The concept goes hand in hand with the very nature of the internet – fast, efficient, readily available. If consumers today aren’t exactly demanding same-day delivery, they’ll want it when it arrives.
When, of course, is the big question. In most markets, same-day delivery appears prohibitively expensive, if not logistically unsound. (There are obvious exceptions, such as grocery delivery, corporate accounts and boutique-style services for very high-priced goods.) Which hasn’t stopped a number of providers from launching tentative efforts in that direction.
“Consumers are not the driver for the emergence of same-day,” says Rob Howard, chief executive officer of Grand Junction Inc., which sells a software platform for executing local delivery. “It’s really about competitive response.”
Meaning that just about every major retailing website feels that it has to jump in the game. Already we’re seeing limited same-day offerings from eBay Inc., Google and Amazon.com. On the logistics-provider side, same-day is on the menu from FedEx, UPS and possibly the U.S. Postal Service. (The last has run pilots of its same-day Metro Post service in San Francisco and New York, to less-than-enthusiastic response from e-tailers.)
Typical of any emerging market, the various services are taking varying forms. In the San Francisco Bay Area, Google is deploying a fleet of some 50 Priuses, while eBay is drawing on the assets of Shutl, a U.K.-based service that it acquired last year. Then there’s Amazon, with its dream of drones that can carry packages to the consumer’s doorstep.
The nature of the service can vary as well. For the moment, the most feasible flavor consists of buyers ordering online, then picking up that day from a retail store. In such cases, of course, the responsibility for ensuring same-day receipt rests with the consumer. In the alternative, an order can be delivered to the consumer directly from the store, rather than being run through a distribution center. Retailers might accrue multiple orders, then deliver them together to their individual destinations. That type of service is already being regularly provided in the maintenance and repair sector, and from industrial parts sellers such as W.W. Grainger, Inc.
Amazon continues to open regional distribution centers all over the country. Currently it operates 108 fulfillment centers, with 74.6 million square feet of space. With that kind of a network, you would think that Amazon could deliver within hours on a regular basis in major markets.
One of its newest D.C.s is in Tracy, in California’s Central Valley. That’s less than 90 minutes from San Francisco, but Howard doubts Amazon’s ability to offer near-instant delivery to the Bay Area’s population of some 6 million consumers.
More likely is the possibility of Amazon taking orders placed before, say, 11:30 a.m., and delivering then throughout the day. “That’s the fear of every retailer we talked to,” says Howard. Amazon’s huge volumes could allow it to provide same-day within a defined area at relatively low cost.
“Retail stores have got to be able to match that,” Howard says. “The only way is with local store presence.”
Most stores aren’t designed as warehouses, however, so retailers would need to make certain changes to enable delivery from a sales floor. In addition to expanding or reorganizing the back room, they would have to employ associates as pickers, creating the possibility that shoppers will confuse them with sales clerks. In any case, the setup could never be as cost-efficient as an automated, purpose-built D.C.
The retail store also serves as picking location for e-tailing sites such as eBay and Google, whose employees assume the role of shopper in order to purchase product and drive it to the actual buyer.
Retailers can’t be too happy with that arrangement, as it cuts them out of the loop. “If I’m a retailer,” says Howard, “I prefer to sell and deliver it myself.” Either way, the use of human avatars for online buyers is likely to be too expensive for most providers. That’s why eBay and Google’s same-day option “is very limited so far.”
The more likely role for those online giants is to collaborate with retailers, offering fulfillment and delivery for orders taken by the stores. Yet they’re far from being experts in executing that delicate task. And retailers might well worry that any service failures will reflect poorly on them, not the middleman.
Which leaves the real experts in logistics – UPS, FedEx and their direct competition – to ramp up their same-day options on behalf of retailers and e-tailers alike. In addition, a number of entities specialize in expedited delivery of critical items, but their services are pricey and not easily extended to everyday retail purchases.
Same-day service appears to be a more mature offering in Europe. The postal services of Sweden and Belgium are successfully handling home delivery of groceries. Whether those programs can be duplicated here by USPS is another question entirely.
With its extensive network of vehicles and sorting centers, USPS would seem a natural candidate for same-day delivery. (That, at least, was the rationale behind the Metro Post pilots.) But Howard thinks that a large-scale commitment to same-day could be disruptive to the Postal Service’s existing offering. “There are some fundamental infrastructure things that prevent them from doing one-hour or same-day,” he says.
In the age of the impatient consumer, same-day delivery is an inevitability. But it won’t become economically viable until there’s a shakeout of the players, a clearer definition of their roles and a market that’s much less fragmented. Which is … some day.
Listen to my podcast interview with ARC Advisory Group’s Steve Banker, about the prospects for same-day delivery.
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