resulted in the final selection of Barcelona, Seoul and San Francisco.

The literature study was mainly focused on qualitative data (for instance, case studies of implemented solutions, successful transportation or delivery pilot projects and attitudes towards various delivery concepts), but it also contained some elements of quantitative (e.g. statistics regarding movement patterns, population density and smartphone usage in cities, as well as profitability for LMD-solutions). Subsequently, data was gathered from semi-structured interviews with customer fulfilment professionals from the case company. The rationale behind conducting expert interviews is generally to condensate relatively reliable data in an efficient and time-saving manner (Bogner et al., 2009). Even if there are drawbacks, especially when it comes to sampling of such a limited population as an expert pool and risks of confirmation bias, expert data has been found to be consistently reliable (Dorussen et al., 2005) and was therefore utilized as a complementary data source in an attempt to gain a better understanding of the experts’ market’s specific challenges and current state. After this, the initial plan was to gather quantitative data on the case company’s supply chain and existing processes in order to assess how a new delivery solution would compare to the existing options in terms of, for instance, cost-efficiency, sustainability and feasibility. However, this step was replaced by a second data collection phase, where more information on specific solutions was gathered, as well as readjusted towards a more qualitative approach. The rationale behind this was both to ensure a time-efficient project, with the researchers not being specialists in logistics operations, and to remain more academically relevant by taking an approach that may be of more general value.

Thus, following the data collection on each exploration city, a list of potential LMD-solutions was produced based on the trends that were identified in the cities as well as other relevant literature that was found in the initial exploration. The list contained eleven different solution concepts, see the results section (5.2) for full descriptions, of which five were discarded either due to incompatibility with the Swedish market, based on the ESTER analysis of the city, or for their highly researched nature, meaning that further analysis would be of limited value both from an academic and industry perspective. The motivation for rejection is described for each solution in

the results section. Of the six remaining solutions, all were analyzed with Rogers’ diffusion of innovations framework, and three were selected for a further analysis due to their short-term deployability and adherence to current regulations. Although the initial idea was to provide separate solutions, the synergy between these solutions warranted the discussion of an ecosystem concept, where different capabilities of each solution are leveraged, contributing to a holistic LMD-system.

Case Studies Case studies are appropriate to use when studying a contemporary phenomenon within a real-life context (Yin, 2009) and when examining open-ended research questions. This thesis has utilized the case study methodology in two dimensions; both for the exploratory research on certain cities, and for the selected case company. The former part of the approach served a purpose in controlling environmental variations, while the latter placed domain constraints on the studied phenomenon, i.e., LMD of large goods, as described by Eisenhardt (1989). The intention of using case studies is generally not to provide statistical evidence, but rather to examine theoretically interesting samples that have potential to extend existing theory (Eisenhardt, 1989).

For the sake of transparency, the case company was decided on before the research questions and research design were fully developed. In fact, the study was built to address certain challenges of the case company, which would also be of academic relevance. Despite this, the case company is an appropriate unit to study for two main reasons. First of all, the issues associated with delivery of large goods are industry-wide and insufficiently researched. Since the selected company is in the process of addressing these issues, it comprises an interesting case to qualitatively study the process in selecting and implementing appropriate solutions in a highly real-life and up-to-date context. Secondly, the aspect of convenience sampling ought to be brought up again. The case company was willing to provide rich data, and commit time to interviews and sending documents, which has benefited the outcome of this study greatly. Worth mentioning is the risk of an excessive focus on the chosen case company and a consequent researcher bias. Notwithstanding, this is not viewed as a significant problem in this thesis, with the main motivation being that the company itself requested an outside-perspective and a thesis where the exploratory part did not specifically cater to IKEA’s needs. Of course, there is a risk of unconsciously doing so regardless, but the authors have taken great care to remain objective and critical to the situation, partly through discussion with and feedback from academic supervisors and peers.

4.3 Data Collection It was decided early on not to record the interviews, due to potential confidentiality issues for the company that the study was conducted in collaboration with. It was also decided not to transcribe the interviews, both due to its time-consuming nature and since continuous contact with interviewees was established, it would be possible to return to topics or questions after the

interviews if anything was unclear. All interviews were conducted in English, except for interview 9, which was in Swedish since all participants were native Swedish speakers. Because of the physical distance and an ongoing pandemic, all interviews were conducted via video calls, with all meetings in Microsoft Teams except for the San Francisco-interview, which utilized Zoom, due to technical difficulties.

All interviews were semi-structured, with the motivation that such interviews can provide a more in-depth understanding of complex questions compared to structured interviews, since they allow for follow-up questions and “probing”, while still leveraging some structure in providing answers to key questions, as opposed to unstructured interviews (Saunders et al. 2015, chap 10). The interview guide can be found in appendix A. Although semi-structured interviews involve a risk to infer bias from the interviewer, they were deemed a sufficient starting point in collecting data on the cities from the perspective of local experts in the company. Moreover, semi-structured interviews generally provide a base for methodological triangulation. Even if interviews are considered a qualitative data collection method, some quantitative data was provided by the interviewees. Additionally, the interviews were used for gathering knowledge on what was not yet explored by the case company and thus gaining some understanding of what was commonly used in the industry today and may not provide as much novel value to examine further. Furthermore, all the interviews were conducted in small groups. This is a time- and cost-efficient method to use in social studies and can often generate new data through the interaction of group dynamics, among other advantages. Disadvantages of this method include that other skills are required by the interviewer to produce this dynamic result, as well as the risk of pressure to conformity, that is, individuals agreeing with the group despite not being of the same opinion (Frey & Fontana, 1991). Due to the small groups and non-personal topics the group dynamics effects are thought to be minimized, while the time-efficiency made it possible for the relatively occupied interviewees to partake in the study and provide input on the interview topics.

Table 3: Summary of interviews with investigated markets Interviewee Region Interview Date Interview Topic Duration Role

A Barcelona 1 19/2 Market insights, 30 min Operations customer preferences & Developer habits, LMD at IKEA

B Barcelona 1 19/2 See above 30 min Service Fulfilment Operations (SFO) Manager

C Barcelona 1 19/2 See above 30 min Local Market Manager

D San 2 23/2 See above 60 min SFO Manager Francisco

E San 2 23/2 See above 60 min SFO Developer Francisco

A Barcelona 3 24/2 Delivery services, 60 min Operations strategy for delivery Developer optimization

A Barcelona 4 26/2 Delivery services - future 60 min Operations solutions & Developer development, LMD challenges

B Barcelona 4 26/2 See above 60 min SFO Manager

F Barcelona 4 26/2 See above 60 min Market Potential Developer

G Seoul 5 3/3 Market insights, 60 min Service customer preferences & Operations habits, LMD - today and Manager future strategy

H Stockholm 6 3/3 See above 60 min Sourcing Developer

I Stockholm 6 3/3 See above 60 min Project Manager

As can be seen in table 3, the interviewees mainly consisted of customer fulfilment professionals, of which two were active in the San Francisco-area, four in Barcelona and one in South Korea.

Ideally, more interviewees from the first- and last-mentioned regions should have been interviewed in order to ensure an equal contribution for all cases, however, this was not possible due to practical constraints. Yet, the authors received answers to the questions that were deemed essential from each city and backed up the interviews with other data sources in order to assemble a sufficiently comprehensive understanding of the circumstances in each area. Due to both the current pandemic and the geographical distance to most of the interviewed individuals, all interviews were conducted using video call with the platform Zoom.

The interview questions were sent to the subjects beforehand, which meant that they could prepare eventual data needed to answer some of the questions and reduce uncertainties on issues that they may not know by heart. Moreover, an unintended advantage of this was that it facilitated the asking of follow-up questions, since short statements describing the interviewees’ answers to the original questions were sent to the authors and read shortly before the interviews. Although this was neither requested nor intended by the authors, it had the advantage of clearing up uncertainties in the answers during the interview and thus reducing ambiguity.

A second round of interviews was held in order to evaluate the solutions that were compiled after the initial research on cities and analyses of the current situations, in terms of their feasibility on the Swedish market specifically. For these interviews, a list of solution concepts, i.e. “ride sharing platforms”, were presented and discussed with the interviewees. The questions were kept open and eventual concerns, existing pilots/discussions of the solutions were noted. Moreover, the second round of interviews also included one interview with employees from the transport service provider (TSP) Bring. This was done in order to ensure theoretical saturation from a perspective outside of the case company, and reduce the possible bias of their perspective.

Table 4: Summary of interviews for solution discussion Interviewee Region Intervie Date Interview Topic Duration Role w

H Stockholm 7 19/3 Solutions overview 50 min Sourcing interview 1 Developer

I Stockholm 7 19/3 Solutions overview 50 min Project Manager interview 1

J Stockholm 7 19/3 Solutions overview 50 min Consumer & interview 1 Customer Insight Leader

H Stockholm 8 25/3 Solutions overview 80 min Sourcing interview 2 Developer

I Stockholm 8 25/3 Solutions overview 80 min Project Manager interview 2

H Stockholm 9 13/4 LMD - today and future 60 min Sourcing strategy Developer

K Sweden 9 13/4 LMD - today and future 60 min Bring strategy representative

L Sweden 9 13/4 LMD - today and future 60 min Bring strategy representative

Notes on the Interviews First of all, although the questions were examined by both the authors and the supervisor responsible for the contact with the case company, both the approach to answering and the exact interpretation of the interview questions differed between the regions. This may in part be attributed to language barriers; the researchers are not native English speakers and neither were most of the interview subjects, with the exception being the two participants from the San Francisco-area. However, an attempt to address this could have included testing the questions in a trial run of the full interview beforehand. This was done with the second set of interview questions, i.e., the ones that were asked when conducting the interviews with fulfilment and customer insight professionals from IKEA Sweden, when assessing the feasibility of the solutions on the Swedish market.

4.4 Coding The material gathered in the interviews was recorded in the form of notes, taken by both authors in order to ensure sufficient coverage of the discussions. These notes were the basis for the coding process. The selected unit of analysis was one line. In the initial coding, the lines were analyzed and split into keywords, and marked with a color that indicated if this was a vision for the future or a reality of today. Furthermore, the sentiment behind the keywords was divided into “positive” and “challenge”, with no sentiment marked meaning a neutral statement. The second phase of the coding started with a read-through of all the keywords and grouping these into categories that encompassed the general topic of what was discussed. This was done in order to structure the focus of the analyses of the current state and to gain some understanding as to what was emphasized by the interviewees as important, prominent and pressing in each city.

4.5 Secondary Literature Review After the data collection phase, it was decided that an additional framework should be incorporated in order to have a structured approach in assessing specific LMD-solutions, their required capabilities and optimal context. In order to provide sufficient data on specific solution concepts, a secondary literature review was conducted. Rather than being purely exploratory like the primary review, this review was more focused on particular technologies, platforms and concepts, as well as their benefits and capabilities. Like the primary review, the second comprised a mixture of gray and academic literature, with the former providing the up-to-date information that was needed for the most novel innovations, and the latter being sources of richer, more in-depth, descriptions.

4.6 Research Quality and Rigour The importance of quality research cannot be understated. It is a necessity in order to produce robust, trustworthy and unbiased contributions, which are required to succeed in advancing science, regardless of the field of study (Hofseth, 2018). When it comes to methodological rigour, there are a number of scholarly discussions on the components that are crucial to form a rigorous procedure. Four criteria that are traditionally used in social science are reliability, construct validity, internal validity and external validity (Yin, 1994).

Reliability depends on the replicability and transparency of the study; a higher degree of reliability enables researchers to draw similar conclusions from the findings given that a similar context is studied. Saunders et al. (2015) described how participant error, participant bias, observer error and observer bias can negatively impact the reliability. The first two threats have been mitigated by having an interview guide, staying in touch with the interview participants, to avoid any easily correctable misunderstandings of the collected data, and ensuring that their participation is anonymized; no single statement will be traceable to a single individual, which increases the likelihood of honest and accurate responses. Regarding the observer bias, the authors have strived

to remain open-minded about the data and the potential findings that would come out of it. Given that the authors were lacking in knowledge on the area beforehand, and have nothing to gain from a certain result, observer bias is considered to have been minimized. Moreover, the strive for transparency has imbued the entire process, from the idea to their description, in the attempt to provide an impartial account of the conducted research.

When it comes to validity, construct validity refers to whether the research fulfills its purpose in measuring what is intended to measure. One way of ascertaining this, as well as internal validity, i.e. demonstrating a causal relationship between variables, is to use triangulation. This has been done by studying various types of data, both from the exploratory literature review, the interviews and the in-depth review of solutions. Worth noting is that both construct and internal validity are strongly based in quantitative and positivist research (Saunders et al., 2015) and therefore not fully applicable to the exploratory approach that most of this thesis takes. Although the concept of external validity originates from the same research tradition, with findings being generalizable to a more general population being desired, the term analytical generalization is more commonly used in the context of case studies (Yin, 1994). This can be enhanced by conducting multiple case studies, where theory is able to predict whether or not cases have similar or different results (Yin, 2009). This study’s research on the current state in different cities can be considered that. The solutions and implementation consideration, however, are only considered in the context of the case company specifically, rendering the generalizability low. Nevertheless, Eisenhardt and Graebner (2007) argue that cases do not have to be generally tested in order to provide value in theory building. Their article mentions that case selection can be used to “explore a significant phenomenon under rare or extreme circumstances” (Eisenhardt & Graebner, 2007). In this instance, the case company is rare in the sense that they can test the solution concept that the study results in. Although it is outside the scope of this specific study to evaluate the result of the test, the aim is to achieve a general understanding of how solutions that address the challenges that come with transporting large goods can be analyzed and implemented - a task that is relevant for many companies with a similar retail profile.

Although the criteria discussed above stem from quantitative research, Lincoln and Guba (1986) present a related set of criteria that focus on naturalistic inquiry: trustworthiness and authenticity. These are intended specifically for research that is not adequately covered by positivist evaluation approaches. Some techniques that have been used in this thesis to achieve these criteria include: long-term engagement with the data (at least as long as the timeline has allowed), cross-checking of data, peer debriefing and thick descriptions. Member checks have also been conducted with the stakeholders from the case company in the sense that report drafts have continuously been sent to their representatives and the authors subsequently being open to change any misunderstood information. Consequently, debriefing or checks have been carried out with other master’s students, academic supervisors and industry professionals; all with different inputs, knowledge and experience. In terms of authenticity, the authors have strived to accommodate different value

systems during the course of the research. Although some of the studied issues are more tangible, the distinction between an operations and innovation mindset became rather apparent during the interviews, with the authors taking both sides into account in an attempt to achieve fairness. Thus, the exploration phase of the research was not limited by what was practically feasible and kept an open approach towards all the different types of information, comments and general data that flowed in.

Van de Ven (1989) pointed out that “Good theory is practical precisely because it advances knowledge in a scientific discipline, guides research toward crucial questions, and enlightens the profession of management”. Although this research starts in a general fashion, by analyzing the current landscape and trends and structuring that information, the research question is closely tied to a highly practical challenge. Rigour is not a sufficient measure of the quality of a study; staying relevant to the practical applications and exploring a timely subject is of equal importance.

4.7 Research Ethics In order to ensure that the thesis work is performed with high ethical standards, it is of great importance that the confidentiality and the anonymity of the participants are kept (Bell and Bryman, 2007). In this thesis, the Swedish Research Council’s four Principles of Research ethics will be followed to achieve this purpose (Vetenskapsrådet, 2002). The four principles are listed below 1) Information requirement: The researcher shall inform the those affected by the research about the purpose of the research task in question 2) Consent requirement: participants in a survey have the right to decide for themselves on their participation 3) Confidentiality requirement: information on all participants in a survey should be handled with outermost confidentiality and their personal information should be stored in such a way that unauthorized persons cannot access it. 4) Utilization requirement: Information collected on individuals can only be used for the stated research purpose.

The first principle underlines the importance of informing the interview participants of how they are expected to contribute to the thesis as well as the conditions for their participation. In this thesis, this has been achieved by providing the participants with a small introduction, including a set of questions, that is meant to lay the foundation for discussion beforehand so that the participants are given the chance to gain an understanding of the interview’s purpose. Furthermore, the purpose of the interview has been stated by the researchers at the beginning of each interview, thus allowing the participants to ask clarifying questions before starting the interview if needed.

The second principle puts weight on getting a consent from the participants before performing the interview, in that way ensuring that all interviewees are making an active choice to participate in

the interview. This has been done by making sure that all participants have given consent to participate in the interview, as well as approving of the authors taking notes during the interviews.

In its original form, the confidentiality principle highlights the importance of the data collection being carried out in such a way that the gathered information cannot be traced back to the individual source. In the case of this study, the interviews have been performed with experts within the field, and thus there is value to be captured in emphasizing that certain data comes from an educated source and in these cases it is important to get the interviewees’ permission to include their name and expertise in the thesis. When it comes to the confidentiality of IKEA as a company, the final product of the project should be reviewed by and discussed with IKEA in order to ensure that no sensitive information is exposed.

Finally, the utilization requirement ensures that the collected information is only used for the stated research purpose. In order to achieve this, the collected information will be handled with caution and not shared with anyone unauthorized. This has also been taken into account as the supervisor from IKEA has gone through the thesis before it has been shared with people outside of IKEA.

5. Empirical Findings and Analysis

5.1 ESTER-Analysis of Cities The city analyses include notable results from the primary literature review, as well as complementing findings from the interviews. Quotes and descriptions from the interviews are selected to be representative for a certain market on a specific topic. The full result from the literature review on each city can be found in the appendix.

Economy

Table 5: ESTER Analysis - Economic overview Seoul San Francisco Barcelona Stockholm

Population density 16000 7000 16000 360 habitants/sqm habitants/sqm habitants/sqm habitants/sqm

Unemployment rate 4,6% 6-7% 12,5% 9%

In terms of the general conditions in the examined cities, they vary in size and density. While Barcelona is one of Europe’s most dense cities, with a density of 16000 inhabitants per square kilometer (World Population Review, 2021a), which is approximately the same as Seoul (World Population Review, 2021c), San Francisco only has nearly half of that number (World Population Review, 2021b). Stockholm sits at the bottom of the list with around 360 inhabitants per square kilometer (World Population Review, 2021d). Although all markets are situated in so-called developed countries, all cities have seen a rise in unemployment rates during 2020 due to the pandemic.

Social

Table 6: ESTER Analysis - Social overview Seoul San Francisco Barcelona Stockholm

Highly digital x x x x mindset

Increase spendings x x x on furniture during pandemic

Sustainability highly x x x valued by the customers

High customer Customers Customers are cost Parcel market demands expects conscious drives customer delivery to be expectations on included in the service offer price

Public transport Public Improvements of Improvements of Public transportation public public transportation is is commonly transportation transportation commonly used used required in order required in order to increase to increase alternative modes alternative modes

Similar to many cities in developed countries, the four focus markets are all large e-commerce markets, with steady growth in the last years that was highly accelerated during the pandemic. This is facilitated by the fact that all the cities are prominent areas in terms of their high technological prowess, internet access and smartphone adoption in their respective regions. For instance, Seoul has prioritized universal connectivity and 99.2% of the city’s inhabitants have access to internet speeds that are four times faster than the global average (AT Kearney, 2020). Seoul and Barcelona are similar in their high growth in mobile e-commerce, although they differ significantly in smartphone penetration, with Seoul at above 90% (Poushter et al., 2018; Winskel et al., 2019; US International Trade Administration, 2020) and Barcelona at 72.5% (J.P. Morgan, 2020). This view was confirmed by the interviews with respective cities where the South Korean market was described by respondent G with the words “Korea has wi-fi everywhere … really really high share of smartphone users” and interviewee C from Barcelona mentioning a “more digital mindset” as an important feature to take into account.

Although household spending has generally decreased during the pandemic, spending on furniture and home interior has increased on some markets. In South Korea for instance, home furnishing spending grew by 7.4% in 2020 (Kim & Choi, 2021), with all major furniture retailers seeing significant sales increases in August 2020 compared to the previous year (Jin, 2020). This, accompanied by the e-commerce growth, means that the online sales of furniture are growing. Albeit it is noted that these numbers are likely inflated by the pandemic and may drop in the future, Sweden saw an unprecedented e-commerce growth of 40% during the year, with the online share of retail of furniture and home interior increasing from 7% to 11% (E-barometern, 2020. p. 6). In Spain, the furnishing and appliances category is expected to grow its online customer base by 15% after the pandemic (Marcos et al., 2020).

Based on the interviews, the trends regarding e-commerce and subsequent delivery have a significant impact on the case company’s business. A large shift is consistently mentioned, and for IKEA this has meant that a large portion of the previous rate of the cash and carry-shopping has been replaced by online shopping and delivery. In Stockholm, the percentage has dropped from around 95% to 65% during the year of the pandemic, meaning about a third of the purchases are conducted differently and implicating obvious requirements in terms of logistics efforts.

Furthermore, all interviews touched upon high consumer demands, however, they focused on slightly different demands. As for Seoul, the respondent mentioned that “Customers expect everything to come with buying a piece”, meaning that bundling the items with a service is what customers expect, thus paying extra for delivery or installation was something that may hinder a customer in buying goods. Respondents A and C from Barcelona mentioned consumers being “cautious” in what they spend their money on, a trend that has become even more apparent in the financially challenging times caused by the pandemic. They also emphasized that the Barcelona population generally has a stronger digital mindset and that internet penetration, mobiles and e- commerce are well above the average of Spain. In one of the Stockholm interviews, respondent K said “The parcel market is driving expectations on lead times and transparency”, pointing out how consumers’ frequent ordering of parcels with fast delivery impacts the demands on deliveries on large goods as well. Both San Francisco, Barcelona and Stockholm customers were described in the interviews as relatively environmentally conscious. In Stockholm, this is backed up by E- barometern, which proclaims that a total of 80% of Swedish customers state that they are willing to wait 1-2 days extra for the delivery, if this means that the goods are being delivered in a more sustainable and environmental-friendly manner (E-barometern, 2020. p. 41).

When it comes to transportation habits, they seem to depend on both infrastructure in the cities, regulations and general population attitudes. While raid-hailing is commonly used in San Francisco (Palgan et al., 2021), regulations, and in South Korea’s case general skepticism towards such business models, have been obstacles to large-scale adoption (Nolan, 2018; Jun, 2018). In Barcelona, a report containing interviews of inhabitants indicates that improvements of, and

incentives to use, public transports would make it a more used mode of transport (Bouchet et al., 2017). Restrictions of combustion engine cars in city centers would likely also promote use of public transport and increase the adoption of zero emission vehicles (Bouchet et al., 2017). This is consistent with the plans of San Francisco to increase alternative modes of transport by improving accessibility and security of public transportation (San Francisco County Transportation Authority, 2017). In both Stockholm and Seoul, public transportation is commonly used, and the latter has done so by incorporating ICT features into the system, for instance in the form of free wi-fi at stations and in buses (Lee et al., 2019). In the interviews it was noted that the most commonly used method to transport a purchase home from an IKEA store is by car, regardless of the market. The interviewees from San Francisco particularly emphasized that their local market was highly car-dominated. However, the means of transportation depends both on the size of the purchase and the accessibility of the public transit network near specific stores. For instance, the traditional outskirts store often offers shuttle traffic to the closest access point, while the city stores may already be located relatively close to such stores.

Technology

Table 7: ESTER Analysis - Technology overview Seoul San Francisco Barcelona Stockholm

Highly innovative x x x x market

Highly rated as start- x x x x up markets

Smart city- x x initiatives

Automated x x x deliveries being tested on the market

Innovative versions x x of more traditional LMD-solutions

All the studied cities are highly innovative markets, with consistently high rankings in different innovation indexes, and attractive markets for tech start-ups (AT Kearney, 2020; Bergquist & Flink, 2020; Chiang, 2018; Mobile World Capital Barcelona, 2016; Musgrove, 2020; Silicon Canals, 2021). The San Francisco Bay Area is home to Silicon Valley and a number of tech start- ups within various areas, with the highest number of so-called Unicorn companies (billion-dollar start-ups), in the world (AT Kearney, 2020), with Stockholm producing the second-most per capita

(Chiang, 2018). Both Barcelona and Seoul are known for their capabilities as so-called smart cities, with a high degree of ICT incorporated in the city, including Internet of Things-features in everything from trash cans to lamp posts (Monroy, 2021; Reimer, 2020; Stevens, 2020; Stevenson, 2017). In Seoul, this has been facilitated by the world’s first 5G network, a technology that is seen as an enabler, if not a requirement, for autonomous vehicles, permitting data flow between cars, nearby sensors and devices (McCaskill, 2019; Raissi et al., 2019).

In terms of LMD-technologies, there are a few notable innovations to bring up. The general trend goes towards a minimization of traditional and combustion engine reliant deliveries and moving towards new modes of transportation in all the four cities. One example of this is the development in autonomous delivery solutions, where both ground- and airborne autonomous vehicles are being launched. In Stockholm, this is piloted in the form of food delivery by the company Foodora (Johansson, 2021), whereas the concept is operational on a small scale in the Bay Area and Seoul with parcel-sized deliveries conducted both by small self-driving robots and flying drones (Dive delivery, n.d.; Korosec, 2020; Urban Air Mobility News, 2020; United Press International, 2020). When it comes to larger autonomous deliveries, Seoul stands out with solutions such as a drone taxi, designed to carry two persons along with a product load of over 300 pounds (Bunyan, 2020; Lee, 2020b), and a self-driving unmanned post office providing mobile deliveries (Korea Herald, 2020). Based on the lack of literature on autonomous deliveries in the Barcelona context, a quote from interviewee A seems representative for the market: “automated is not the reality yet in the last mile”.

When it comes to more traditional delivery methods, however, Barcelona has two noteworthy examples that focus more on improving the conventional concepts. The first one is Kiwi Last Mile, which provides a model where a van is used as mobile storage, and then releases electric motorbikes as they get closer to the delivery location, eliminating the need for parking or unnecessary stops. This method solves several of the problems associated with LMD, both associated with time and environmental aspects, as the method has proven to reduce the last-mile emissions by 50% (Shahabi, 2020). Moreover, the areaDUM project by the city of Barcelona aims to provide short-term parking spots close to delivery destinations, dedicated to delivery vehicles specifically, with the intention of generating fast-paced rotations of such parking spaces (Ajuntament de Barcelona, 2020). In Stockholm, one of the largest semi-traditional actors on the market is Budbee. They are traditional in the sense that B2C deliveries are carried out mainly by vans, although with an unconventionally large focus on using technology, such as algorithmic route optimization and real-time tracking, to provide customers with fast, smooth and transparent deliveries (Moderna Livet, 2019; Budbee, 2021).

Another category of solutions are pick-up points, with automated parcel lockers being mentioned in the interviews as frequently used both on the San Francisco and Stockholm markets. In Sweden, the lockers are provided by a variety of different providers, for instance, the partially state-owned

postal company PostNord, actors that only provide locker solutions like Instabox, and general logistics providers. As was brought up by one respondent in the interview with representatives from the logistics company Bring, this is one example of the kind of ecosystem-centered LMD- solutions emerging on the Stockholm market, where start-ups and other high-tech actors are creating solutions with a strong digital focus and open-source systems, resulting in a more coherent and smooth customer experience.

Although the literature review rendered a plethora of interesting technologies that could provide fast, cost-efficient and sustainable deliveries, it was noted in the Barcelona, Seoul and Stockholm interviews that these solutions, especially the autonomous category, may not be sufficiently mature in the last mile at the moment, and emphasis was placed on the difficulties associated with the delivery process of large items and loading and deloading of such goods. Another common factor of all markets was the mentioning of zero emission vehicles, which will be discussed further under the following section.

Environment

Table 8: ESTER Analysis - Environment overview Seoul San Francisco Barcelona Stockholm

Sustainability Large 80% of all trips Carbon neutrality Climate neutrality initiatives investments on made sustainable reached by 2050 reached by 2040 green by 2030 technologies Reduce emissions Fossil free by Only allow for with 45% by 2030 2030 sales of EVs by 2035

All cities have plans to reduce emissions and environmental impact that vary in ambition, roadmaps and timeline. When it comes to San Francisco there is both a city-wide plan to shift transportation towards the goal of 80% sustainable trips by 2030 (San Francisco County Transportation Authority, 2017), and a state-level legislation to only allow sales of electric cars by 2035 (Baker et al., 2020). Seoul has a similar situation with plans both for local initiatives, such as EV charging infrastructure (Seoul Metropolitan Government, 2021), and a National Green Growth plan (OECD, n.d.), focusing large investments on green growth technologies. When it comes to Stockholm, the city is to be considered as one of Europe’s most environmentally-friendly cities with ambitious goals of becoming fossil free by 2030 and climate neutral 2040 (Hugosson, 2021). Similarly, in Barcelona the ambition is to become carbon neutral by 2050 and reduce emissions by 45% by 2030 (Marcon, 2019).

In addition to a congestion tax, which is present in all of the studied cities (except Barcelona) to varying degrees, with peak hours generally rendering higher fees (Angloinfo, n.d.; Region Stockholm, 2020; San Francisco County Transportation Authority, 2021; Transportstyrelsen, 2021), Seoul also has a car free-day initiative where drivers who leave their car at home at least one day per week are entitled to a reduction in car tax as well as other price reductions and discounts (Angloinfo, n.d.). A further note related to the city center setting is the introduction of low-emission zones. These will be elaborated on in the first regulations paragraph.

When it comes to the case company, the strive towards a sustainable supply chain is described as even more ambitious than those of the local governments. The goal is to reach zero emissions from home deliveries before 2025 globally, with even earlier timelines on some markets. For this reason, any new solution that is considered for implementation must be environmentally sustainable. However, it was emphasized in the interviews that the shift towards zero emission is a difficult task, with suppliers (of both logistics services and physical vehicles) being too slow in adapting and local regulations constituting two main obstacles. Consolidation of deliveries was also discussed as a way of minimizing environmental impact; less distance travelled per delivery item likely means less emissions per delivery.

Regulations

Table 9: ESTER Analysis - Regulations overview Seoul San Francisco Barcelona Stockholm

Low-emission zones x x x

Superblocks x

Legislation to protect x x x gig-workers

Ride-hailing Harsh Non-existing regulations regulations regulations for the protecting the ride-hailing taxi business market

Since the beginning of 2020, Swedish cities and municipalities are allowed to create low emission zones within the cities that regulate traffic, disallowing diesel cars that do not meet certain emission standards (Urban Access Regulations in Europe, 2019). Barcelona has similar low-emission zones, restricting movement of cars that do not possess an environmental label from DGT, prohibiting entry during daytime. Additionally, the city of Barcelona has introduced so-called Superblocks, severely restricting traffic within multi-blocks areas, prohibiting all cars except for residential and

delivery traffic from entering the superblock, and even permitted cars may only drive at a low speed in the area (BBC, 2020). Interviewee G mentioned similar restrictions of diesel engine vehicles in the city center of Seoul.

Besides environmental regulations, labor law also comes into play in the LMD-market. Gig economy business models have been frequently criticized and subsequently discussed by governmental and legislative bodies. In Spain, legislation to protect gig workers was established in 2020, giving employees the right to demand formal labour contracts and benefits (Carreño & Faus, 2021). South Korea and Sweden have similar conceptual distinctions between workers (arbetstagare) and contractors (uppdragstagare), although their terms differ. In the beginning of 2021, the Swedish transport sector signed a collective agreement with the food delivery company Foodora. According to this agreement, the employees at Foodora will be granted the same rights as the rest of the transport sector regarding minimum wages and compensation for inconvenient working hours, yearly wage increases as well as retirement and insurance policies (Martinsson, 2021). Despite South Korea’s large number of contractors, or non-regular workers, at about 36.4% of the country’s workforce, the ride-hailing market specifically faces harsh regulations in South Korea. The taxi business is carefully protected and has caused Uber to struggle in establishing a presence, along with a court case for ride-hailing company Tada last year (Reuters, 2020). In contrast, the regulations of ride-hailing services like Uber and Lyft are almost non-existent in San Francisco compared to the other markets, as the services are considered to contribute to decreasing unemployment locally (Palgan et al., 2021). The general attitude of San Francisco towards sharing economy organizations is described as a “hands-off approach”, letting the market economy regulate itself, as described by Palgan et al. (2021).

In interview 2, the San Francisco representatives highlighted that changing regulations, which is a frequent occurrence in California, entail not only overseeing the in-house business but ensuring that the crucial partners in the sourcing network live up to the new legal standards in order to retain previous levels of customer experience. Nevertheless, Stockholm was the market where regulations were most thoroughly discussed; it was described as an important obstacle blocking innovative and sustainable delivery solutions. Strong labour and consumer laws were one aspect of this, with another being legislation of technology, like autonomous vehicles for instance, lagging behind the technological development. For drones specifically, the existence of flight restricted areas was mentioned as another limiting factor.

5.2 Solutions The following section discusses eleven LMD-solutions that are relevant in the context of delivery of large goods. Out of these eleven solutions, six are analysed further through the application of Rogers’ diffusion of innovations theory. Finally, three of the solutions are analysed on a more in- depth level through a discussion on how these solutions could be implemented on the Swedish market as well as what the key requirements of such implementations would be.

The table below shows an overview of the solutions’ feasibility for the Swedish market and large goods respectively, as well as which solutions have been selected for further analysis. The color green signifies a high degree of novelty or feasibility respectively, red represents a low degree, and yellow partial novelty and partial or pilot stage feasibility. The two notable columns that guided the selection of which solutions to analyze further were Innovation Novelty and Feasibility for the Case Company on the Swedish Market. For the solutions that were elaborated on in an implementation context, the latter was obviously key; even if e-cargo bikes and pick-up points already exist on the market, they were deemed feasible and these two solutions, novelty was identified in the context of large goods. Automated ground deliveries, drones and underground delivery tunnels were considered novel enough for a discussion to provide value for future research, which is why these were not excluded despite being less feasible. Moreover, the obstacles towards these solutions are deemed likely to change in the foreseeable future, which is another reason why an analysis is motivated.

Table 10: Overview of LMD-solutions Solutions Innovation Feasibility Feasibility Diffusion of Implementation Novelty Case Company Large Goods Innovation discussion Stockholm Analysis Market

Integrated ride- hailing platform

Authority to leave

Consolidation centers

Route planning

Delivery truck parking and lanes

Automated * ✓ ground delivery

Drones ✓

Underground ✓ tunnels

E-cargo bikes ✓ ✓

Pick-up points ✓ ✓

Neighbourhoo ✓ ✓ d delivery *This solution is orange since there are two different concepts in this solution; the autonomous small robots are piloted in Stockholm and considered yellow, while larger autonomous vehicles are less developed and thus red.

Integrated Ride-Hailing Platform Following the rise of gig economy platforms, on-demand services providing transportation have become increasingly popular (Feng et al., 2020; Farrell et al., 2018). Although uber is perhaps the most well-discussed example, the covid-19 pandemic has led to an increase in transportation of goods as well, with food delivery leading this trend (Baker et al, 2020). Ideally, these solutions comprise a low-cost service, provide options for the customer and flexibility for the worker, with a minimized cost of middlemen, matching a need with a service easily accessible with a smartphone (Flanagan, 2018). On the other hand, securing ethical labour conditions for gig workers is considered a key challenge for companies operating with this business model (Manyika et al., 2016).

In terms of the customer perception, providing a coherent experience is associated with large benefits for companies (Gao et al., 2020). Thus, one can conclude that a platform that is integrated in the current omnichannel system would be attractive. Integrating a gig platform to ensure customers’ access to not only home delivery, but installation, is therefore one possible approach to gaining a competitive advantage on the LMD scene. This could be achieved either by developing a solution in-house, ensuring a higher degree of control over the supply chain, or working with a third-party solution that may already have the capabilities required for such a venture. If the second option is chosen, it is essential to confirm coherency with the mother company’s values. This is especially important given the dubious circumstances and consequent frequent law actions and negative media around gig platforms, which can generate dissent and deter companies from collaborating with such service providers (Bacchi & Asher-Schapiro, 2020). As was brought up in the interviews with the representatives from the case company’s Stockholm market, internal guidelines and high requirements on suppliers make up an obstacle blocking this particular solution. If a potential ride-hailing platform provider cannot ensure, for instance, an upper limit for consecutive working hours, the case company cannot go into partnership with that provider.

As mentioned in the literature review of this report, delivery of large goods is often more complex and demanding compared to packages. Even if a platform for shared transportation of goods may work well for smaller items such as food or medical deliveries, there is no guarantee that it holds as well for furniture, as it may require the drivers to own vans or larger trucks to operate efficiently. This is another factor that speaks for retaining a high degree of control over the solution, either by conducting it in-house or ensuring close collaboration with a third party, in order to ascertain that the dimensions of the transported goods are accounted for.

Authority to Leave - Tracking & Digital Signatures Although this is not an entirely new solution, one way of increasing the productivity for LMD is to grant the transport service workers the authority to leave. Essentially, this is a simple solution, meaning that a delivery is left on the doorstep or curbside of a delivery address, which minimizes unnecessary waiting times and doing double trips trying to deliver to a customer who is not

currently at home. In order to make this a more attractive option for the customer, it could be combined with a digital platform supplying a real-time tracking service for following the delivery and a digital signature making sure that an unattended drop-off is approved. This not only gives a demanding customer an overview of and feeling of participation in the process, but could also potentially clear the company of any risk when it comes to holding the responsibility for the goods.

Although this solution may be possible on some markets, in the target market of Stockholm it would not be a viable option due to laws concerning consumer rights, which state that the company from where the delivery originates remains responsible for the goods even when left on the curbside, regardless of if the customers approve of it or not (Swedish consumer purchase act, 1990:932). While it is a relevant solution for smaller items, and even in practice for those items today, interviewee H and I pointed out that more costly deliveries are not included in this offer on the Swedish market due to the risk of theft and consequent liability of the case company. However, in markets with different regulations, it could be a viable solution for large goods in addition to smaller or lower-value items.

Consolidation Centers with Charging Stations This solution consists of using consolidation centers in the outskirts of cities to move packages from large, long-distance trucks to smaller, electrified vehicles to make the LMD into the city center. The concept is often referred to as Urban Consolidation Centers (UCC), that is “a logistic facility that is situated in relatively close proximity to the geographic area that it serves, be that a city centre, an entire town or a specific site, from which consolidated deliveries are carried out within that area” (Velickovic et al., 2017). Previous studies have shown that the usage of UCC increases the load factor on the vehicles and reduces the number of kilometers driven, leading to decreased negative transportation externalities in urban areas (Velickovic et al., 2017). Furthermore, assuming an electrified transportation fleet, the centers could have car chargers to ensure that any idle time, or loading, is used efficiently and proactively to counteract the issue of electric vehicles running out of battery mid-delivery.

The implementation of an UCC is highly dependent on the city context as there are many outside factors that determine the success of such an implementation. These factors include city size, number of inhabitants and population density, geographic area and commercial land use patterns. While the concept appears to have several successful implementation cases, in practice it has failed many times due to low profitability. The main reasons for these failed implementation attempts include shortage of stakeholders, the wrong choice of UCC location and an inadequate urban distribution fleet (Velickovic et al., 2017).

Route Planning with EV Route planning is commonly used within the field of LMD as a means for optimizing resource consumption. The idea is to supply the delivery providers with a smart route planning software that allows the users to plan the delivery processes in an efficient way through a system that is integrated with both the providers and the customers. This includes planning the routes taking limiting factors such as vehicle capacities and work time into account (Dahl Petersen, 2017). Route planning systems often start out by creating an initial plan where tasks or parcels are assigned to the delivery vehicles keeping the limiting factors in mind. The initial plan is then evaluated by calculating the cost as the total sum of drive time minutes and the cost of starting the vehicles (Dahl Petersen, 2017). The next step is to allow the software to run several improvement steps where billions of possible combinations are being investigated and evaluated. This improvement step will often result in a reduction of the total drive time for the delivery fleet by 25-30% (Dahl Petersen, 2017). Without such a system, the providers must rely on phone calls or text messages to have insight into where the drivers are and how the deliveries should be optimized. Digitalizing this process gives the provider control over the process as updates can be done automatically, contributing to an improved customer experience (Workwave, 2021). This solution could also be combined with the usage of electrical vehicles, thus achieving an even more sustainable LMD- service. One example of a successful implementation of such a system is the case of Budbee, who has integrated route planning in their deliveries with the objectives of mapping traffic flows and parking availability in order to improve the efficiency of the deliveries (Budbee, 2021). Budbee has also shown that the usage of dynamic rerouting, that is calculating a new route mid-delivery as the conditions change, is not very effective when handling large volumes of deliveries as the improvements of the rerouting is marginal and have a negative impact on the majority of the customers’ experience as the expected delivery time changes (Budbee, 2021).

Dynamic routing also opens up the possibility to incorporate returns in the calculated routes. Return is an important feature within LMD, as customers expect fast and easy ways of booking a return of their goods. With dynamic routing, the delivery providers will be able to adapt a planned route when retrieving information of a return, and thus increase the efficiency of the route planning (Hower & Staples, 2019).

Despite its efficiency, the use of route planning requires a service provider to have a high degree of digital know-how and technical capabilities. As was mentioned in interview 6, the case company utilizes a variety of different such actors on the Swedish market, with some having relevant capabilities and some using almost fully manual systems.

Delivery Truck Parking and Lanes One solution related to the LMD-services consists of changing traffic regulations in a way that is beneficial for these delivery vehicles, by for example introducing parking spaces or lanes that are especially assigned to such vehicles. This would benefit the LMD-services as the city center would

become more easily accessible for deliveries, eliminating the obstacles of performing deliveries in narrow and confined spaces. One example of such a solution can be found in Barcelona, where the aforementioned areaDUM project is used with the intention to develop a parking management service that is beneficial for both the freight delivery vehicle drivers and the city at large. The system consists of parking spaces that can only be used by freight vehicles at certain times in the day (between 8am and 8pm) and that allow for a maximum parking time of 30 minutes. This solution could be combined with the usage of truck-only lanes (TOLs) in a similar way to what has been seen in Barcelona, with the superblocks restricting all traffic apart from delivery vehicles from central parts of the city. In a study on the effects of TOLs, it was concluded that appropriate demand conditions are needed to warrant their introduction, as too few trucks using the TOLs will result in a loss in operational efficiency, while too many trucks using the TOLs will lead to delays and thus, the benefits of using TOLs are lost (Rudra & Roodra, 2014). Therefore, the solution requires detailed planning of implementation in order to achieve an effective result. While the solution of dedicated parking spaces and delivery lanes would be beneficial for IKEA’s LMD- operations, it would probably have to be performed as a city-level initiative as it would include all of the city center of Stockholm.

Autonomous Ground Deliveries This section will discuss different solutions that fall under the category of autonomous ground delivery. Firstly, using small autonomous robots for delivery of parcels is currently a functional delivery solution that is used in both Seoul and several municipalities in California. Although the cost of hardware and software of such solutions today is high (Palmer, 2019), research suggests that delivery robots could reduce total costs if utilized to maximize their potential (Figliozzi & Jennings, 2019). Moreover, delivery robots have been shown to significantly reduce both emissions and energy consumption (Figliozzi & Jennings, 2020). The idea utilizes dispersion, moving from consolidation to many end points. The most commonly suggested approach to maximizing the efficiency of the robots is to transport them to a service area using a larger van and then rolling them out for the individual deliveries (Figliozzi & Jennings., 2020; Figliozzi & Jennings et al., 2019). Given their relatively low speed, the most significant gains are likely achieved when operated in densely populated areas (Figliozzi & Jennings, 2019), as seen with the case of Seoul.

Apart from small autonomous robots, self-driving car-sized vehicles conducting deliveries is a possible solution. Another option is having autonomous vans as mobile pick-up locations, which is something that has been piloted by the Korea post agency (Yonhap, 2020). These differ in terms of the approach that is taken to improve delivery efficiency. Since it works as a pick-up point it leverages consolidation of deliveries, relying on the customer to conduct the final part of the delivery distance. However, the mobility of the vehicle could perhaps mitigate the perceived inconvenience for the customer of having to travel to a certain location to pick up a parcel - such a solution could instead travel to the customer.

Although there are legal barriers, both small delivery robots operating on sidewalks and larger (car-sized) autonomous vehicles have been shown to have potential to reduce delivery costs (Figliozzi & Jennings, 2019; Figliozzi & Jennings, 2020). The critical question with both is their viability for large goods. While the curbside robots that are currently in operation are relatively constrained regarding size and weight capacity, with weight capacities ranging from around 20 to 100 lbs (9 to 45 kg) (Figliozzi & Jennings, 2020). Regarding car-sized deliveries, the major issue is the difficulties associated with unloading larger goods from the truck, as well as the limited range, meaning that a larger battery may have to be used, sacrificing space for goods (Figliozzi & Jennings, 2019).

Table 11: Autonomous ground deliveries - Summary of Rogers’ analysis Relative Compatibility Complexity Trialability Observability advantages

• Safer and • Meets customer • Low customer • High customer • High exposure cleaner delivery demands of fast complexity trialability - low towards potential deliveries and threshold customers • Lower costs for high • High company gas and drivers transparency complexity due • Several actors • Uncertain compared to to technically for potential technology and traditional LMD- • Collaborate advanced collaboration on undeveloped solutions with existing solution the Stockholm legal market actors to market, but frameworks pilot solution eventually large might cause investments will first-mover be required disadvantages

Relative Advantages The usage of autonomous vehicles enables a safer, cleaner and more efficient LMD. As an opposite to traditional delivery methods, autonomous vehicles are not limited by human factors and can therefore work for longer hours and with fewer accidents. Thus, comparing this method to other delivery methods, where the costs of drivers and gas usually make up up to 70% of the total cost, the efficiency of the LMD can be increased remarkably with the usage of autonomous vehicles (Udelv, 2018).

From a customer perspective, the usage of autonomous ground deliveries offers advantages in terms of both convenience and easy access. With autonomous ground deliveries, the customers are able to track their delivery in real-time, which contributes to the satisfaction of the customer experience. While this is true for many other delivery alternatives as well, autonomous ground vehicles are usually able to achieve a more precise tracking of the delivery resulting in a shorter

delivery window for the customers, namely 15 minutes, to be compared with that of traditional deliveries where a 2-3 hours delivery window is standard (Udelv, 2018). Autonomous ground deliveries also offer easy access for the customers, as the goods can be delivered directly to the residence of the customer and easily retrieved (Udelv, 2018).

Compatibility As previously discussed, the city center customers expect fast and comfortable same-day deliveries. This could be achieved through the usage of autonomous ground deliveries, especially in dense areas where the method has proven to be particularly effective. Autonomous ground deliveries also allow for transparency of delivery time towards the customers, a factor that has been proven to have a large impact of the overall customer experience on the Stockholm market, as 80% of the customers state that it is of great importance to get a precise delivery date in the purchase stage (E-barometern, 2020. p. 44). However, there are also some worries amongst potential customers regarding the quality and safety of autonomous deliveries (see the compatibility chapter on drones) that makes the solution less compatible with the customers’ existing values and habits.

The solution may be compatible with the values of the case company as it can contribute to reduced costs and increased comfort for the customers. Seeing how there already exist actors on the Stockholm market that have begun to launch autonomous ground deliveries, with one example being the collaboration between Tele2 and Foodora, the opportunities to collaborate with suitable actors makes this solution compatible for the case company. As previously mentioned, Sweden is a market with a highly innovative business climate, and as a result there are several actors that can be considered suitable collaboration partners if IKEA was to implement autonomous ground delivery. In order to make this reality, the case company may have to work proactively with partners to ensure compatibility with their supply network, size of goods and company values.

Complexity The complexity of autonomous ground deliveries for the customers is considered low, as the level of customer involvement in these types of deliveries is limited. However, this is not necessarily true for the delivery of large goods, that might require more customer engagement in connection to the delivery, which would render the complexity higher. When considering the supplier’s perspective, autonomous ground delivery is a highly complex innovation as the technology behind the solution is rather advanced. However, in the case of IKEA the challenge would most probably be tackled in collaboration with a third-party actor, which lowers the need for in-house technical competency and instead shifts the responsibility of selecting appropriate partners to the sourcing team.

Trialability There would likely be no large investments required by consumers in order to test out an autonomous ground delivery. Today, the customers can choose the delivery option with each delivery, and if this was an option like any other, they would be able to try a new option without large commitments and easily go back to the former options if desired. When it comes to the company perspective, the alternative of launching autonomous ground deliveries include several successful examples on the Stockholm market where the projects have been piloted in a small scale, including the collaboration between Tele2 and Foodora. According to Simoudis, there is however a need for constant investments in autonomous pilots in order to achieve reliability of the LMD-technology. In the test phase, there is a need to test broadly and iterate fast in order to identify a scalable alternative. This requires a large amount of data in order to train the AI-based systems that the autonomous robots rely upon (Simoudis, 2019). Thus, a successful small-scale launch of autonomous ground deliveries might be hard to reach as a large amount of resources is needed in order to achieve an effective LMD.

Observability The observability of this solution is considered to be high, as the autonomous delivery robots would be operating on public streets with a high exposure towards potential users. This factor could be highlighted further by designing the autonomous delivery robots in a way that makes it easy to identify them as IKEA-robots, namely by putting the IKEA logo on them. The introduction of autonomous IKEA-robots would probably yield a large amount of attention, partly because the case company would be one of the first actors on the Stockholm market to introduce autonomous ground deliveries. However, there is slight uncertainty when it comes to autonomous ground deliveries for larger goods, as there are not as many pilots for this segment. Thus, implementing this solution can be considered as investing in a rather uncertain technology, which is a common first-mover disadvantage. Furthermore, the legal development for autonomous deliveries in Sweden is still at an early stage, and can thus be considered another first-mover disadvantage.

Drones Drones, or unmanned aerial vehicles (UAV), are flying vehicles that are operated remotely or fly autonomously, without carrying a human operator (Hassanalian & Abdelkefi, 2017). The commercial use of drones for delivery has become increasingly common in the times of the covid- 19 pandemic, as contactless and efficient home delivery has been increasingly demanded by customers. (Choe et al., 2021) Drone based delivery solutions could potentially relieve delivery related congestion and lead to faster and more cost-efficient deliveries (Chiang et al., 2019). Moreover, given that they are electric and light, lower emission rates for deliveries could be achieved (Stolaroff et al., 2018). Multiple studies have examined how the negative effects associated with a relatively limited range and sensitivity to adverse weather can be mitigated. One such proposal is for drones to hitch rides on public transportation vehicles, with an adaptive algorithm taking the existing system’s schedules and routes fully into account (Huang et al., 2019).

Another option is to have delivery trucks from which the drones can start and land to charge after a completed delivery (Chang & Lee, 2018).

Similar to delivery robots, concerns regarding capacity constraints of the individual drones are relevant to discuss. Although most delivery drones are designed to hold one parcel, with a limit of about 2 to 10 pounds (1 to 5 kg) (Amazon Prime Air, 2021; DHL, 2021; Hader & Baur, 2020), there are examples of large drones, such as the drone taxi that was piloted in Seoul with a capacity of up to 331 lbs (150 kg) (Bunyan, 2020), as well as cargo drones with a capacity of 225 kg (nearly 500 lbs) (Hader & Baur, 2020). One of the main obstacles to a full-scale implementation of drones is current and future laws restricting their usage (Kellermann et al., 2020).

Since the commercial applications comprise a relatively new market, there is an obvious risk associated with investing in this before the legal framework is fully developed and supportive of UAVs. Additionally, drones capable of carrying heavy loads are likely to be vastly more expensive than parcel capacity drones. Even if the prices drop as the innovation becomes more developed and well-used, commercial large goods delivery in cities seems far away from today’s reality, but might be interesting to discuss in a parcel context as well as for future research.

Table 12: Drones - Summary of Rogers’ analysis Relative Compatibility Complexity Trialability Observability advantages

• Reduced • Compatible • Low customer • No large • Attract emissions and with customers’ complexity commitments customer energy demand for required from attention due to consumption seamless • High company the customers novel technology complexity - • Lower • Customer requires • IKEA pilot • First-mover personnel costs uncertainty extensive may be valuable advantages such regarding the resources for as brand loyalty • Decreased lead safety pilot and securing of times strategic • Collaborate • Third party resources • Increased with TSP to pilot solution efficiency of solution probable return of deliveries • Compatible with IKEA’s zero emission goals

Relative Advantages The main advantages of using drones for the LMD is the ability to reduce emissions and energy consumption associated with this process. Furthermore, using drones can also help lower cost for personnel as parts of the delivery process can be performed unmanned. However, the usage of drones should initially be viewed as an investment rather than a savings for the companies. In order to achieve cost benefits, the drone technology needs to be improved to fully autonomous solutions that can be implemented on a large scale. Initially, the usage of drones will generate benefits mainly through decreasing the lead time of delivery as the drones are not affected by traffic, stop signs or other road challenges that other types of delivery methods face. Thus, the speed of delivery can be increased remarkably. Furthermore, drones can help reduce return issues as they allow for reduced return time cycles as well as offering to pick up the return at the residence of the customers, as an alternative to the customers having to go to the post office in order to return a parcel (Bray Solutions, 2021).

Compatibility The solution can be viewed as compatible with existing values and habits of the customers as it would enable a seamless delivery experience, requiring little or no interaction from the customer. Furthermore, the usage of drones is well-aligned with customers’ expectations of fast deliveries, as the delivery time would be shorter in comparison to other solutions having to take the city center traffic into consideration. However, there are also some studies revealing an uncertainty among

customers when it comes to drone deliveries. According to a survey conducted by Clutch, 25% of the customers stated that they would be less likely to order a package if they knew that it was being delivered by a drone. This is due to concerns around the quality of a drone delivery, with 20% of online shoppers stating that they are worried about their packages getting damaged during delivery and 19% of online shoppers stating that they are worried about the drone getting stolen or hacked (Panko, 2020).

Since the case company’s deliveries are generally conducted by TSPs, it is likely that that would be the case for drone deliveries as well. Thus, a collaboration would have to be set up with a TSP supplying a functioning drone network. Of course, this third party would have to ensure that their employees are treated in accordance with the IKEA policies for suppliers, that the materials are produced fairly and that a high standard of ethics and safety is achieved. Moreover, even if the solution appears to be far away in terms of larger items, it could fit well into the zero-emission delivery goal of the case company for smaller items.

Complexity The degree of complexity is rather different depending on the perspective of the analysis. For a customer, most drone delivery models would not mean any increase in complexity; it would likely work like any home delivery, perhaps with the added step of a notification telling them to not stand directly under the drop-off. However, from a company perspective, having the infrastructure, the network model, the software and the hardware required to perform a successful delivery implies several layers of difficulties. With that said, this complexity would likely not be tackled by an in- house solution but rather a TSP as a 3rd party solution. Although understanding and joint development should be conducted for an optimal function, this takes away some of the pressure from the provider of the goods. Instead, the sourcing process in selecting the appropriate partner is of importance.

Trialability Similar to the solution of autonomous delivery vehicles, there are not large commitments required from the customer perspective in order to try out drone delivery. The solution would simply be listed as one of the delivery options available for the customers when making their purchase and then the order would be delivered all the way to their doorstep. However, as mentioned in the compatibility section, there is some customer uncertainty related to drone delivery, and thus there might be some issues with getting the customers to try the solution, despite the fact that it could result in several benefits from a customer experience point of view. A plausible starting point for drone delivery could include launching a pilot, only covering specific areas of the Stockholm city center. That way, the quality and profitability of the delivery solution could be evaluated before a large investment is made. With time, the solution could be scaled up to include all of Stockholm if found profitable.

Observability An innovative and futuristic solution such as this one is bound to attract attention, at least in the state that the market is today. If desired, there could be measures taken to further enhance the observability, such as having the well-known brand colors of the case company on the drones or the packages, for instance. In terms of IKEA reaping the benefits of drone delivery, there could be first-mover advantages related to introducing drone delivery, such as brand loyalty and securing of strategic resources. The latter could be the case if IKEA is able to secure contracts with external partners that help secure the usage of drone delivery.

Underground Tunnel Deliveries The solution of underground tunnel deliveries consists of building an underground tunnel network that can be used in order to transport large goods. The solution was first launched by The Boring Company, an enterprise that was founded by Elon Musk in 2016 that works specifically with infrastructure and tunnel constructing services. The Boring Company works to create safe, fast-to- dig and low-cost transportation and freight tunnels with the mission to solve the problem of traffic congestion and enable rapid point-to-point transportation in a city center setting. To give a more in-depth description of the tunnel networks, these are typically built with a minimum depth of 30 feet and placed beneath most utilities. While the building process is often costly, time-consuming, and noisy, the long-term effects of the underground delivery tunnels have a positive environmental impact (The Boring Company, 2021).

There are several possible variations of this solution that could become relevant for the case of LMD. Firstly, the underground tunnels could be constructed in a similar way to the subway, with carts that allow the customers to transport their goods from the city center store to the outskirts of the city. In this case, the tunnel system could be directly connected to the city center store and in that way making it easy for the customer to transport their goods out of the city center. Another alternative would be to have the customer collect their goods at end stations of the tunnel system, thus making the IKEA personnel responsible for the majority of the LMD. This could potentially lead to an LMD-solution that is performed unmanned, with the exception of the driver, which might increase the efficiency of the solution.

Moving away from the variations that are similar to the subway system, it is also possible that the solution could be implemented with tunnels for delivery vehicles. One can imagine combining the tunnels with autonomous delivery vehicles, which would likely result in highly effective and precise deliveries. The autonomous delivery could either be used during all of the delivery process or combined with the usage of normal delivery vehicles. In the latter case, the solution could be designed in a similar way as what is discussed in the section on consolidation centers, with the autonomous vehicles transporting the goods from the city center to a station in the outskirts of the city where normal delivery vehicles would take over the delivery. In the city-center setting, it could

be possible for the autonomous delivery vehicles to deliver the large goods all the way to the customers' doorsteps.

Table 13: Underground tunnel deliveries - Summary of Rogers’ analysis Relative Compatibility Complexity Trialability Observability advantages

• Economically • Compatible • Low customer • High • High customer viable way of with customer complexity due trialability for observability achieving high- needs of high- to similarities the customers through word-of- throughput quality and fast with existing mouth marketing transportation solutions collection points • Small scale pilots not • Uncertain • High-speed • The solution’s • Highly available due to technology and transportation compatibility complex for the large high investment with IKEA case company: investments and costs act as first- • Unlimited values is subject extensive collaboration mover transportation for future resources and between actors disadvantages capacity research regional level required actions required

Relative Advantages One of the biggest issues with existing surface road systems is that availability of surface land is a limited resource in densely populated cities. Existing solutions to handle this issue mainly consists of incorporating 3D model-like highways with elevated sections and cloverleaf interchanges. However, such solutions are expensive and disruptive to build, making this an ineffective way of dealing with the problem. An underground tunnel system is an economically viable way of achieving high-throughput transportation without creating any conflicts with currently operating transport systems. The underground tunnel system also allows for hyperloop networks that unblock high-speed regional transportation where each individual point-to-point transportation can be performed with high efficiency. Furthermore, the underground tunnels enable unlimited transportation capacity, as there is no limit to how many layers of tunnels that can be built. This results in a flexibility that contrasts with surface systems where adding a lane to a road is often difficult. Finally, the underground delivery system is to be considered a weatherproof operation, as the system is not affected by weather conditions such as rain, snow, wind or surface temperature (The Boring Company, 2021).

Compatibility As the usage of underground tunnels would offer the customers a high-quality and fast delivery, the solution is considered to be well aligned with the customers’ existing values and needs. With the opportunity to create so-called loops, that allow for the development of underground public

transportation systems in which passengers are transported directly to their final destination without any stops along the way, the customer compatibility is high as the service can be tailored according to individual needs (The Boring Company, 2021). From the Stockholm analysis, it is also clear that the customers have high expectations when it comes to the sustainability aspect of future delivery options, with 80% of the customers stating that they are willing to wait 1-2 days extra for their orders if this ensures that the delivery is performed in a sustainable way (E- barometern, 2020. p. 41). If the solution were to work similarly to today’s subway system, the location of the stations would be rather crucial for the compatibility of the solution as the stations would have to be located in places with high accessibility for the customers. The underground delivery tunnels are a very energy intensive solution as they require continual maintenance, periodic major refurbishments, and upgrades (Mutlay, 2018). Furthermore, the ventilations, lightning and camera systems require energy 24 hours a day (The Boring Company, 2021). Thus, the solution might not be compatible with the sustainability values of the case company. However, this is a solution that will not become relevant in the near future and therefore there is a possibility of the solution being developed into a more sustainable alternative before it becomes relevant for IKEA. Thus, how well aligned the solution is with the values of IKEA is a subject for future discussions.

Complexity The solution is not considered particularly complex for the potential customers as it would be similar to the subway system, a means of transport that most city center habitants are used to. If the tunnel system was directly connected to the city center store, no large effort would be required from the customer in order to pick up the large goods from the tunnel system. For the case company however, the implementation process of this solution is considered highly complex as it would require a lot of resources in order to pilot this solution. Furthermore, this is not a solution that could be implemented by IKEA alone but rather one that would require investments and support from a regional level. However, one future scenario could be to build upon the existing subway network on the implementation market, which would reduce the complexity of the solution.

Trialability One factor influencing the trialability of the solution is the fact that no large commitment is required from the customers in order to try out the solution. However, the trialability of the solution might vary depending on how it is implemented. For example, if the solution includes fully automated vehicles, potential customers might be more hesitant to try out the solution and the trialability of the solution can be considered low. On the other hand, if the solution is incorporated into the existing subway system, potential customers might be more willing to use the innovation and thus the trialability of the solution would become higher.

For the company, the possibility of trying out this solution on a small scale is rather limited as large up-front investments are required in order to launch the tunnel systems. Existing methods for

implementing underground tunnel systems are rather expensive, ranging from $10 million to $1 billion per mile (The Boring Company, 2021). Thus, the solution might not be feasible for IKEA to test out alone but might require IKEA to collaborate with several other actors in order to be able to build the tunnel system. As mentioned above, there might be ways to implement the solution that take advantage of existing systems, such as the subway system, and in that way improving the trialability of the solution.

Observability As in the case of drone delivery, the solution with underground tunnel delivery is deemed to attract a lot of attention as it can be considered a highly innovative solution. The observability of the innovation can be increased further by clearly marking out the stations with the IKEA logo. A solution of this magnitude is also likely to create a word-of-mouth marketing, where customers who have tried the solution and are happy with the experience spread the word to people in their surroundings, contributing to a chain effect resulting in a high spread of the innovation. As this is a solution that probably would require collaboration between several different actors in order to become profitable, there are no first-mover advantages in terms of switching costs or control of strategic resources related to this solution. However, the solution would probably contribute to the IKEA brand as an innovative actor as it would be viewed as a highly technology-innovative solution. Regarding the disadvantages for first movers, the solution could be viewed as an uncertain technology as large investments would be required in order to make it work and given the novelty of the solution, it is hard to foresee how it would be received by potential customers. However, the solution would probably be carried out in collaboration with other actors and thus the investments and risks would be shared among these. Furthermore, if the tunnel system was designed in such a way that several actors could utilize it as a means for LMD, the chances of the solution establishing on the market would be higher as the solution would be more valuable for the customers.

E-cargo Bikes E-cargo bikes can be used as a LMD-solution since the bikes are provided both with an engine and cargo boxes that allow the bikes to carry and deliver larger items. Among the advantages of using e-cargo bikes are time and resource savings due to the vehicles not needing to find parking spaces, environmental advantages due to less emissions and increased delivery reliability as e-cargo bikes can avoid congested roads and use bike lanes to meet delivery deadlines. When it comes to the disadvantages of this delivery method, these are mainly limitations caused by road regulations and incomplete bicycle infrastructures (Sheth et al., 2019). Moreover, there are physical limitations in terms of weight and size of larger goods, as well as range limitations, even if an electrified bike would have greater capacity than a regular bike (Edge et al., 2020). Moreover, this solution requires a fair amount of work from the customer. For some, even if the bike is electric, it may pose too much of a physical challenge to transport any large items in such a way. During recent years however, the usage of e-cargo bikes as a means for transport has increased rapidly due to

changes in attitudes towards the environment and changes in the road space (Sutton, 2020). With more and more cities around the world formulating goals of reducing air pollution and reserving spaces on the streets for cyclists and pedestrians, new regulations are making it harder for large vehicles to access the city centers. Thus, e-cargo bikes are becoming a permanent feature of the LMD-landscape all over the globe (Greehalgh, 2020).

Table 14: E-cargo bikes - Summary of Rogers’ analysis Relative Compatibility Complexity Trialability Observability advantages

• High level of • Alignment • Low • The customer • High customer control and with customer complexity from trialability varies observability if convenience for values of a customer’s depending on bicycle stations customers sustainable LMD perspective what revenue placed in city and customer model is centers • Increases the mobility habits • Requires implemented availability for platform and/or • Several the many people • Highly third-party • High company successful compatible with supplier trialability implementations • Electrified IKEA’s through on the bikes - sustainability • Potential collaboration Stockholm sustainable LMD agenda problems of with third party market that can bicycle inspire clustering and return of bicycles

Relative Advantages E-cargo bikes offer advantages as the customers are able to perform the LMD themselves. This indicates a high level of control for the customers who can perform the delivery at their own convenience. If the stations for the e-cargo bikes are placed in connection with city center stores, the accessibility should be high for all city customers, thus supporting IKEA’s aim to develop solutions that benefit the many people. With the usage of electrified cargo bikes, the solution also offers advantages from an environmental perspective as it contributes to decreased pollution and congestion.

Compatibility From the Stockholm analysis, it is evident that the environmental aspects of LMD is a highly valued factor for the customers. Thus, one can draw the conclusion that the e-cargo bikes are well- aligned with the customers’ value and thus the compatibility of the solution is high. Looking at the transport alternatives on the Stockholm market, one can see that the usage of e-cargo bikes and scooters is in no way a new concept for the customers, but a technology that they are rather used

to with companies such as Voi, Lime and Bzzt being established actors on the mobility market (Björkman, 2018). Thus, the solution would be able to trade on the habits of the customers of Stockholm and probably fit well into the customers’ behavioral patterns. Furthermore, the stations for the bicycles need to be placed in proximity to the city-center stores in order to make it easy for the customers to place their purchases on to the bicycles and transport the goods to their home.

As previously mentioned, the solution would be well-aligned with IKEAs aim to support the many people. Furthermore, as the usage of cargo bikes can be considered a far more environmentally- friendly solution than solutions including combustion engines, the solution also aligns with IKEAs sustainability goals.

Complexity In essence, the solution should be easy to understand and use for the customers as the main instrument of the solution would be a bicycle. However, in order to implement the solution in an efficient way, some type of mobile platform solution would be required and thus it is important that such a platform is developed with a highly user-friendly interface. For a supplier, the complexity of the solution can be considered as slightly higher. This is because the solution would require the company to make large investments in bicycles, bicycle racks as well as the platform. Furthermore, the company would be faced with the problem of clustering and return of the bicycles, as the customers lack incentives to return the bicycles to the city center stores after transporting their goods home. This makes the alternative somewhat complex from a company perspective as it requires a solution to avoid clustering problems.

Trialability The customer trialability of e-cargo bikes is much dependent upon how the revenue model of such a solution is developed. When it comes to the e-cargo bikes solution, there are several different revenue models that could be implemented. Firstly, e-cargo bikes could be implemented with a per-trip revenue model where the price is based on either the time or distance for which the bike is used. Another possible revenue model could be introducing a membership with a monthly fee that gives the users unlimited access to the e-cargo bikes. Comparing the two alternatives, it is clear that the former would result in a higher trialability for the customers as trying out the innovation would not require any long-term commitment for the customer.

As for the case company, the trialability of the solution is limited if the bikes are handled in-house, as a rather large initial investment of bicycles and parking spaces would be required in order to get the solution rolling. However, partnering up with a third party would significantly mitigate this risk. Certainly, an option would be to launch a pilot at a single city center store in order to be able to try out the solution at a smaller scale before making a large investment.

Observability

The observability of the solution is considered to be rather high. This is especially true as the stations for gathering the e-cargo bikes can be placed on central locations in the city, where a large number of people pass by naturally on a daily basis. If the bikes are clearly marked with the IKEA- logo, they are likely to attract even more attention from potential users and thus the chance of the innovation diffusing is even larger. Similarly, the observability for the company is high, as there are many examples of companies successfully implementing e-cargo bikes. Thus, a lot of the uncertainty connected to implementing a new solution can be mitigated by looking at how similar solutions have been introduced on the market. In that way, one can consider the placement of collection points for other e-cargo bikes actors in Stockholm in order to understand when and how the transportation flows take place.

Pick-Up Points Pick-up points will mainly be focused on so-called parcel lockers, locations with automated lockers to which goods are delivered and left for the customer to pick up at their own convenience. They are found on most markets and generally located in areas where customer density is high, such as post offices or commercial establishments (Van Duin et al., 2020). Studies have concluded that this method of consolidating deliveries has the potential to reduce both cost and emissions (Jiang et al, 2019). It is reasonable to assume that these effects are especially significant in cities where delivery providers are operating on suboptimal efficiency due to factors such as congestion and difficulties with parking.

The success of this solution is reliant on the customer’s willingness to take responsibility for the actual LMD. It is based on a do-it-yourself concept where a customer must transport the package from the pick-up location to their home instead of getting the delivery directly to their home. When it comes to the case of IKEA, there is potential to have pick-up lockers in connection with the stores as they generally own the property where stores are located. However, given that the stores are often located outside of the most densely populated city areas, the circumstances around the new concept of smaller city stores may have to be examined.

Table 15: Pick-up points - Summary of Rogers’ analysis Relative Compatibility Complexity Trialability Observability advantages

• Time and cost • Location is • Low • High customer • Strategic efficiency for crucial for complexity from trialability since positioning of both customers customer a customer no large the lockers key and the case compatibility as perspective commitments are to achieve high company well as route required in order customer optimization for • Challenges for to try out the observability • High flexibility the case the case solution for the both the company company include • Less innovative customers and finding • High solution could the case • The solution appropriate trialability for indicate both company must be locations for the the case advantages and compatible with lockers and company since disadvantages existing finding lockers the solution can for the case technologies of appropriate be implemented company such as size on a small scale smartphones before a full commitment is made

Relative Advantages From both a customer and company standpoint, time and cost efficiency are considered relative advantages for this solution. This solution offers a high flexibility as it allows the customer to pick up their delivery in their own time and at their own convenience, rather than having to adapt their behavior by, for example, staying home all night waiting for a package to be delivered within a 3- hour window. This is especially true since most of the pick-up points in central Stockholm have extensive opening hours, meaning that the customers can access their deliveries at almost any time in the day. From a company perspective, having goods available for pick-up at a chosen time reduces the risk of superfluous delivery rounds, as all packages will be delivered to the same address at the pick-up point. Thus, the LMD can be made more efficient both from a time and cost perspective. The company can also benefit from the extensive opening hours of the pick-up point, as it increases the customer accessibility and therefore also the customer satisfaction.

Compatibility In order to achieve customer compatibility, parcel lockers should be located in places that are “natural stops” for the customers, making sure that the trip needed for pick-up is not seen as inconvenient. Furthermore, the parcel lockers must also be compatible with existing technologies such as smart phones and smart watches, in order to ensure a smooth and friction free customer experience. In other words, the customers will expect to be able to use their everyday technologies in order to pick up their parcels from the pick-up points, for example by receiving a code to their

smartphone that can be used in order to unlock the parcel lockers. For the company, it is essential that the lockers are either a part of an in-house supply network or a part of the contract with a TSP. Additionally, the locations of the lockers are crucial not only to attract customers but to ensure a maximized benefit that comes with optimized routes and efficient consolidation.

Complexity In essence, this solution is simple for the customer. Although there are a few examples of lockers where registration and personal authorization is needed, the concept of picking up packages is not difficult to understand or utilize. The same ease of understanding is true for the company perspective. Using the lockers is more challenging, mainly because of two aspects; ensuring an appropriate location, perhaps in collaboration with the relevant service provider, and, since the case company deals with large goods, ascertaining that the lockers are of an appropriate size for the packages.

Trialability The solution does not require large commitments from the customer or the company. Introducing the lockers in a few, or even a single location, can ascertain the feasibility of the solution on the market before larger investments are made. This process may be more complicated if it depends on a TSP supplying the lockers, since they may require a certain number of locations or packages for reaching an agreement about collaboration. This is especially true if the lockers are intended for items larger than the average parcel locker. For instance, custom made flat-pack shapes could be beneficial for the smaller segment of larger goods.

Observability If the lockers are placed where customer flow is high, there may be literal observability in that customers can see the lockers and their utility to others while passing by. The critical point on this aspect is to make sure that the customer does not feel a burden of being forced to make a trip solely to handle the last delivery stretch themselves. Thus, a clear marketing of the solution as convenient and catering to the customer preference is key. The fact that this is not an incredibly innovative solution may be both an advantage and a disadvantage for the case company. On one hand, the risks are rather low given the number of examples, however, it also means a less unexploited market to enter.

Neighbourhood Delivery One solution that falls into the category of neighbourhood delivery consists of merging all deliveries going to a specific area into one delivery to a customer in that neighbourhood. The customer receiving the delivery would then be responsible for handing out the remaining packages to his or her neighbours. This could be done by using an integrated platform where neighbours could connect and receive information relevant to the hand-out of the deliveries. For the customer receiving the entire order, the incentive would be the opportunity to get the delivery for free, in

return for agreeing to hand out all of the deliveries. This could be a beneficial solution as it offers free delivery, and from IKEAs perspective, the solution would result in a smoother LMD-operation as the delivery would only have to be done to one household, as opposed to handing out all orders in the entire neighbourhood. However, the solution relies on the fact that customers would be willing to trust their neighbours with their deliveries, which might not always be the case. Thus, the solution might require some legal frameworks in order to assure that the deliveries are being made in a safe and sustainable way.

Another version of the neighbourhood delivery could utilize the concept of dynamic pricing. Dynamic pricing, in its general form, is a pricing strategy where the price of a product or service changes based on current market demands. In the case of LMD, this could mean that the price of the delivery services varies depending on the load factor of the delivery vehicles. For example, if a delivery vehicle is to make a delivery to a specific neighbourhood in two days but still have room for a couple of more items, the delivery price in this area can be dynamically lowered during the next two days. This would increase the chances of more orders being made to this area, thus increasing the efficiency of the delivery. As a consequence, a win-win situation for the customers and the company would be created as the customers are offered a lower delivery fee while the company can avoid making deliveries where the vehicle’s capacity is not fully used. Given that the case company collaborates with third party TSPs, there must be a system integration between where the price is retrieved and displayed to the customer and the system accounting for the delivery trucks’ load factor.

Table 16: Neighbourhood delivery - Summary of Rogers’ analysis Relative Compatibility Complexity Trialability Observability advantages

• Higher • Uncertainty • Low • High •Word-of-mouth flexibility and regarding the complexity from trialability for marketing lower delivery customers’ a customer the customers crucial for high fee for customers willingness to perspective observability trust their • High • Increased load neighbours • Requires the trialability for • Dynamic factor for case company to the case pricing strategy IKEA’s • Blockchain provide a company since would result in deliveries technology or platform the solution can high resulting in cost brand be implemented observability and time savings recognition may on a small scale be used to before a full • First-mover establish trust commitment is advantages and made network effects available.

Relative Advantages Both versions of the neighbourhood delivery solution would imply advantages for both IKEA and the customers, as they would result in a smoother LMD-process. In the first mentioned case, IKEA would receive benefits in form of both cost and time savings as they would only have to make the delivery to a single household, as opposed to the entire neighbourhood. This would ease the delivery process considerably, as the delivery personnel would be able to achieve a more efficient LMD. From a customer perspective, the main benefits would be receiving a lower delivery fee as a result of using the neighbourhood delivery. The solution would also result in a higher flexibility for the customers as they are no longer required to stay home and retrieve their delivery at a specific time, but rather have the freedom to pick up the delivery at their neighbours at a time that fits their schedule. However, this advantage does not apply for the customer receiving the delivery to their home as they would have to be home in order for the delivery to be successful.

Moving on to the concept of dynamic pricing, this solution would result in relative advantages for IKEA as it would increase the load factor of the LMDs, and thus increase IKEAs overall efficiency. This factor would likely increase with the usage of dynamic pricing as the strategy can be used to optimize the load factor of LMDs. This would also be beneficial for the customers as they would be able to achieve a lower delivery price by booking their delivery on these types of delivery slots. This would be especially valuable for IKEA as part of their stated mission is to offer their customers furniture in an affordable and accessible manner, as mentioned in several of the interviews.

Compatibility One of the cornerstones of this solution is the assumption that the customer will be willing to trust their neighbours with the responsibility of their delivery goods. Looking at the habits of the population of Stockholm city, this might not always be the case since many people are living in apartment buildings with little or no relation to their neighbours. According to a survey made by Postkodslotteriet, over 70% of all people living in apartments claim that they do not know their neighbours (Svenska Postkodlotteriet, 2016). From a company perspective, it is important to perform the neighbourhood deliveries in a way that assures that the customer feels comfortable and safe throughout the whole process. Thus, this solution might benefit from some type of blockchain technology where the customers can verify each other and thereby create trust. Perhaps, the IKEA brand could also be used as a method of establishing trust, given its strength and recognizability. As this solution would lead to a cheaper, and therefore more accessible, delivery process for the customers, it is to be considered as compatible with IKEAs values regarding accessibility for the many people.

Complexity From a customer perspective, the solution should not be that difficult to understand as it is quite self-explanatory. However, the solution would require some kind of platform in order to handle the distribution of the orders. In order to develop a platform that creates value for the customers, it is important to keep a large focus on user friendliness and an interface that is intuitive and easy to use. Regarding the company perspective, the solution is not to be considered as complex as the delivery process would not look any different from a regular delivery. However, if the platform used by the customers to distribute the delivered goods was hosted by IKEA, a level of complexity is added to the solution as it would require IKEA to develop a well-functioning and user-friendly platform.

Trialability The trialability of the solution is high as the customers can try out the delivery solution one time without any large commitments. This would require the solution to be easily accessible from the check-out phase of the customer journey, and not be too time consuming to start using. From IKEA’s side, the solution could be introduced in the form of a pilot in order to allow for a trial period before any major investments are made. This could be done by introducing the pilot to customers in certain areas before implementing the solution fully. However, the solution would require an up-front investment in the form of developing a platform and thus it might be difficult to launch the solution as a pure pilot.

Observability As this solution presumes several customers in the same neighbourhood ordering through home delivery, the observability can be crucial for the success of the solution. One possible way of spreading awareness of this solution in targeted neighbourhoods could be through a type of word- of-mouth marketing where one rely on that customers that are pleased with their experience of the neighbourhood delivery will spread the word among their neighbours, as doing so would benefit them if it leads to them being able to include even more orders in the next delivery. With the second version of the suggested solution, including dynamic pricing, the observability of the solution would be high as the customers would be able to see the delivery price being lowered as more orders are booked on to the same delivery.

A company that implements this solution would benefit from first-mover advantages as it is a relatively untried solution on the Stockholm market. If IKEA was to introduce this solution it would probably retrieve a lot of attention as it is different from anything being done on the current Swedish LMD-market. Keeping IKEAs strong brand reputation in mind, the solution is likely to gain momentum if implemented in a solid way. Furthermore, neighbourhood delivery could benefit from network effects as the efficiency of the solution increases with the number of users. In other words, the users of the neighbourhood delivery would have incentives to encourage their

neighbours to use the neighbourhood delivery services as well as this would lower the delivery costs. This would create a domino effect leading to a higher observability for the solution.

6. Discussion The following chapter discusses three last mile delivery solutions in the context of IKEA on the Stockholm market. The key points that are needed for integrating a solution into the last mile delivery network will be listed and deliberated on. The second section highlights the implications of the results by elaborating on overarching themes identified throughout the research process.

6.1 Implementation and Key Requirements As was mentioned in the previous section, the research resulted in the finding that three solutions that are both feasible on the Stockholm market and relatively novel, at least in the context of large goods deliveries, and those are e-cargo bikes, parcel lockers and neighbourhood deliveries. In summary, e-cargo bikes is a solution which fits well into the city center store concept; in dense locations where the distance from the store to the door is relatively short and parking is difficult, a bike-centered solution would likely be beneficial for both the customers and the company. Parcel lockers are also presumed to be well suited to the Swedish customers’ desire for flexibility and sustainability in delivery options. The neighbourhood delivery concepts are less well-tried. While it may be most efficient in dense areas with apartment buildings, those are perhaps the areas in Sweden where the neighbours know each other to the lowest degree. Hopefully, this can be mitigated by building trust into the platform that would be needed for this solution to be operational.

The neighbourhood delivery solution that consists of dynamic pricing for deliveries into certain areas only has one main requirement, which is compatibility between IT systems so that the customer interface changes based on the TSPs’ load capacity. Since this is the superiorly crucial factor for this solution’s success, the further analysis will discuss neighbourhood delivery in terms of a platform solution connecting neighbours with available transportation capacity and those needing goods to be transported. This version of the solution, along with e-cargo bikes and parcel lockers, will be discussed in the context of what key requirements have been identified for implementation on the Stockholm market.

Third Party Agreement With the IKEA context in mind, the e-cargo bikes and parcel lockers would not be operated as an in-house solution, but rather performed through a third party, which makes the selection and sourcing of this provider the foremost requirement for success. This relationship could be established both through a formal partnership, or by accommodating the provider by simply making physical space for bike parking-spaces or parcel lockers. The first concept has the drawback of giving the case company less power over the solution design as well as less stability in the long run. The latter option renders an opposite set of drawbacks and advantages. Although more control over the solution is ensured, the process of examining if the third party meets the case company’s high requirements when it comes to working conditions, sustainability, and so

forth, will be more time and resource consuming. The same can be said for the neighbourhood delivery concept if it involves a platform solution, although there is a possibility of running that in-house, conceivably by combining it with the IKEA application.

Physical Properties When it comes to general requirements for both an e-cargo bike solution, a provider should supply bikes and parking structures. It is crucial to ascertain that the loading capacity is suitable for the intended size of goods. Similarly, a locker-based solution would have a third party providing the lockers. Perhaps, the bikes and lockers could even be tailor-made for IKEA’s standard shape, although that type of commitment from the supplier may require a contract to ensure long-term value. Given the variety of providers of lockers on the Swedish market, there is an opportunity to partner up with and offer lockers from different suppliers. Another key to the success of parcel lockers is location; placing them in connection with locations where customer flow is high would be ideal. This could be either in close proximity to IKEA city center stores, with the added benefit of potentially driving visitation and conversion into the stores, or with the traditional concept of placing lockers near grocery stores or post offices. The neighbourhood delivery solution lacks the need of physical tools; it would be reliant on the consumer’s own cars, trucks, or trailers.

Platform The platform supplied for each of these solutions is another key factor for success, possibly principally for neighbourhood delivery. Matching consumers with each other would probably need a location service, some form of authentication to minimize the risk of theft or fraudulent behaviours and either a chat or an order list. In order to enable accessibility, it should be multi- platform, possibly with a web interface, and simple to use. Although a third-party agreement would likely cover this area for e-cargo bikes and parcel lockers, the neighbourhood delivery may benefit from the development of a company-specific platform, due to the higher degree of control over adherence to company labour policies and customer trust, of which the latter is elaborated on in the following paragraph. Regardless, the choice of a platform and degree of integration with internal systems may depend on the capabilities available as well as the technological feasibility of such an action.

Consumers Obviously, regardless of a solution’s innovativeness, cost-efficiency or sustainability, catering to the consumers’ needs and expectations is always going to be the main requirement for successfully adding a service - a delivery solution that no one uses is pointless. Therefore, designing solutions with the customer in mind should be a starting point. As was illustrated by both interviews and studied literature, the Swedish customers have high expectations on transparency, flexibility, and sustainability of their deliveries. All of the mentioned solutions have the potential to address sustainability concerns and thus lessen the case company’s environmental impact, which should be appreciated by the consumers. Both parcel lockers and neighbourhood deliveries benefit from

a high degree of consolidation, which decreases the number of trips and stops done by delivery trucks, while e-cargo bikes benefit from being light and electric, which reduces or even removes the emission of green-house gases. Moving on, neighbourhood delivery’s main pain point for consumers is presumed to be the establishment of trust between peers. For e-cargo bikes and parcel lockers, the main obstacle is thought to be the low service degree; the customer has to conduct the transport by themselves.

Combining solutions Until this point, the solutions have mainly been discussed as separate alternatives for delivery. One can, however, consider how a mix of solutions could be implemented, leveraging different capabilities from other solutions. For instance, one can imagine placing lockers close to bike stations, thus allowing the customer to order for do-it-yourself pick-up and delivery in one smooth process. In highly dense areas, the neighbourhood delivery could be performed to a locker, from which the individuals who live in close proximity may pick-up their goods.

6.2 Discussion of Results High customer expectations pose challenges for last-mile delivery of large goods One identified trend on all of the investigated markets is the increasing customer expectations when it comes to delivery of large goods. With the boom in e-commerce, delivery demand has increased, and new technologies designed to address this issue have allowed a rapid development of LMD of parcels, customers’ expectations on delivery time and accessibility have risen and the customer has grown to expect similar delivery qualities when it comes to large goods deliveries as well. Although the delivery factors are being valued differently on the different exploration markets, it is clear that the overall high customer expectations pose challenges for LMD of large goods. This is consistent with Zwahlen’s findings (2018), which state that customers are frustrated by the lack of speed, flexibility and transparency for large goods deliveries, comparing with their experience from delivery of smaller goods. This is mainly due to the fact that prerequisite factors for LMD for large goods, such as city-center regulations and technologies available on the market, are lacking behind in the development and make it difficult for the companies to live up to customers’ expectations. Similar to what was discussed in the introductory section of this thesis, there are few, if any, qualitative studies presenting solutions for delivering large goods. Although there is research outlining the difficulties (Macioszek, 2017; Siegfried & Zhang, 2021; Zwahlen, 2018) the approaches to handling the problem are rarely studied, especially when it comes to new technology such as the ones discussed in this report.

The sustainability factor is becoming increasingly important In all three of the studied exploration markets sustainability is a highly valued factor, with all of the cities having ambitious mobility plans in place with the aim of reducing emissions and encouraging sustainable mobility. From a social perspective, it is clear that the customers are paying increasing attention to the sustainability aspect of their consumptions, exemplified by a rise

of second-hand consumption seen among Barcelona’s population (Santander, 2020) and 80% of the Stockholm consumers stating that they are willing to accept a longer delivery time given that the deliveries are performed in a sustainable manner (E-barometern, 2020. p.41). Looking at the investigated LMD-technologies, one can see a trend moving towards electrified options regardless of the mode: trucks, bikes, delivery robots and drones are all moving towards electrification. This is evident from the investigated solutions and had also been described by Caggiani et al. (2020). Whether the delivery is being made by the customer, the company or autonomously, the LMD solutions have a consistent theme of being electrified and sustainable.

Development of ecosystem based last-mile delivery solutions Based on Rogers’ analysis of the different proposed LMD-solutions, it is clear that the discussed solutions differ in terms of what customer fulfillment factors they are focusing on. For example, while solutions such as e-cargo bikes and underground tunnels focus on high-speed deliveries, the convenience factor is rated as higher with solutions such as autonomous deliveries and neighbourhood delivery. Thus, the future LMD-scene is likely to combine several of these solutions in an ecosystem, thereby meeting multiple customer expectations at once. From a social perspective, our findings indicate that today’s customers are becoming increasingly used to being able to choose where, when and how to receive their deliveries, which is similar to what other studies have discussed (Joerss et al., 2016; E-barometers, 2020. p.44; Zwahlen, 2018) and with that the pressure on the companies to be able to meet these needs intensifies. At the same time, strict regulations regarding traffic and sustainability makes it hard for the companies to develop efficient LMD-strategies. The social and regulatory context plays into the emerging ecosystem composition as it creates the prerequisites under which different actors can collaborate within the LMD. The existing literature mainly provides insight regarding some specific LMD solutions and the approach towards solving their issues, such as drones route optimization (Chang & Lee, 2018; Choudhury et al., 2020) or pick-up lockers cost- and emissions savings (Jiang et al., 2019; Wang et al., 2014), or an overview of potential issues and solutions (Macioszek, 2017). Again, the majority of the descriptions are mainly focused on parcel delivery. The ecosystem concept that is discussed here is considered to be partially, if not fully, applicable to large goods as well.

Last-mile delivery solutions require mature technology and legal frameworks When analyzing the LMD-solutions, it became clear that several of the discussed solutions are not feasible on the Swedish market. As displayed in table 10, only five out of the eleven discussed solutions were deemed feasible on the Stockholm market, mainly because of lack of support from legal frameworks and immature technology. Regulations are found to be a significant barrier to adoption of new technologies, as described by Figliozzi and Jennings (2019, 2020) in the context of self-driving robots and by Kennerman et al. (2020) regarding drones. Additionally, due to the many regulations in Sweden when it comes to labour and consumer rights, several of the solutions found on the exploration markets would not be possible to launch on the Stockholm market today. Thus, finding LMD-solutions that are sustainable, fast, and cost-efficient is challenging, even in

the case where a solution is aligned with IKEA’s internal goals. While solutions such as ride- hailing platforms and authority to leave stands in conflict with current legal frameworks and IKEA values, it is possible that the solutions such as delivery truck driving lanes and parking, underground delivery, and drones will be possible to implement in the foreseeable future as the legal frameworks are likely to be developed to support the technological development, in a similar way that has been seen on the exploration markets.

7. Conclusion The final chapter concludes the thesis by circling back to the initial problem and the research questions. The findings are used to answer the questions and discuss tangible recommendations for the case company along with more general implications for the industry. Finally, some suggestions for future research on the topic are presented.

7.1 Answering Research Questions Circling back to the research questions that were presented in the introduction: The first subquestion of this thesis; What are the salient technological and platform solutions to the last mile delivery issue in city centers? rendered a list of eleven solutions, as outlined in table 10, that were either already in use, at a pilot stage or an idea stage. The conclusion drawn from this part of the study is that there are various different ways to address the LMD challenge depending on the surrounding circumstances, with legal frameworks being an important factor that impacts the choice of technology or platform, regardless of the technological maturity or relative advantages associated with a solution.

Moving on to the second subquestion; Which of these solutions are appropriate for large goods retailers to implement on the Swedish market and what are the keys to successful implementation? The evaluation process showed that six of the eleven initial solutions were appropriate to analyze with Rogers’ diffusion of innovation framework, with key criteria and implementation being discussed for e-cargo bikes, pick-up points, and neighbourhood delivery. On the Swedish market, these three are likely appropriate to use for large goods delivery, and the keys to successful implementation would be third party agreements and correctly dimensioned physical properties for the former two solutions, as well as well-designed platforms for all three. Using a combination of all these in addition to the existing LMD service offer may be the optimal way to address customer demands.

Ergo, the answer to the main research question How can the last mile delivery issue be handled for large goods in city centers? is that there are a variety of approaches to addressing LMD challenges associated with large goods, with some being more feasible than others at the current state of the technology, social and legal circumstances. The key to successful delivery could lie in combining these options in a way that renders optimal delivery flows and allows the high-demanding customers of today to select their preferred alternative. Moreover, the solution to the problems will likely be highly market-dependent; what works in one city may not work in another, and a company trying to implement a solution should consider the context and circumstances before committing to any one method.

7.2 Contributions to Research This thesis contributes to research regarding last-mile delivery, both by outlining and analyzing various different technologies and business concepts related to LMD and by evaluating these in a concrete context, and specifically for large goods. As mentioned in the introductory sections 1.2 and 1.4, the literature on LMD is mainly focused on parcel deliveries, which highlights the importance of making a contribution to the literature on larger items. There are certain difficulties associated with transporting large goods, and the existing literature addresses these. However, solutions to said difficulties are rarely discussed, and in the cases where they are, they mainly consist of mathematical models or a narrow focus on single solution concepts. In this thesis, an overview of several solutions is presented and all are evaluated both in terms of general LMD potential, and in particular, their feasibility for larger items. For instance, as is elaborated on in section 5.2, underground tunnels and automated ground delivery may be well suited to large goods, nevertheless, their short-term feasibility is limited due to regulatory issues or large investment requirements. While neighbourhood delivery, e-cargo bikes and pick-up lockers are relevant for large goods, they may not be appropriate for the largest items, given possible inconveniences that customers would experience with these solutions.

As our city analyses indicate, the topic is highly dependent on the context and thus, a description of the Stockholm market specifically, provides in-depth knowledge of how these particular market dynamics influence the feasibility and success criteria of different LMD solutions. The slow-paced regulatory climate, along with fast-paced changes in customer demands, makes revolutionary technological advances difficult and therefore, reliance on incremental improvements of existing technologies and concepts is necessary. Again, this may differ between markets and adapting to the context at hand is crucial.

Regardless of the context, the findings indicate that customer expectations on deliveries are higher than ever. Additionally, it seems like these expectations are driven by parcel deliveries, which make up a large portion of the customers’ total delivery consumption. Even if large goods are more difficult to deliver from a company perspective, the customer demand on flexibility, transparency, sustainability, and speed are comparable to the demands on parcel deliveries. This is supported by the interviews conducted with several customer fulfilment professionals on the studied exploration markets, that struggle with the challenge of meeting these expectations.

7.3 Implications and Recommendations for Case Company In terms of concrete recommendations for the case company, there are a few points that ought to be mentioned. For today’s Stockholm market, e-cargo bikes, parcel lockers and neighbourhood deliveries are considered viable suggestions to implement within a short timeframe. The main requirement for the former two is finding compatible third-party partners. The recommendation of the authors is to trial this in close proximity to the city center store in Stockholm on a relatively

limited scale and evaluate the customer willingness to handle the delivery themselves, in order to mitigate risks and ensure market potential.

For neighbourhood deliveries, creating a IKEA-specific platform may be the most beneficial approach. The strong and well-known IKEA brand would mitigate the issues in establishing trust among customers. Moreover, keeping the platform in-house would ensure sustainable labour, something that IKEA values and strictly enforces through their company policy, which would be significantly more difficult if involving a third-party solution providing a gig platform.

In terms of the other solutions that are discussed in the essay, the recommendation is to remain updated on the development of, not only the innovations themselves, but also the regulations that come with them. Perhaps, there are more appropriate markets to trial these types of solutions than Stockholm, given the lagging and strict regulatory framework that is present there. For instance, ride-hailing solutions, or other gig-based concepts may be best fitted for US markets, like San Francisco, at the moment, due to the lenient regulations and social acceptance in such questions. More technologically advanced solutions within the autonomous spectrum could be trialed in Seoul, where smart city features and regulations make those kinds of pilots more feasible. Based on the findings in this report, solutions like autonomous delivery trucks and drones are just around the corner; maintaining a dominant position on the market may be facilitated by the ability to adopt novel innovations.

7.4 Implications for Industry Given the assumption that some of IKEA’s challenges, and subsequently the findings of this thesis, are generalizable to an industry setting, there are indications of a need to improve LMD for large goods. The customers are demanding increasingly high flexibility and sustainability while the price is expected to remain low, putting companies in a complicated position. In approaching solutions for this issue, it is crucial to properly understand the market powers that are present in the specific context that is intended for implementation; which solutions that are appropriate may vary greatly. As shown in the study, the feasibility of an LMD-innovation on a specific market is influenced by several different factors, and thus it is important to maintain a holistic view on the issue, similar to the process of this thesis.

Looking forward, apart from the implementation of separate concepts for LMD solutions, one should consider how these solutions can be leveraged in combination with others. Collaboration between multiple actors is encouraged, and dependence on a single provider is unlikely. As elaborated on in the discussion, there seems to be a shift within the industry of LMD towards an ecosystem of delivery services, in the attempt to cater to demanding customers while maintaining sustainability and cost-efficiency. This is not solely relevant for retailers, in the sense that utilizing a variety of providers is a sensible business decision, but may be an applicable recommendation for the TSPs as well. Rather than operating with the aim to put other actors out of business by

maintaining unsustainably low prices, since this does likely not benefit customers or the environment in the long run, collaboration and specialization in niche areas is recommended.

In terms of more tangible changes, electrifying truck or van fleets and diversifying to different transportation solutions may help companies remain profitable. Finding new ways to consolidate is another approach towards both cost-efficiency and sustainability; not all solutions have to depend on highly advanced technology, rather, intelligent use of existing resources and capabilities could contribute to achieving customer satisfaction and profitability with relatively small-scale means. The mentioned decisions mainly fall under the TSP’s business. Nevertheless, this recommendation can be viewed from the perspective of the retailer, that are not performing the deliveries in-house, as well, in which case putting pressure on collaboration partners, and making careful selections of with whom to collaborate is important.

7.5 Recommendations for Policy Makers As indicated by the findings of the thesis, regulations and legislation are important factors that significantly affect the LMD climate in specific contexts. Unsupportive laws are a challenge and an important obstacle for many innovative technologies, with autonomous ground deliveries and drones being prominent examples. With the fast-paced developments that are currently underway, policy is lagging and hence delays the progress towards sustainable and efficient innovations. This was brought up frequently during discussion with the Stockholm market in particular, however, the reasoning can be extended to any market where policy falls behind fast- paced technological development. Thus, the recommendation aimed towards policy makers encompasses suggestions to facilitate and accelerate the process in approving novel innovations. There may be several approaches to this issue. One possibility is involving policy makers earlier in the process of technological developments. If the legislative process is significantly slower than the innovation rate of new technologies, examining and obtaining sufficient information during the development process could lead to a more timely approval decision when the technology is ready for the market. Another option is to investigate the possibilities to increase the speed with which innovations are approved, or to issue conditioned approvals for a limited time. Looking at successful cases of innovation policies, South Korea makes an appealing example mainly due to their strong collaboration between private and public actors. Based on that, collaboration and communication between policy makers and involved private companies could be the key to solving this issue.

7.6 Limitations and Recommendations for Future Studies Based on the findings in this study, there are several questions that can be subject for future studies. First of all, future research is needed to look into how the solutions could be implemented on a more concrete level. Through the usage of the developed framework, the study has succeeded in providing a method of exploring and evaluating LMD-solutions in a market-specific context, and

to some extent discussed how an LMD-solution can be evaluated from the perspective of an individual company. However, a deeper investigation on how to evaluate and map a specific LMD- solution in a company context could be subject for future studies with factors such as resource availability, capabilities and time frames taken into account.

Secondly, there are several LMD-solutions discussed in this essay for which the supporting technology is available on the Swedish market, but where current legal frameworks hinder implementation of such solutions. However, from the research conducted on the exploration markets it is clear that the regulatory frameworks are influenced by the development of new LMD- technologies and thus one can predict a similar development of the Swedish legal frameworks, with more support given to solutions such as drone delivery and autonomous ground deliveries. Thus, future studies could look into the development of regulatory frameworks, on the Swedish market and how the discussed LMD-solutions would be affected by such a development.

Looking at the methodology used in the study, there are improvements to be suggested for future studies. Firstly, one can consider how generalizable the result is to other markets as the findings of this study are based on three exploration markets and one implementation market. Since the LMD-landscape is affected by the unique dynamics on each market, it might be valuable to examine more cities and the trends identified on these markets. However, the scope of this study had to be limited due to time constraints. Another factor that could be considered in future research is how the theoretical framework could be improved. As mentioned in the discussion, the LMD- landscape is increasingly becoming a complex ecosystem where several different actors integrate and collaborate. Thus, future studies could investigate how this factor can be captured in the theoretical framework. This could, for example, be done by integrating a value network model into the suggested theoretical framework in order to display the integration between the actors in the LMD-value chain. Such an approach may provide particularly significant value when it comes to solutions that require the collaboration between private and public actors, such as underground tunnel delivery where local governments and multiple private actors are likely to be involved, or autonomous vehicles, for which local regulations as well as city-wide sensors and other adaptations must be aligned for successful execution.

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Appendices

Appendix A) Interview Guide Questions Today ● What delivery services are you offering? ○ How does the distribution between options look? ○ What are the margins on different options? ○ Are there any key third party partners involved in these services? ● How do customers shop from IKEA? ○ How do they go to and from the stores? ○ How do their purchases go from store/warehouse to their homes? ○ What are the pros and cons with the current solutions? ● What are the most prominent challenges on today’s market related to last-mile delivery?

Future ● How do you work in order to identify these challenges and stay up to date with the market? ● How do you adapt your services to new regulations etc. on the market? ● How do you work in order to detect trends on a local market-level? ● What solutions/projects are in the pipeline, i.e. under development? ● What are solutions/projects that have been rejected? ● What will the delivery services look like in 5 years?

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Appendix B) Full City Literature Reviews

Seoul Economy Seoul is considered a megacity with a city center population of around 10 million and a density of 16000 inhabitants per square kilometer (World Population Review, 2021c). Following a fast urbanization process, the city has established a position at the forefront of technological innovation. Although the pandemic caused a recession, the OECD states that it was less impactful than in other OECD countries, mainly due to rapid political responses and substantial financial support to households, ensuring a relative recovery of spending (OECD, 2021). The unemployment rate is currently at 4.6% (Statista, 2021b). Irrespective of the past growth, the aging population and subsequent diminishing labour force, are predicted to cause a stunt in the absolute economic growth in the coming years. However, it may also raise the GDP per capita, reducing unemployment rates and increasing productivity (OECD, 2021).

Social Behaviour and Attitudes Customer Behaviour South Korea is a large e-commerce market. Even before the pandemic, between the years 2009 and 2019, the e-commerce market grew in an exponential fashion (Statista, 2021a). Although the sources differ slightly when it comes to exact numbers, they can agree that South Koreans have one of the highest smartphone and internet usage ratios in the world, consistently estimated to over 90% (Poushter et al., 2018; Winskel et al., 2019; US International Trade Administration, 2020). The AT Kearney global index of 2020 mentions Seoul as the foremost city in the world when it comes to universal connectivity, noting that 99.2% of the city’s inhabitants have access to internet speeds that are four times faster than the global average (AT Kearney, 2020).

During the pandemic, the home furnishing market has seen large growth; IKEA in South Korea increased sales by 33% from August 2019 to August 2020, compared to the previous fiscal year. The trend is similar for other large furniture companies, such as Hanssem (18.5%) and Hyundai Livart (17.7%) (Jin, 2020). Although total household spending has declined, the spending on furniture and home appliances has risen by 7.4% in one year (Kim & Choi, 2021).

Regarding online purchases, not only the price and quality of the goods matter, the services included in the price are considered important as well. Most South Korean consumers prefer fast delivery and are used to this, given the density, relatively short distances and highly connected logistics network of the country (Park, 2018).

Transportation Habits Public transport is commonly used in Seoul. ICT features in the public transit system, such as wi- fi provided on buses or on subway stations, likely contributes to the demand of such services,

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according to a study conducted by the International Transportation Forum (2019). The long-term plan for the city’s transportation system is “People, Sharing and Environment”, with the ambitious goal to provide subway stations or car sharing centers within five minutes from anywhere in the city. These plans also describe aims to decrease individual car usage while still providing convenient mobility options (Seoul Metropolitan Government, n.d.).

The attitudes towards ride-hailing services are characterized by a general skepticism regarding safety (Nolan, 2018). However, the service Tada has grown increasingly popular amongst customers since its launch in 2018 (Reuters, 2020). Moreover, Kakao Taxi, the most widely used taxi service in the country, has launched a ride-sharing service within the native application, in spite of the large-scale protests from taxi drivers and unions (Jun, 2018).

Technology According to different indexes and ratings, Seoul consistently ranks as one of the most technologically innovative cities in the world, for instance, The World Intellectual Property Organization places Seoul at fourth place in terms of innovation intensity (AT Kearney, 2020; Bergquist & Flink, 2020). A large part of the success includes its ecosystem of public and private actors prioritizing incorporating novel technologies into the processes of the city (Soh, 2020). One of these innovations is the 5G network, which was launched in South Korea even before handheld devices supported the service (McCaskill, 2019). The presence of 5G services is seen as a requirement for a functional smart city, capable of providing the transmission speeds to handle the data flowing between physical sensors and central monitoring units (Pisarov & Mester, 2020; Yaqoob, 2020). Moreover, a 5G network is seen as an enabler, if not a requirement, to autonomous vehicles for the same reason, permitting data flow between cars, nearby sensors and devices (Raissi et al., 2019). The building of the 5G network has been heavily subsidized by the South Korean government and has been built in collaboration with multiple private actors (Kim et al., 2020).

The car ownership in the city has risen in the last few years, rendering congestion and emissions high, and both the South Korean government and the local Seoul Metropolitan Government have recently intensified initiatives to subsidize purchases of electric vehicles (Park, 2019; Seoul Metropolitan Government, 2021). The main obstacle to development of electrification seems to have been the lack of infrastructure when it comes to charging stations and a subsequent concern for a lack of range (LMC Automotive, 2019), which is why the government is currently expanding their efforts in an attempt to increase the number of charging stations from 60 000 in 2020 to reach 500 000 in 2025 (Hampel, 2020).

The drone industry is developing rapidly, and an unmanned drone taxi was piloted in central Seoul late 2020, with an alleged potential to shorten the time for trips made in the area by 70% (Bunyan, 2020; Lee, 2020b). Physically smaller deliveries, such as food items, have also been tested in small-scale trials during the pandemic, with a demand rising for non-contact services (Urban Air

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Mobility News, 2020; United Press International, 2020). On the ground, autonomous delivery is being tested by for instance the South Korean post service, trialing package delivery by autonomous vehicles acting as a mobile post office (Korea Herald, 2020). Moreover, the company WoowaBrothers are piloting autonomous delivery robots that deliver food to front doors outside of buildings, with a future aim to develop a system that can travel through the gates and up the elevator in apartment buildings (Lee, 2020a).

Regulations The Labour Standards Act (LSA) regulates upholding minimum standards of working conditions in South Korea (Lee & Lee, 2020), concerning for instance minimum wages and employment contracts. However, the definition of an employer-employee relation specifies a list of requirements, such as the employer determining the schedule, providing equipment etc. (Lee & Lee, 2020), and according to a report by the International Trade Union Confederation (2020), South Korea had 7.48 million workers in 2019 who were not considered regular employees, amounting to about 36.4% of the country’s employed workforce.

Despite the large number of non-regular workers, the ride-hailing market faces harsh regulations in South Korea. There are specific laws to protect the taxi business, entailing restrictions on any commercialization of trips that are not provided by a licensed taxi and chauffeur. This contributed to Uber’s slow rollout towards establishing a presence in the country (Joon, 2019) and caused the ride-sharing company Tada to be brought up in court last year (Lee & Jin, 2020). Although that specific case was cleared of the violations, the National Labour Relations Commission found that based on a complaint of a discontinued Tada driver, the gig worker should in fact be considered an employee and be protected by general labour laws. Despite this not being a general legal ruling, it could impact the future regulations around gig economy platforms and the working conditions of their workers (Butler, 2021; Gu & Yu, 2020). Moreover, what vehicles may be used and during what hours is still subject to restrictions, complicating the market for related innovations and investments (Lee & Jin, 2020).

Environment As mentioned, both local and national governmental bodies are making efforts to progress towards a more environmentally-friendly society. This comes in the form of a more long-term overarching National Green Growth plan released in 2009 (OECD, n.d.), focusing large investments on green growth technologies (Kim et al., 2014) and concrete local initiatives, such as an increased number of EV charging stations (Seoul Metropolitan Government, 2021). Additionally, the aim to reduce congestion and emissions in Seoul is followed both by a conventional congestion charge, which generally applies to combustion engine vehicles with less than two passengers in certain tunnels between 7.00 and 21.00 on weekdays, and a voluntary car free day-initiative. The latter means that drivers who leave their car at home at least one day per week are entitled to a reduction in car tax as well as other price reductions and discounts (Angloinfo, n.d.).

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San Francisco Economic The population of the metro area of San Francisco is about 4.7 million with a city center of nearly 900 000 inhabitants (World Population Review, 2021b). It is the most densely populated large city in the state of California, with over 7000 inhabitants per square kilometer (World Population Review, 2021b). The San Francisco population saw an increase in both numbers, employment rates and household income between the years of 2012 and 2016 (Roy et al., 2020). The unemployment reached levels below 3% in 2019 but rose significantly to about 13% in April 2020, only to stabilize around 6-7% towards the end of the year (US Bureau of Labor Statistics, 2021).

Social Behaviour and Attitudes Customer Behavior Regarding e-commerce, the continuous growth in the last ten years was disrupted by the covid-19 pandemic, increasing to about 35% of all purchases in the US (JLL, 2020). In particular, California is the state in the United States where the largest portion of the population, 56.5%, made more purchases online than in physical stores in September last year (Shibu, 2020). As a result, the delivery business has spiked. With physical stores being closed, or at least discouraged to visit, this is an obvious consequence. This has led to the already pressed matter of LMD becoming increasingly intense.

When shopping for large goods in store, customers mainly rely on personal vehicles for the transportation to and from the store and the market is highly car focused. A study examining interest in various transportation innovations among San Francisco inhabitants observed higher household income as a predictor for adoption of and interest in new mobility technology, with the exception of services that consist of sharing/pooling cars, where low income was a contributor. Moreover, it was noted that the younger population has adopted ride-hailing to a higher degree and have a higher degree of interest towards using electric and/or autonomous vehicles in the future, a finding that is consistent with studies of other geographical locations as well (Spurlock et al., 2019).

Transportation Habits In 2016, the car ownership in San Francisco was estimated to 1.10 cars per household (Erhardt et al., 2019). Although congestion remains high with 50% of the trips being made by car in 2015 (San Francisco County Transportation Authority, 2017), there have been initiatives in the last few years to encourage other modes of transportation. The goal of the city is that 80% of all trips should be sustainable by 2030. This will be achieved through, for instance, through improvements of the transit system, making it more reliable, secure and accessible, and a shift towards electric cars (San Francisco Municipal Transportation Agency, 2017).

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The physical proximity to Silicon Valley has rendered San Francisco a city with high innovation intensity. According to AT Kearney Global Cities ranking, San Francisco was the world leader in number of so-called unicorn companies, i.e., private companies valued at $1 billion, in 2020 (AT Kearney, 2020). Moreover, in the years 2014-2018, nearly 40000 patents were applied for in the San Francisco-San José area, placing it fifth in the world in that aspect (Bergquist & Fink, 2020).

Autonomous delivery robots were tested and even banned as early as in 2017. Since then, the legislation has been somewhat softened, allowing companies to apply for permits for curbside delivery robots. The technology can be considered mature and Starship technologies, a San Francisco-based firm, has several pilots that include such technologies (Korosec, 2020; Starship Technologies, n.d.). Although the delivery may be too slow to use from store to customer, creating a base either from local distribution centers or from a larger (autonomous or manned) van, are options that are being explored (Chen, 2021). Moreover, Uber’s autonomous cars were re-launched in the city in 2020 (although that branch of the company was sold to a local start-up later in the year) (Hawkins, 2020).

The internet coverage of the city is among the highest in California at 99.8%, with high internet speeds available (BroadbandNow, 2021). Additionally, about 15% of the population in the United States are “smartphone dependent” in the sense that they do not have access to the internet from a stationary broadband, but their only access point is the smartphone (Pew Research Center, 2021).

Regarding airborne delivery, the pandemic has accelerated the trials of food and medical deliveries. A company called dive delivery is currently doing trials of drop-offs of face masks and hand sanitizers in the backyard of houses. The customers are notified via text or email before the drop-off, in order to avoid risks associated with standing under the drone, and again when the process is finished. The trials are held in two counties located in the San Francisco Bay Area, namely San Mateo and Contra Costa (Dive delivery, n.d.).

Furthermore, San Francisco has introduced a system of lockers that are installed in conjecture with local post offices. The lockers are electrified and fully automatic, meaning that a customer may register via the post service’s website in order to receive a PIN code and an access card that is used to access the lockers. The lockers vary in size and can be used for both receiving and sending packages (Ruiz, 2019).

Regulations When it comes to autonomous delivery, the regulatory frameworks are the main obstacle to scaling up the implementation (Hoffman & Prause, 2018). It has been somewhat more lenient when it comes to unmanned aircraft systems, i.e. drones.

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In contrast, the regulations of ride-hailing services like Uber and Lyft are almost non-existent compared to in other countries, as the services are considered to contribute to decreasing unemployment locally (Palgan et al., 2021). Bike-sharing services are subsidized by an initiative by the City of San Francisco in order to increase their availability for individuals with a lower income (Palgan et al., 2021). However, the general attitude of San Francisco towards sharing economy organizations is described as a “hands-off approach”, letting the market economy regulate itself, as described by Palgal et al. (2021), which is a significant difference from the approach of many European cities.

Environment During the time that the population and economic status of the inhabitants in San Francisco has increased, a worsening in congestion has followed, as outlined in the San Francisco 2040 Mobility plan, updated in 2017 (San Francisco County Transportation Authority, 2017). This includes the goal of 80% of all trips being sustainable by 2030. Although the local report does not mention electric vehicles, California as a state has legislated to shift towards only allowing sales of electric cars by 2035 (Baker et al., 2020).

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Barcelona Economy Barcelona is a dense city with a population of approximately 5,5 million and a population density of 16 000 inhabitants per square kilometer. Thus, it is one of Europe’s most densely populated cities. The population size of Barcelona has an annual growth rate of 0,7% based on the period 2015-2020 (World Population Review, 2021a). The GDP per capita in Spain is 29 600 USD and the unemployment rate reached 12,5% in 2020 (The world bank, 2019; Generalitat de Catalunya, 2020).

Social Behaviour and Attitudes Customer Behavior The rise of e-commerce has led to a sharp increase in on-demand deliveries in Barcelona. As a result of the economic crisis and a high level of unemployment, the Spanish population sees price as one of the main purchase determinants. A trend of responsible consumption is emerging in Spain with the second-hand market and collaborative economy platforms expanding at a rapid pace (Santander, 2020). The pandemic has also caused a rise of e-commerce in Barcelona, and according to J.P. Morgan a compound annual growth rate of 17,3% can be expected for the period of 2019-2023 (J.P. Morgan, 2020). Looking at the furnishing and appliances category separately, this category is expected to grow its online customer base by 15% after the pandemic (Marcos et al., 2020). Another behavior trait of the Spanish population that has become prominent as a result of the increase in e-commerce is the low brand loyalty, with 66% of the Spanish consumers having changed stores, brands or the way they shop during the pandemic (Marcos et al., 2020). At the same time, Spanish consumers are claiming to be more mindful of how they spend their money and make larger efforts to find ways to save money when shopping compared to before the pandemic (Marcos et al., 2020).

The growth of smartphone market penetration has led to an overall tendency to shop using portable devices. Among the identified trends in the Spanish e-commerce is the extended use of voice assistance technology, with around 50% of Spaniards using voice assistants as part of app-based mobile commerce (J.P. Morgan, 2020).

Transportation Habits In a report investigating the attitudes towards car ownership and alternative transport means, it was found that 60,2% of the Barcelona population believes that their car usage will not change in the next 10 years. When asked about what factors would make the citizens stop using the cars, improvement of the public transportation system and incentives to use public transportation from the public administration were listed as the main factors (Bouchet et al., 2017). The report also looked into the effect that restrictions on the usage of private vehicles in city centers could have on people’s mobility patterns and found that a majority of the citizens would either purchase a

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non-polluting vehicle or alternatively combine the usage of private vehicles and public transport (Bouchet et al., 2017).

Technology Relevant Technologies One innovative LMD-solution in Barcelona is the Kiwi Last Mile, whose distribution system is designed as a “cellular model”, allowing deliveries to be made in specific time slots in a profitable and sustainable manner. The model consists of using a van as mobile storage and several electrical motorcycles for the delivery. As the van reaches the delivery point, the riders can deliver the product by motorcycle and thus eliminate the van’s need to look for a parking space and allow the van to continue on their route without losing any time. This method solves several of the problems associated with LMD, both associated with time and environmental aspects, as the method has proven to reduce the last-mile emissions by 50% (Shahabi, 2020).

Another solution that has been introduced on the Barcelona market is the areaDUM project. The objective of this project is to provide all delivery vehicles with a parking option close to the destination for a limited amount of time, usually 30 minutes. By limiting the time that the delivery vehicle is allowed to be parked on these spots, the goal is to generate a high rotation of the parking spaces, allowing for optimization of the use of the loading/unloading zones and thus a reduction of the delivery time (Ajuntament de Barcelona, 2020). The scope of the project covers approximately 9000 parking places in Barcelona and more than 45 000 daily operations (Ajuntament de Barcelona, 2015).

Level of Innovation Barcelona is often referred to as Europe’s smartest city, with innovative technology solutions ranging from smart parking systems that guides drivers to available spots, weather-adjusting LED- lights and smart waste bins that encourage people to be more conscious of their waste (Reimer, 2020; Stevenson, 2017). The city has developed a digital ecosystem that is aimed at making it possible for everyone to have equal opportunities to benefit from digital technology, making the city a popular target market for high tech companies and start-ups (Mobile World Capital Barcelona, 2016). Among other investments, Barcelona has implemented 19,500 Internet of Things-sensors that are distributed all around the city in order to enhance a smarter, more digital city (Monroy, 2021). As a result, the city has been able to save 42.5 million euros in water expenses and generate an additional 36.5 million euros through smart car parks in a year's time (Zigurat Global Institute of Technology, 2019).

Looking at the technological awareness on an individual level, Barcelona is a city with high internet access with 93% of the metropolitan population having access to the internet and more than 85% owning a smartphone (Dignity Project, 2021).

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Regulations Superblocks/Low Emission Zones In 2016, Barcelona launched its first superblock, a concept that carves out city islands of car-free spaces by sharply restricting cars in multi-block areas in the city and instead routing traffic around these areas. This is done by prohibiting all traffic except for residential and delivery from entering the area, and setting the maximum speed limit of the allowed vehicles to 10km/h. Since then, an additional five superblocks have been developed (BBC, 2020) and the concept has inspired numerous cities all over the world (ReVeal, 2020). The superblocks are aimed at reducing pollution from vehicles, as well as providing the residents with a central space where they can meet and engage in activities without the disturbance of heavy traffic (Nanda, 2019). With the City Councils plans of implementing an additional 503 superblocks, the CO2-emissions are expected to be reduced by 40% and the car traffic by 21% (Bugler, 2020). The superblocks have also inspired further actions to be taken, with one example being the introduction of Low Emission Zone (LMZ) in the city center of Barcelona that restrict cars that do not have an environmental label from DGT and prohibits them to enter the LMZ on weekdays between the hours of 7am and 8pm (Generalitat de Catalunya, 2020). These actions, combined with the introduction of new cycle lanes and increased public transport options, are estimated to reduce the current number of vehicles in the city by 20% by 2024 (Blanchar, 2019). When it comes to LMD-vehicles, these are affected by the implementation of these restrictions as the speed at which these vehicles can operate, and thus their efficiency, is reduced.

Regulations of the Gig-Economy In general, Spain aims to protect the service sector workers hired on a freelance basis by requiring employers to develop proper contracts. This regulation was put into action in September 2020 when the supreme court ruled that workers of the food delivery app Glovo were employees, and not freelancers, thus giving the employees the right to demand formal labour contracts and benefits (Carreño and Faus, 2021). The event has sparked further discussion of the subject, with the government stating that they are currently looking into a more extensive regulatory regime for gig employment. However, the consequences of such regulations are hard to predict, and legal experts have expressed concerns of the service sector becoming more reliant on subcontractors and temporary work agencies as a result of the regulations (Staffing Industry Analysis, 2021).

Environment Barcelona has introduced an ambitious zero waste plan with the objectives to be fulfilled by 2025. According to the plan, the goal is to achieve Emission GHG savings of 160-250 thousand tonnes per year and create 1500 high quality jobs within collection, reuse and recycling, resulting in savings of 20 million euros per year (Marcon, 2019). When it comes to delivery of heavy goods, several environmental challenges are introduced such as vehicle congestion, roadway safety and air pollution (Local Governments for Sustainability, 2021). In 2017, the LMD-services were

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responsible for 40% of all congestion in Barcelona (Shahabi, 2020) and in 2020 the city was rated as the most congested city in Spain (Rippin, 2021).

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Stockholm Economy Stockholm has a population of approximately 975 000 habitants and a population density of 360 habitants per square kilometer (Stockholms stad, 2021; SCB, 2019). The city has an annual growth rate of 1,46%, calculated based on the period 2015-2020 (World population review, 2021d). The gross domestic product (GDP) of Stockholm is 77 000 USD (Öresundsinstitutet, 2019). According to Stockholm’s county administration, the unemployment rate in Stockholm will reach 9% during 2021 (The county of administrative board, 2020).

Social Behavior and Attitudes Customer Behavior In 2020, the Swedish e-commerce increased rapidly as a result of the pandemic with a yearly growth of 40%, which is a historically high growth rate (E-barometern, 2020. p. 1). However, as pointed out by Postnord in their report E-barometer‚ going into 2021 it is hard to predict what part of this growth is due to the pandemic, and thus will be declining as the situation stabilizes, and what part of this growth is to be seen as permanent (E-barometern, 2020, p. 3). Looking at the furniture and home interior category specifically, the industry had a growth rate of 63% in 2020, and the online share for the category grew from 7% to 11%. This makes it the second fastest growing industry, with only sales of groceries experiencing a faster growth rate (E-barometern, 2020. p. 6). One of the stated reasons for the fast growth is the fact that people are spending more time at home during the pandemic, and thus an unusually large share of the Swedes has invested in their home environment. This is also prominent when looking at the statistics for home renovations in Sweden, with Skatteverket claiming that the number of ROT-discounts have increased by 10% during 2020 (E-barometern, 2020. p. 25).

The overall growth of the Swedish e-commerce has led to a higher demand for user-friendly e- stores and high-quality customer service, especially among the older generation whose shopping behavior has changed radically due to the pandemic. As a result, 64% of the Swedish e-commerce companies state that new customer segments have emerged since the start of the pandemic (E- barometern, 2020. p. 14). Apart from the growth of the senior customer segment, the Swedish e- commerce has also extended to include several new product types during 2020, with 50% of the respondents claiming that they have made first-time online purchases from certain product categories (E-barometern, 2020. p. 15).

With the growth in e-commerce also comes an increased customer demand for fast deliveries and being able to choose how and when the package is delivered. Thus, the highest valued factor is being able to choose whether the product should be delivered directly to the customer’s home or to a local pick-up point (E-barometern, 2020. p.44). According to IKEA, the demand for express deliveries is higher in Stockholm compared to the rest of Sweden (Interview 6, 2021). The customers of Stockholm have high expectations regarding lead times and transparency related to

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the LMD. Moreover, the customers have high expectations on speed and quality for deliveries, regardless of the size of the delivery, implicating challenging customer demands for deliveries of large goods (Interview 9, 2021). The second highest rated factor is clear communication of the expected delivery date, with 80% of the customers stating that it is of great importance to get a precise delivery date in the purchase phase (E-barometern, 2020. p. 44). Another identified rising trend among e-commerce customers is the demand for sustainable delivery options. According to E-barometern, a total of 80% of the customers state that they are willing to wait 1-2 days extra for the delivery, if this means that the goods are being delivered in a more sustainable and environmental-friendly manner (E-barometern, 2020. p. 41).

When it comes to home delivery versus pick-up points for e-commerce, the most common approach is to pick-up a package at the nearest post office, with 65% of the e-commerce packages during 2019 being delivered in this way. However, the trend has changed during the pandemic with more and more people choosing to have their products delivered directly to their home and in 2020, only 53% of the e-commerce packages were delivered to a pick-up point (E-barometern, 2020. p. 40). Another delivery alternative that has gained popularity during 2020 is the parcel lockers at pick-up points. According to e-barometern, the main reasons for this increase are the flexibility that such a solution provides, as well as the fact that the customer can avoid having to interact with personnel at the post offices. These factors, combined with the fact that the number of automatic vending machines for packages has increased rapidly, has led to an increased demand for this delivery option (E-barometern, 2020. p. 40). On the Stockholm market, the parcel lockers have gained a large market share and the lockers are developed in such a way that they are independent of each supplier. According to Bring, this is one example of the kind of ecosystem- centered LMD-solutions emerging on the Stockholm market, where start-ups and other high-tech actors are creating solutions with a strong digital focus and open-source systems, resulting in a more coherent and smooth customer experience (Interview 9, 2021).

When it comes to the behavior of IKEA’s current customer base, a shift in the preferred purchase channel has been observed during the last year. Before the pandemic, 95% of the customers in the Stockholm stores used cash and carry for their purchases. Today, that number has decreased to 65%, as alternatives that allow the customers to shop in a pandemic-friendly way, such as online shopping and click and collect, have become increasingly popular (Interview 6, 2021).

Transportation Habits In the Stockholm city center, the usage of public transport is high with 72% of all trips being made through public transport. Public transportation is an alternative that has increased in popularity during the 2000s, as only 58% of the trips were made through public transport in 2000 (Miljöbarometern, 2019a). Looking at car ownership in the city, the measure has remained rather stable during the 2000s, with around 37% of the Stockholm inhabitants owning a car (Miljöbarometern, 2020). The average number of kilometers driven per year and inhabitant has

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however decreased during this period, with 5400 kilometers per inhabitant registered during 2019 (Miljöbarometern, 2019b).

Technology Stockholm is a highly innovative market, with the city producing the second most billion-dollar startups per capita, with only Silicon Valley being considered as a more innovative market. Thus, the population of Stockholm is used to technology advanced solutions, with examples such as Spotify, Skype and Klarna (Chiang, 2018). When it comes to technologies related to LMD, Stockholm is the base for several successful start-ups, such as BudBee and AirMee. Notable for both of these start-ups is the benefits of launching new technologies on the Stockholm market, where the innovative business climate and advanced technology usage lead to start-ups getting a lot of support in the form of investments from other tech-giants (Silicon canals, 2021; Musgrove, 2020).

One of the largest actors on the Swedish LMD-market is the start-up company BudBee, which has challenged and revolutionized the home delivery market since its establishment in 2015. The company focuses on B2C deliveries and aims at providing their customers with a fast and smooth delivery where the customer can track the delivery in real-time (Moderna Livet, 2019). This is done by using advanced algorithms for route optimization that allows a simple and effective way of delivering goods (Budbee, 2021).

Autonomous deliveries have been tested in the Stockholm area, with the Foodora robot Doora being the most recent example. In collaboration with the telecom operator Tele2, Foodora has launched self-driving home deliveries by robot. The Doora robot has been piloted around the Stureplan square in central Stockholm and can carry up to 20 kilograms of goods. Using Tele2’s 5G network, the Doora robot can send and receive information from Foodora in real time. The robot is also equipped with a camera, making it possible for the robot to perceive its surroundings, communicate and thus create a situation-adapted service (Lund and Cwikowska, 2021).

When it comes to individual technology usage, Stockholm is a market with high internet penetration with 94% of the population between the ages of 16 and 85 having access to the internet in their homes. This number is lower when considering the oldest segments of the population, as only 75% of the population in the age group 75 to 85 have access to the internet. Around 90% of the population use the internet on a daily basis, but this differs depending on the age group as 99% of the age group 25 to 34 years uses the internet daily while this number is only 49% for the age group 75 to 85 years (SCB, 2020).

Last-Mile Delivery When it comes to IKEA’s value proposition, there are several different LMD-services that are being offered to the customers. The traditional home delivery is offered either as a standard

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delivery or an express delivery. The main difference between these two options is the delivery time, where the express alternative can deliver the order as fast as within an hour, and is available in all of central Stockholm, while the standard delivery has an delivery time of 48 hours. Compared to the rest of Sweden, the deliveries in Stockholm have a higher share of express delivery, implicating that the customers of Stockholm value the time aspect of the deliveries higher compared to other customers. However, the average delivery time of these express deliveries is 6- 8 hours, indicating that there might be an inconvenience of getting large goods delivered as fast as within an hour. Apart from these two delivery options, IKEA also offers several delivery alternatives where the customer does not get the goods delivered directly to their home. Such alternatives include deliveries to pick-up locations, insta boxes and click and collect (Interview 6, 2021).

Regulations Low-Emission Zones Since the beginning of 2020, Swedish cities and municipalities are allowed to create low emission zones within the cities that regulate traffic, only allowing diesel cars that meet certain emission standards to enter these zones (Urban Access Regulations in Europe, 2019). While the government has high ambitions to introduce such low emission zones in large parts of Stockholm’s city center, the proposal has faced harsh critique as state investigations have shown that the effects of the low emission zones might not be as large as first thought (Lundberg, 2020). In the end 2019, however, it was concluded by the city council that the proposal on low emission zones should be taken into action, and in the beginning of 2020 the first low emission zone was introduced on Hornsgatan in central Stockholm.

Congestion Tax In 2006, Stockholm introduced congestion tax in the city center by charging all vehicles that pass the borders of Stockholm (Trafikverket, 2017). The aim of the congestion tax is to decrease the congestion as well as increase the passability in the city center (Transportstyrelsen, 2021b). The increased passability in the city center will have a positive effect on public transportation, as the timetable for the busses will be more accurate without the heavy traffic and the demand for using public transportation will increase as the costs connected to car usage becomes higher (Region Stockholm, 2020). Today, congestion taxes are being charged between the hours of 6am and 6:30pm, with the charged amount fluctuating during the day depending on the traffic (Transportstyrelsen, 2021a).

Gig-Economy Regulations According to Swedish law, there is a distinction to be made between workers (arbetstagare) and contractors (uppdragstagare) when it comes to labour rights. The main differences between these two types of employment are that the work of contractors is usually limited to a certain set of predetermined tasks, that the agreement between the employer and the contractor is temporary and

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that the contractors have influence over when, where and how the tasks are performed (Swedish law, 2021). When it comes to the Swedish regulations regarding the gig-economy business model, there have been discussions on whether or not so-called gig-workers should be classified as workers or contractors. According to Saco, there are three main factors contributing to the uncertainty of what laws and regulations should include the gig-economy. These factors are invisibilization of labour, the unclear distinction of the sharing economy as a good or as a service, as well as unclear boundaries between different actors on the labour market (Wahlbäck, 2019).

In the beginning of 2021, the Swedish transport sector took a stand in the debate as they signed a collective agreement with Foodora, thus forming the first Swedish collective agreement within the gig-economy sector. According to this agreement, the employees at Foodora will be granted the same rights as the rest of the transport sector regarding minimum wages and compensation for inconvenient working hours, yearly wage increases as well as retirement and insurance policies (Martinsson, 2021).

Environment Stockholm is one of Europe’s most environmentally-friendly cities and has the ambitious goal of becoming climate neutral by 2040. This is the long-term goal of the Environment Programme, that covers the period 2020-2024 and has set goals such as the city having clean air and low noise levels, Stockholm being developed into a smart city and being fossil free by 2030 (Hugosson, 2021). On an individual level, the inhabitants of Stockholm are considered having an environmentally sustainable lifestyle compared to many other European cities, partly thanks to the popularity of recycling. In 2019, nearly half, 49%, of the plastics on the Swedish market was recycled and 69% of all packaging (Hinde, 2020).

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