January 2, 2013
The Same-Day Delivery Experiment
With Amazon, Walmart and eBay all rolling out or experimenting with same-day delivery and a host of start-ups also touting similar services, same-day delivery became a popular theme this past holiday season. But several articles recently exploring the trend ultimately question the value of the service.
The glass-half-empty view harks back to the failures of Kozmo.com and Webvan during the dot-com era due to the exorbitant costs involved. With the going charge to consumers of between $5.00 and $10.00 per order, many articles assume retailers are subsidizing the same-day perk at this point.
The Wall Street Journal points to how eBay, which worked with Toys "R" Us, Macy’s, Target and others this past holiday season on the service, is paying couriers about $12.50 per hour, as well as parking fees and 55 cents per mile driven.
On the supply chain side, high-volume, same-day delivery with robot-driven warehouses likely costs $10 an order with one-off offers likely costing $50 each, Yossi Sheffi, director of the M.I.T. Center for Transportation and Logistics, estimated for The New York Times. "It’s outrageously expensive," he said.
The bigger question is whether consumers will pay up for same-day or just wait a day or two for free-delivery. Walmart told the Times that its test is showing that consumers often pick next-day delivery rather than same day. Other articles also attested that consumers would wait for free-delivery.
But on the glass-full side, some said consumers will eventually demand same-day delivery after getting accustomed to it.
"People don’t need immediate delivery today, but they will need it tomorrow, because as soon as you know it’s available, you start expecting it and you start demanding it," Tom Allason, chief executive of Shutl, a British same-day delivery service that will expand to the U.S. in 2013, told the Times.
For online retailers, offering same-delivery removes the "instant gratification" edge that brick & mortar stores have long held over e-commerce shopping.
Pulling products from local stores, closer warehouses, and other logistic efficiencies promise to reduce costs versus the Webvan days. EBay’s marketplace President Devin Wenig told the Journal, "To make local delivery work requires scale, there’s no doubt about that," but "we think we can significantly squeeze cost and times in local markets."
Regardless, brick & mortar retailers as well as Google and others are said to feel the need to invest in same-day delivery because of the threat of Amazon. Amazon’s opening of warehouses across the country are said to be setting the stage for the rollout of same-day delivery that has been offered since 2009 in cities near its warehouses. It costs only $3.99 for "Prime Service" customers.
"Amazon created this monster and everyone has had to jump on board to compete," Kerry Rice, an analyst at Needham & Co., told the Journal.
- Instantly Yours, for a Fee – The New York Times
- Daily Report: Online Retailers Push Same-Day Shipping – The New York Times
- Retailers gamble on same-day delivery – USA Today
- Retailers Rush Same-Day Delivery – The Wall Street Journal
- Order It Online, And… Voilà – The Wall Street Journal
- Same-day delivery plots a comeback – Direct Marketing News
BrainTrust
Recent Discussions
Discussion Questions
How big a threat is same-day delivery to brick & mortar? Will same-day delivery for a fee largely appeal to last-minute shoppers or a broader range of consumers? Do you see costs for the service reaching a level that will allow for profitable sales?
Poll
The search is always on for a better mousetrap or some delivery enhancement. But adding a fee for same-day service does not necessarily produce glee.
The difference in same-day delivery for a fee and next-day delivery without one will depend on both the economy and the impatience on a sufficiently large number of consumers. As for me, I can wait an extra day.
There will clearly be some who want same-day delivery and are willing to pay for it. You can always cost-basis the price tag and at least break even on the delivery. The answer may hinge on whether our increasing inability to delay gratification continues or finally tops out.
Same day delivery can level the playing field between online and offline retailers. It may not be needed for every purchase, but in a pinch it’s nice to know that it is available.
Retailers need to enter this fray with their eyes wide open to the costs. While it may make sense to subsidize a portion of the cost initially, loosing money on a sale is not a sustainable proposition. As with free shipping, same day delivery will go through a shake down phase before potentially settling in as a regular offering.
Here are the steps I expect most online consumers’ decision process regarding delivery entails. Same-day delivery—hey I want it fast. Oh it going to cost me $X—that’s okay I can wait a day or so longer and will take the free delivery. True after paying Amazon $79 a year you can then only pay $3.99, but how many items do you need to buy to amortize the upfront cost?
This is case of where the sizzle is greater than the steak. I think everyone is going to work towards trying to delivery same day, but unless someone figures out a way to take the cost out, somebody’s got to pay. I don’t see B&M retailers being willing to absorb that cost on smaller orders. The middle ground is to offer it free or for a reduced cost with an order that exceeds $X.
There certainly is a place in the marketplace for same-day delivery for a fee, but I don’t think it is a real threat to brick-and-mortar for a few reasons:
1. People still want to touch and feel products – the store experience can not be matched online;
2. Retailers will not be able to afford to offer a same-day delivery fee that will appeal to the masses and deliver a healthy profit at the same time; and
3. During the holidays, many retail companies offered two- or three-day delivery for free, which will be satisfactory for most shoppers.
Same-day delivery is a huge threat to brick & mortar. Not because people will opt for it, but because, as the article suggests, “offering same-delivery removes the ‘instant gratification” edge that brick & mortar stores have long held over e-commerce shopping.”
How many of us think we need something right now, but given we can have it tomorrow, find that acceptable. Online is all about customer service. Adding same-day is just one more step in beating brick & mortar. Once someone considers same-day, online, they consider the time and expense they save from going to the store. Surely, it is worth $10 to avoid the 2 hours or more in our busy lives that it takes to go to the store. And once that consideration is made, then the value of waiting until tomorrow increases.
The economics of same-day might not be great for the retailer, but the attraction is overwhelming. And, in the end, most consumers will opt for the free delivery options. This is a big win for on-line.
We have become consumers in a nanosecond world. We expect immediate response and gratification. As Amazon builds its network of distribution centers and warehouses the ability to offer same-day delivery will become increasingly cost-effective. Once we successfully experience this shopping service it will evolve into an expectation.
The shopping experience is about discovery, surprise and delight followed very quickly by tactile touch and experience. When I go through the emotional and validation process of a purchase decision, I want to be able to reward myself with using the product—immediately! This isn’t the case for all purchases, but same-day delivery will certainly become yet another brand differentiator for Amazon. This will in turn place pressure on select retailers to address this competitive service to further validate their relevance in the digital empowered consumer landscape.
Brick and mortars are in an interesting position: they actually have some of the warehouse and supply chain advantages Amazon is currently building, but they don’t use them currently for individual pick, pack and ship. In my opinion, we’re looking at another supply chain revolution where broken case and small unit shipments will be the norm and stores will become their own showrooms. Brick and mortar stores will need to rethink the amount of floor space devoted to selling and the amount devoted to inventory and shipping.
That being said, I think stores still have an advantage of “touch and feel” as well as no shipping costs required. Shoppers will take advantage of same day service for special events, but I think the bigger shopper revolution will be around getting the right inventory to the right place.
Today, Nordstroms, Macy’s and others are getting inventory from one store to service a customer in another. Shoppers will expect if their local store doesn’t have the right size or color that the clerk will be able to find that item in stock somewhere in the system and send it to the customer’s house. Getting inventory right and visible across the system will be the way brick and mortars compete.
I think this is about as dumb as trying to be the low cost provider or signing up with Groupon.
Who really is demanding same-day delivery? Is this a life-saving medicine? Some million dollar deal that will expire if not signed in 24 hours? Will the love of your life leave you if you don’t wear that new sweater tonight? Give me a break.
This is rapidly becoming yet another “entitlement” that the self-centered American consumer is being taught to demand. Think Saturday Postal Delivery. Does anyone get paper mail worth reading any more? Especially on a Saturday? Yet you’d think the prospect of no Saturday delivery is akin to snatching a bottle from a baby for all the furor it arouses.
The only good thing is that we’re rapidly running out of ways to self-inflict wounds in the retail world. Hope we live to see that day!
Different consumers have different needs at different times. Same-day delivery is an option that makes a lot of sense. Is this a “threat” to brick & mortar? I wouldn’t go that far. But if brick & mortar thinks so, then the solution is obvious: offer the same thing. Send the merchandise to the consumer’s door on the same day and make it a profitable endeavor to do so.
More interesting to me is the change I’ve noticed on Amazon for Prime customers—get it slower and we’ll credit you free on-demand music or movies. So far, I haven’t been offered enough of a credit to make it worth slow-boating things, especially over the holidays. But what an interesting math calculation I found myself doing: is 3 more days to get what I ordered worth $3 of music? Nope. That kind of calculation should scare all retailers, because what it hints at to me is once you subsidize your shipping costs, the odds of weaning customers off of it are going to be pretty low.
Same day delivery is really important in only a few categories, in my opinion. Pharmacy (Rx as well as OTC cough cold), beer, wine and liquor, grocery, and office products to name a few. I believe consumers are willing to wait a day or even two for free delivery of their book, clothing or shoe order.
More important than same day delivery for brick & mortar in my opinion is channel consistency. This holiday season I ran into two mind blowing examples of pricing not being consistent across online and Brick & Mortar which made me question why I was even shopping these two retailers. Retailers should not focus on controlling the channel someone decides to shop, but rather work on influencing them to shop you rather than a competitor. Consistent pricing and clean and easy to use UI is a great place to start building loyal customers.
Focus and perfect the basics before you rush to the new shiny object.
Brick & mortar has had the advantage of instant delivery as an offset for higher prices. Amazon is reaching critical size allowing them to have warehouses across the country and thus the capability for same day delivery. Most other online retailers simply don’t have the size to execute same-day in an economical manner.
Same-day at a fee will only represent a very small percentage of online sales. Consumers shop online for lower cost and to give it back in delivery will not be widely accepted.
The crowd that loved the $450 Starbucks card will love same-day delivery. Retailers should exercise caution when rolling this out; this option will work best for non-apparel items. I can’t imagine that retailers will want to encourage customers to have customers order 6 dresses, then return 5.
Same-day delivery can work in NYC, or some other big city, as the rural routes are way too expensive to manage. And as I said a million times before, only high income areas can easily adjust to the added expense of the same day delivery. I don’t think this is going to be the next great thing, because every year it costs more to do business.
Have we become that needy a buyer that same day service has/will become a requirement? What can we need so desperately that “today” is the only acceptable option? If same day service is that badly needed; let’s get off our butts and drive to the store. Same day service is always available there. It’s called “take it home with you.”
In certain markets, consumers will pay for the convenience, benefit, and ego-gratification of same day delivery. This is not a service that will pay out all across the country. It definitely cannot be sustained on a free delivery basis. In addition, returns will likely need to be charged a re-stocking fee for these same day requests.
This is a merchandising service that offers value for merchants and clients at peak times of year, and in selected markets. Merchants would do well to capture a better understanding of consumer-demand side before rushing into the fray. Better to invest a modest fee in a couple of months of consumer surveys, than to invest six or seven figures in setting up the platform, and potentially mis-directing an operations unit.
Cautious steps are in order.
Here is a real opportunity for brick and mortar operators. Instead of forcing them to carry around all their purchases, allow shoppers at the mall to leave them with the sales clerk. When the shopper arrives at the mall to park their car, they get a “storage key” from a set of lockers near the car. While they are shopping, they scan the key at a retailer and mall workers are constantly circling to pick up and route purchases to the parking area. When the shopper is ready to leave, they return to the locker near their car and retrieve their items.
There are a lot of issues here, from the issue of lost keys to the locker that is never emptied, but it brings a whole new perspective to “same day delivery.” It could even grow into using the selling area merely as a display area with the purchases being fulfilled from backroom inventory. Instant gratification is nice but we are fast reaching the tipping point, where tomorrow’s prime shopping age consumers have always shopped online. The challenge will be to get them to the mall. Anything we can do to make it easier will help.
There are definitely product categories that have more propensity to be desired to have same-day delivery potential. Those more likely categories need to assess the costs involved and start collaborative processes with the ecosystem of business partners (couriers, etc.) to extract as much cost as possible, in order to keep consumer fees reasonable. Same-day delivery will be the norm soon for certain items. Physical stores need to match that capability where necessary as soon as possible.
Same day delivery is a new to have, IMHO, but not a threat to b&m stores.Venturing out to visit a store is more about the experience and the ‘hunt’ which then results in the ‘find’. It will be a while before that can be replaced with an online experience.
As for same day delivery fees, it’s all about the customers’ needs, if they’re in a hurry and willing to spend, etc. Retailers must think through who their customer is and what their needs might be and not let the cost of this service destroy their profits.
I think it is a bigger threat to most company’s bottom line that does it. I had Amazon do a same day delivery at no charge. It showed up after 9pm and was left on my doorstep all night. I would have been fine with two-day.
Same day delivery may be a differentiator, but I don’t see enough people wanting it to make a difference in most industries.
With that said, we are seeing same day delivery being used by some independent book stores to compete against Amazon’s next day delivery. Here it is creating incremental sales, and they are keeping the delivery cost down.
This is a poor model to compete with brick and mortar retailers. The customers who need urgent products will go to the retailer to purchase it. This has proven itself time and again as other online retailers have tried to do this. The costs are tremendous and the advantages are almost negative in the value offered.
There is a select group of consumers that can afford a trip into space. What is that percentage? Is it a group that every retailer should target and try to meet the need? Sound silly? Yes.
Today, I can get online with Zappos and purchase a pair of shoes and have them on my doorstep the next morning. I don’t have to ask for it. I don’t have to pay extra for it. They just do it. How many online retailers can do that? Seriously. How about the majority of online retailers even trying to guarantee two-day delivery without a fee. Oh sure, there is free shipping. But, even that is three to five days.
The bigger threat to brick and mortar retailers is that online retailers CAN deliver.
In a shopping trip over the holidays, I attempted purchasing a pair of shoes at five different brick and mortar stores. None had them in stock or in my size. These weren’t obscure shoes, they were a pretty standard staple that is regularly displayed. I will give them this—each retailer offered to order them for me and call me to pick them up. One offered to ship directly to the house. My response? I can do that with Zappos.
Brick and mortar has many more threats than same day delivery. Their biggest threat is being able to deliver period. I haven’t even seen a retailer be able to provide the same instant information that Zappos can provide. No, same day delivery is not a hot demand. Delivery would be nice.
I was actually in shock at how antiquated the experience was at each location. Brick and mortar needs to look to experience and bringing an equal to in-person information versus being completely blown away by information online.
Well, let’s see. I go to Amazon and, so far at least, I find everything I’m looking for. I one-click to pay and no more than two days later and occasionally the next day, there it is outside my front door. Contrast this with driving to a mall, searching the store to find it’s out of stock and then driving home frustrated. Doesn’t seem like much of a contest does it? This obviously doesn’t include intellectual content like books, movies, etc. I click and I’m watching/reading in less than a minute.
Other than to see what’s going on, I don’t go shopping in 4-wall other than the Apple Store and Lowe’s.
Inasmuch as I’m meeting more and more people like me every day, I’d say this was a pretty big deal.
Let’s put it this way, 30% of all supermarket shopping trips are for one or two items, half are for 5 or less. There is no single definition of what a “quick trip” is (So Just What IS a “Quick Trip”?), but number of items purchased is clearly a factor.
Then, there is the dominant characteristic of these 1 or few item purchases: IMMEDIACY! That is, these trips are characterized by an immediate need of an item for consumption or use. It may be something to eat right now (or soon) or it could be something you urgently need and just found out you don’t have it. This could be almost anything, but a 9V battery for a smoke detector that just started beeping could be a good example.
The immediacy character of the trip is why the quick trip is NOT characterized by categories of merchandise, since if you break a shoelace, you may need it RIGHT NOW. So of course certain foods and beverages are obvious components of many quick trips, but a huge share of the quick trips are not necessarily selected by category.
Any discussion of same day delivery that does not recognize the massive magnitude of same day “SELF”-delivery, AKA quick trips, is unnecessarily complicating the question/answer.
Same-day delivery has been around – it’s not new. What’s new and changing are the players. As Amazon.com, Walmart, etc. get into the game, you can bet the stakes are raised. Not everyone will be willing to pay for it. The ones that do will be looking for the companies who offer them this convenience.
There will also be some companies that provide the service, but don’t charge more. As long as the companies can be competitively priced, customers might be willing to spend a little more for the value of the service. The question is about the value. Is it worth it?
Personally, I’m excited about what this means to the industry. I hope that it pushes retailers to the next level of providing a great service experience to their customers.
“…same-day delivery with robot-driven warehouses likely costs $10 an order with one-off offers likely costing $50 each”….
Let’s just digest those numbers for a while (but what does MIT know, right?)
Until I’m seeing delivery charges set at least at these levels, I’ll consider this whole thing a folly; what we learned from the dot-com nonsense, it seems, is that we’ll never learn anything! La plus ca change….
Imagine a scenario when all merchandise from the brick-and-mortar stores is delivered by the retailer using a courier. This can cause massive pressure on the logistics channel. Though customers can go for convenience associated with same-day delivery, with time the fees will rise as retailers’ capacity will be stretched.
Same-day delivery can be a source of new revenue or new customer acquisition for brick & mortar. But they should try to dissuade existing shoppers in retail outlets to use the service. This can jeopardize the existing business model and cause severe strain on new business.
This is not a threat to progressive retailers any more than mobile is, though some are being hurt by mobile while others are benefiting. What seems to be missing from this and other stories regarding digital/online is that these are tools. If your competition uses them and you don’t, you lose. The cost is a red herring as it is mostly displace by retail overhead/staff. This is not unlike Pizza delivery.
Remember, the free shipping from online is also a relatively new practice. The early days of ecommerce nearly always charged for shipping, but now free is the norm. I see this eventually happening in same day, or perhaps use the Pizza method of charging $1 for delivery. Most of the shipping cost will be absorbed by savings elsewhere.
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The search is always on for a better mousetrap or some delivery enhancement. But adding a fee for same-day service does not necessarily produce glee.
The difference in same-day delivery for a fee and next-day delivery without one will depend on both the economy and the impatience on a sufficiently large number of consumers. As for me, I can wait an extra day.
There will clearly be some who want same-day delivery and are willing to pay for it. You can always cost-basis the price tag and at least break even on the delivery. The answer may hinge on whether our increasing inability to delay gratification continues or finally tops out.
Same day delivery can level the playing field between online and offline retailers. It may not be needed for every purchase, but in a pinch it’s nice to know that it is available.
Retailers need to enter this fray with their eyes wide open to the costs. While it may make sense to subsidize a portion of the cost initially, loosing money on a sale is not a sustainable proposition. As with free shipping, same day delivery will go through a shake down phase before potentially settling in as a regular offering.
Here are the steps I expect most online consumers’ decision process regarding delivery entails. Same-day delivery—hey I want it fast. Oh it going to cost me $X—that’s okay I can wait a day or so longer and will take the free delivery. True after paying Amazon $79 a year you can then only pay $3.99, but how many items do you need to buy to amortize the upfront cost?
This is case of where the sizzle is greater than the steak. I think everyone is going to work towards trying to delivery same day, but unless someone figures out a way to take the cost out, somebody’s got to pay. I don’t see B&M retailers being willing to absorb that cost on smaller orders. The middle ground is to offer it free or for a reduced cost with an order that exceeds $X.
There certainly is a place in the marketplace for same-day delivery for a fee, but I don’t think it is a real threat to brick-and-mortar for a few reasons:
1. People still want to touch and feel products – the store experience can not be matched online;
2. Retailers will not be able to afford to offer a same-day delivery fee that will appeal to the masses and deliver a healthy profit at the same time; and
3. During the holidays, many retail companies offered two- or three-day delivery for free, which will be satisfactory for most shoppers.
Same-day delivery is a huge threat to brick & mortar. Not because people will opt for it, but because, as the article suggests, “offering same-delivery removes the ‘instant gratification” edge that brick & mortar stores have long held over e-commerce shopping.”
How many of us think we need something right now, but given we can have it tomorrow, find that acceptable. Online is all about customer service. Adding same-day is just one more step in beating brick & mortar. Once someone considers same-day, online, they consider the time and expense they save from going to the store. Surely, it is worth $10 to avoid the 2 hours or more in our busy lives that it takes to go to the store. And once that consideration is made, then the value of waiting until tomorrow increases.
The economics of same-day might not be great for the retailer, but the attraction is overwhelming. And, in the end, most consumers will opt for the free delivery options. This is a big win for on-line.
We have become consumers in a nanosecond world. We expect immediate response and gratification. As Amazon builds its network of distribution centers and warehouses the ability to offer same-day delivery will become increasingly cost-effective. Once we successfully experience this shopping service it will evolve into an expectation.
The shopping experience is about discovery, surprise and delight followed very quickly by tactile touch and experience. When I go through the emotional and validation process of a purchase decision, I want to be able to reward myself with using the product—immediately! This isn’t the case for all purchases, but same-day delivery will certainly become yet another brand differentiator for Amazon. This will in turn place pressure on select retailers to address this competitive service to further validate their relevance in the digital empowered consumer landscape.
Brick and mortars are in an interesting position: they actually have some of the warehouse and supply chain advantages Amazon is currently building, but they don’t use them currently for individual pick, pack and ship. In my opinion, we’re looking at another supply chain revolution where broken case and small unit shipments will be the norm and stores will become their own showrooms. Brick and mortar stores will need to rethink the amount of floor space devoted to selling and the amount devoted to inventory and shipping.
That being said, I think stores still have an advantage of “touch and feel” as well as no shipping costs required. Shoppers will take advantage of same day service for special events, but I think the bigger shopper revolution will be around getting the right inventory to the right place.
Today, Nordstroms, Macy’s and others are getting inventory from one store to service a customer in another. Shoppers will expect if their local store doesn’t have the right size or color that the clerk will be able to find that item in stock somewhere in the system and send it to the customer’s house. Getting inventory right and visible across the system will be the way brick and mortars compete.
I think this is about as dumb as trying to be the low cost provider or signing up with Groupon.
Who really is demanding same-day delivery? Is this a life-saving medicine? Some million dollar deal that will expire if not signed in 24 hours? Will the love of your life leave you if you don’t wear that new sweater tonight? Give me a break.
This is rapidly becoming yet another “entitlement” that the self-centered American consumer is being taught to demand. Think Saturday Postal Delivery. Does anyone get paper mail worth reading any more? Especially on a Saturday? Yet you’d think the prospect of no Saturday delivery is akin to snatching a bottle from a baby for all the furor it arouses.
The only good thing is that we’re rapidly running out of ways to self-inflict wounds in the retail world. Hope we live to see that day!
Different consumers have different needs at different times. Same-day delivery is an option that makes a lot of sense. Is this a “threat” to brick & mortar? I wouldn’t go that far. But if brick & mortar thinks so, then the solution is obvious: offer the same thing. Send the merchandise to the consumer’s door on the same day and make it a profitable endeavor to do so.
More interesting to me is the change I’ve noticed on Amazon for Prime customers—get it slower and we’ll credit you free on-demand music or movies. So far, I haven’t been offered enough of a credit to make it worth slow-boating things, especially over the holidays. But what an interesting math calculation I found myself doing: is 3 more days to get what I ordered worth $3 of music? Nope. That kind of calculation should scare all retailers, because what it hints at to me is once you subsidize your shipping costs, the odds of weaning customers off of it are going to be pretty low.
Same day delivery is really important in only a few categories, in my opinion. Pharmacy (Rx as well as OTC cough cold), beer, wine and liquor, grocery, and office products to name a few. I believe consumers are willing to wait a day or even two for free delivery of their book, clothing or shoe order.
More important than same day delivery for brick & mortar in my opinion is channel consistency. This holiday season I ran into two mind blowing examples of pricing not being consistent across online and Brick & Mortar which made me question why I was even shopping these two retailers. Retailers should not focus on controlling the channel someone decides to shop, but rather work on influencing them to shop you rather than a competitor. Consistent pricing and clean and easy to use UI is a great place to start building loyal customers.
Focus and perfect the basics before you rush to the new shiny object.
Brick & mortar has had the advantage of instant delivery as an offset for higher prices. Amazon is reaching critical size allowing them to have warehouses across the country and thus the capability for same day delivery. Most other online retailers simply don’t have the size to execute same-day in an economical manner.
Same-day at a fee will only represent a very small percentage of online sales. Consumers shop online for lower cost and to give it back in delivery will not be widely accepted.
The crowd that loved the $450 Starbucks card will love same-day delivery. Retailers should exercise caution when rolling this out; this option will work best for non-apparel items. I can’t imagine that retailers will want to encourage customers to have customers order 6 dresses, then return 5.
Same-day delivery can work in NYC, or some other big city, as the rural routes are way too expensive to manage. And as I said a million times before, only high income areas can easily adjust to the added expense of the same day delivery. I don’t think this is going to be the next great thing, because every year it costs more to do business.
Have we become that needy a buyer that same day service has/will become a requirement? What can we need so desperately that “today” is the only acceptable option? If same day service is that badly needed; let’s get off our butts and drive to the store. Same day service is always available there. It’s called “take it home with you.”
In certain markets, consumers will pay for the convenience, benefit, and ego-gratification of same day delivery. This is not a service that will pay out all across the country. It definitely cannot be sustained on a free delivery basis. In addition, returns will likely need to be charged a re-stocking fee for these same day requests.
This is a merchandising service that offers value for merchants and clients at peak times of year, and in selected markets. Merchants would do well to capture a better understanding of consumer-demand side before rushing into the fray. Better to invest a modest fee in a couple of months of consumer surveys, than to invest six or seven figures in setting up the platform, and potentially mis-directing an operations unit.
Cautious steps are in order.
Here is a real opportunity for brick and mortar operators. Instead of forcing them to carry around all their purchases, allow shoppers at the mall to leave them with the sales clerk. When the shopper arrives at the mall to park their car, they get a “storage key” from a set of lockers near the car. While they are shopping, they scan the key at a retailer and mall workers are constantly circling to pick up and route purchases to the parking area. When the shopper is ready to leave, they return to the locker near their car and retrieve their items.
There are a lot of issues here, from the issue of lost keys to the locker that is never emptied, but it brings a whole new perspective to “same day delivery.” It could even grow into using the selling area merely as a display area with the purchases being fulfilled from backroom inventory. Instant gratification is nice but we are fast reaching the tipping point, where tomorrow’s prime shopping age consumers have always shopped online. The challenge will be to get them to the mall. Anything we can do to make it easier will help.
There are definitely product categories that have more propensity to be desired to have same-day delivery potential. Those more likely categories need to assess the costs involved and start collaborative processes with the ecosystem of business partners (couriers, etc.) to extract as much cost as possible, in order to keep consumer fees reasonable. Same-day delivery will be the norm soon for certain items. Physical stores need to match that capability where necessary as soon as possible.
Same day delivery is a new to have, IMHO, but not a threat to b&m stores.Venturing out to visit a store is more about the experience and the ‘hunt’ which then results in the ‘find’. It will be a while before that can be replaced with an online experience.
As for same day delivery fees, it’s all about the customers’ needs, if they’re in a hurry and willing to spend, etc. Retailers must think through who their customer is and what their needs might be and not let the cost of this service destroy their profits.
I think it is a bigger threat to most company’s bottom line that does it. I had Amazon do a same day delivery at no charge. It showed up after 9pm and was left on my doorstep all night. I would have been fine with two-day.
Same day delivery may be a differentiator, but I don’t see enough people wanting it to make a difference in most industries.
With that said, we are seeing same day delivery being used by some independent book stores to compete against Amazon’s next day delivery. Here it is creating incremental sales, and they are keeping the delivery cost down.
This is a poor model to compete with brick and mortar retailers. The customers who need urgent products will go to the retailer to purchase it. This has proven itself time and again as other online retailers have tried to do this. The costs are tremendous and the advantages are almost negative in the value offered.
There is a select group of consumers that can afford a trip into space. What is that percentage? Is it a group that every retailer should target and try to meet the need? Sound silly? Yes.
Today, I can get online with Zappos and purchase a pair of shoes and have them on my doorstep the next morning. I don’t have to ask for it. I don’t have to pay extra for it. They just do it. How many online retailers can do that? Seriously. How about the majority of online retailers even trying to guarantee two-day delivery without a fee. Oh sure, there is free shipping. But, even that is three to five days.
The bigger threat to brick and mortar retailers is that online retailers CAN deliver.
In a shopping trip over the holidays, I attempted purchasing a pair of shoes at five different brick and mortar stores. None had them in stock or in my size. These weren’t obscure shoes, they were a pretty standard staple that is regularly displayed. I will give them this—each retailer offered to order them for me and call me to pick them up. One offered to ship directly to the house. My response? I can do that with Zappos.
Brick and mortar has many more threats than same day delivery. Their biggest threat is being able to deliver period. I haven’t even seen a retailer be able to provide the same instant information that Zappos can provide. No, same day delivery is not a hot demand. Delivery would be nice.
I was actually in shock at how antiquated the experience was at each location. Brick and mortar needs to look to experience and bringing an equal to in-person information versus being completely blown away by information online.
Well, let’s see. I go to Amazon and, so far at least, I find everything I’m looking for. I one-click to pay and no more than two days later and occasionally the next day, there it is outside my front door. Contrast this with driving to a mall, searching the store to find it’s out of stock and then driving home frustrated. Doesn’t seem like much of a contest does it? This obviously doesn’t include intellectual content like books, movies, etc. I click and I’m watching/reading in less than a minute.
Other than to see what’s going on, I don’t go shopping in 4-wall other than the Apple Store and Lowe’s.
Inasmuch as I’m meeting more and more people like me every day, I’d say this was a pretty big deal.
Let’s put it this way, 30% of all supermarket shopping trips are for one or two items, half are for 5 or less. There is no single definition of what a “quick trip” is (So Just What IS a “Quick Trip”?), but number of items purchased is clearly a factor.
Then, there is the dominant characteristic of these 1 or few item purchases: IMMEDIACY! That is, these trips are characterized by an immediate need of an item for consumption or use. It may be something to eat right now (or soon) or it could be something you urgently need and just found out you don’t have it. This could be almost anything, but a 9V battery for a smoke detector that just started beeping could be a good example.
The immediacy character of the trip is why the quick trip is NOT characterized by categories of merchandise, since if you break a shoelace, you may need it RIGHT NOW. So of course certain foods and beverages are obvious components of many quick trips, but a huge share of the quick trips are not necessarily selected by category.
Any discussion of same day delivery that does not recognize the massive magnitude of same day “SELF”-delivery, AKA quick trips, is unnecessarily complicating the question/answer.
Same-day delivery has been around – it’s not new. What’s new and changing are the players. As Amazon.com, Walmart, etc. get into the game, you can bet the stakes are raised. Not everyone will be willing to pay for it. The ones that do will be looking for the companies who offer them this convenience.
There will also be some companies that provide the service, but don’t charge more. As long as the companies can be competitively priced, customers might be willing to spend a little more for the value of the service. The question is about the value. Is it worth it?
Personally, I’m excited about what this means to the industry. I hope that it pushes retailers to the next level of providing a great service experience to their customers.
“…same-day delivery with robot-driven warehouses likely costs $10 an order with one-off offers likely costing $50 each”….
Let’s just digest those numbers for a while (but what does MIT know, right?)
Until I’m seeing delivery charges set at least at these levels, I’ll consider this whole thing a folly; what we learned from the dot-com nonsense, it seems, is that we’ll never learn anything! La plus ca change….
Imagine a scenario when all merchandise from the brick-and-mortar stores is delivered by the retailer using a courier. This can cause massive pressure on the logistics channel. Though customers can go for convenience associated with same-day delivery, with time the fees will rise as retailers’ capacity will be stretched.
Same-day delivery can be a source of new revenue or new customer acquisition for brick & mortar. But they should try to dissuade existing shoppers in retail outlets to use the service. This can jeopardize the existing business model and cause severe strain on new business.
This is not a threat to progressive retailers any more than mobile is, though some are being hurt by mobile while others are benefiting. What seems to be missing from this and other stories regarding digital/online is that these are tools. If your competition uses them and you don’t, you lose. The cost is a red herring as it is mostly displace by retail overhead/staff. This is not unlike Pizza delivery.
Remember, the free shipping from online is also a relatively new practice. The early days of ecommerce nearly always charged for shipping, but now free is the norm. I see this eventually happening in same day, or perhaps use the Pizza method of charging $1 for delivery. Most of the shipping cost will be absorbed by savings elsewhere.