BrainTrust Query: Will Same-Day Delivery Become a Retail Necessity?
Through a special arrangement, presented here for discussion is a section of a current article from the newmarketbuilders blog.
According to Tom Allason, founder and CEO of the U.K. delivery service, Shutl, American retailers are "freaked out" over the prospect of Amazon achieving nationwide same-day delivery because it removes one of the largest competitive advantages brick ‘n mortars still have.
"Retailers realize that they have to do something because otherwise Amazon is going to offer a much better convenience proposition than they can," said Mr. Allason in an interview with newmarketbuilders. "At the moment, Amazon is competing and winning in two key battlegrounds where multi-channel retailers are structurally disadvantaged: price and range."
No multi-channel retailer can come near to competing with Amazon on product range because Amazon isn’t limited by what it can fit in stores. Said Mr. Allason, "Its only limitation is what it can fit in its warehouses, which are huge and located in the middle of nowhere where land is cheap. By the end of this year, it will have 50 warehouses across North America."
By contrast, multi-channel retailers need stores located near consumers, where land is expensive. Amazon doesn’t need many workers in its warehouses and will need even fewer in the future because Kiva Systems, the robotics company it acquired in March 2012, will make its warehouses more efficient.
Also, while "Buy Online, Pick Up in Store" may help retailers, the execution has been lacking.
![[Image:Â Shutl]](/public/images/discussions/16775/shutl-still.jpg)
Not surprisingly, Shutl believes it offers a solution with its outsourced same-day delivery service recently debuted in Chicago, New York City and San Francisco, with more cities to follow. Founded in 2009, it currently operates in 60 cities in the U.K.
Shutl coordinates orders with local retailers and courier companies, a service "way outside" the core competencies of a retailer. It keeps costs down by working with established couriers, removing the infrastructure costs of hiring drivers or owning trucks. Shutl also arranges pickups only for customers who live within 10 miles of a store, another touted advantage over Amazon whose warehouses may be many miles further away.
"We’re a software business, not a logistics business, and the advantage of our platform is that we leverage the volume of all of our retail partners to offer awesome pricing and really high-quality service," said Mr. Allason. "This just isn’t something that any retailer can do."
In the U.K., Shutl offers delivery within as few as 90 minutes of the order at a cost of around $10 to consumers, although some retailers in the U.K. are willing to absorb the cost in certain cases in order to drive sales.
As far as demand, Mr. Allason said that once Amazon, Google, eBay and Walmart start pushing same-day delivery, consumers are going to expect it. Said Mr. Allason, "Of course, I’m slightly biased, but I see that as inevitable."
Discussion Questions
Will offering same-day delivery become a competitive necessity for retailers in the future? Should retailers outsource same-day delivery or manage the service in-house?
We live in a world of sound bites and instant gratification. This includes getting whatever we’ve purchased delivered as quickly as possible. That being said, I don’t see same day delivery being a necessity for all items. It may become a needed-to-win for certain categories, but not a needed-to-play.
The decision to internalize or outsource same-day delivery will likely be a function of cost and service levels. If a retailer can achieve the service levels its customers expect and take advantage of the shared cost of an outsourced service, then they will.
Same-day delivery will have to add some cost to the program, as this is necessary to cover the program. There are some up-and-coming same-day outsourcing companies and franchises that will do this for you, but rural areas will still be left in the dust. Major cities and suburbs will eventually have this soon, and the logistics will be important to do this right.
I am guessing $10 for delivery should cover it, and hopefully the customers will be home to receive the goods, or it could slow down the system.
I would outsource it if I had this service, as I don’t need more employees and liability insurance, and that will probably be the way many businesses will go as well, knowing what the cost is up front.
Free delivery was the last battlefield, same-day delivery is the next one. I agree with Steve, however, that it’s more important for some categories than others. The best way for “omnichannel” retailers to compete on this front is to leverage the inventory in their brick-and-mortar locations. It helps explain why stores from Walmart to Macy’s are moving fast in this direction.
A “necessity”? No.
But it is going to be one powerful addition to the shopping satisfaction equation that is going to be very difficult to offset—for the immediate gratification purchase.
Whether a retailer invests in same-day delivery, regardless of whether they are online or B&M, should be driven by how consumers view their purchase. Is it important to me to get same day delivery on the new table saw I just bought online? Not really. Will it be important to me to get the replacement for the blade I just broke when I have a customer waiting for a piece of furniture? You bet!
Maybe same-day delivery will become essential, but bricks will still retain some edge for immediacy.
The advantage for the consumer of this being handled by third parties is that they can offer the service across multiple retailers (effectively negating some of Amazon’s “range” advantage).
I agree that multichannel retailers have struggled with executing on this capability. That said, how much it will really cost and how much stuff people will decide they want to have the same day are still important, open questions.
Same delivery is not the major issue. The importance of managing a quick response inventory system is. Macy’s now leverages inventory from all stores and warehouses to get products to consumers as quickly as possible. This is possible only if the retailer knows where all inventory is at any point in time and knows how critical same day delivery is to the consumer.
The bar continues to be raised as do consumer expectations. Getting the organization systems in place to respond is critical for success.
This is a really exciting value proposition for shoppers. To get the lower-cost benefits of giants like Amazon.com, coupled with the convenience of not having to wait for packages is extremely attractive.
Shutl is right: customers hate shipping costs. People are more inclined to pay for accessibility, and the demand will only grow. Amazon, eBay, and other online giants will join the ranks to compete. The challenge for brick and mortar retailers will be to offer services and appeal that will keep customers coming into stores. If people can source items in-store and go online and pay a lesser price and have it delivered the same day, they will most certainly take advantage. It’s an entirely new way to shop; it will be interesting to watch the race to get there and who gets it right first.
Same-day delivery will continue to pick up steam and be important to certain groups of shoppers, indeed expected by those shoppers. While it moves closer to immediate gratification, brick and mortar stores still have that advantage, as they do if product advice/knowledge or personal service is important. However for basic transactions of undifferentiated products, same-day delivery will suffice without any real personal interaction. So much will depend on what you are selling, and your positioning, as to whether this is a necessity for you.
Remember dial-up? Made my teeth hurt when I had to use it at home, as I had high-speed at work. Once people become accustomed to a convenience like this, they will have trouble going back to waiting. A retailer trying to replicate what a software service can provide would be stupid. The operational efficiency of an outsourced service system can’t be beat and allows the retailer to do what it does best, even better—find customers and products for them.
For the very few retailers that have the scale to support this service, it will increasingly be adopted as a differentiating factor for consumers. I don’t think this will become a “necessity” however.
Amazon has a distinct advantage by nature of its business structure, and brick and mortar retailers must each determine their key assets and how they can be used to fight back.
Same-day delivery will not become a necessity for retailers. Will it be tested? Yes. Will it be a roaring success? No. Consumers don’t want to pay delivery charges.
In my opinion, same day will only be relevant in certain categories. Pharmacy and personal care items, food, beverage (alcohol), office supplies are some easy examples. Not sure a customer really needs or will be willing to pay for same day delivery of their Nike sneakers. Do you really need them in 90 minutes?
Same day delivery service should be outsourced. Far too expensive for an individual chain to maintain and update while keeping costs down. I like the Shutl model.
I really don’t think same-day delivery will be a competitive necessity. What will be important is the service offered by each retailer.
For certain categories I may be more than happy to wait a few days for the best price and free shipping. In other instances, if I need it now, I may just have to buy from a different retailer. So it goes….
Should the service be outsourced? Absolutely!
Retail used to be a service business. When I was a boy, few people went to the grocery store—you called in your order and it was delivered before supper. When you bought a suit, it was fitted. Retailers were judged by their service and lived and died based on their service.
Then self-service became the fad and over time, people who knew what they were doing were replaced by people who can’t make change without a computerized cash register. The variety and efficiency of the internet coupled with mega-retailers like Walmart and Target have made general merchandise and grocery commodity businesses.
The future of retail has to revert to service. The electronic retailer who used to make it on TVs can now make a living selling custom programmable remotes and setting up Roku devices. A communications consultant can make a living without selling TVs from his inventory. Well, you might say that this service isn’t of value, but you don’t realize that the baby boomers account for well over 80% of the wealth in the USA and many of them aren’t tech savvy.
Same-day delivery won’t save local retailers—personal service can save some of these retailers. If you want to invest locally, look at your community, look at the businesses—you are going to find that almost all of those doing well are service businesses, not retailers. Delivery isn’t the cure for anything! Service is the cure; unfortunately, it isn’t easy to do!
We just did a broad study here in the U.S. on this topic and one of the most interesting results we got back was that the ‘bricks’ promise of “instant gratification” (i.e. buying something and walking out with it NOW) topped the highest rated advantages of online shopping, including peer reviews, price comps and unlimited options.
So, to an extent, what Mr. Allason is saying is true. But what our study tells us is that there are certain elements of old fashioned store shopping that still far outweigh the online versions. Obviously though, these factors (like instant gratification) need to be emphasized more by ‘bricks’ retailers or they risk getting out P.R.’d by their media savvy digital counterparts.
The concept of same-day delivery in some retail sectors is becoming a reality. This is a “disruptive service.” It will potentially change the way many, if not all retailers do business. Companies will figure out how to best compete and adapt to this new version of retail interaction. It doesn’t matter if the retailer outsources or manages it in-house, it must be seamless and invisible to the customer.
Absolutely. Retailers should encourage customers to shop when and where it pleases them, and capitalize on the brick and mortar benefit of inventory close to where the consumer lives.
Retailers should outsource this feature—it is important to recognize what you are good at and where you do not have expertise. Delivery is subject to so many variables that retailers should let those who specialize worry about staffing, traffic, weather, etc.
We used to be satisfied with “4-6=week” delivery times in the dark ages prior to online shopping. (LOL) Then we were fine with exorbitant shipping charges when online landed on the planet.
Same-day delivery is a luxury…but only for now. We will expect it within 18 months. Mark my words.
Of course! Luxuries of yesteryears are necessity for today. While we will witness evolution in terms of “which” items will be prioritized for same day delivery, eventually the expectation would be for all. We don’t like ambiguities do we? As Sid rightly mentioned in his post, remember dial-up?
Refrigerators killed the ice business, TV killed the Radio and effective, low cost, same-day delivery will sound the death knell for brick and mortar retail. Not that brick and mortar will disappear completely, but it will not exist as it does today.
Most of the companies strive to achieve “Same-day delivery,” the shopping model which have made a significant impact among shoppers. The model is in its growth phase where it is being tested, tracked the performance and customer response. Only few of the customers would like to get delivered quickly, paying an extra premium and hence it could not be a retail necessity. It is only during holiday season or for others reasons where a customer would like same day delivery. But growing infrastructure, logistics and development in information technology has helped establishing the same day delivery concept and hence retailers that couldn’t provide the service would be under the pressure of retail giants who are significantly establishing the required infrastructure. It would become a necessity for all retailers just for competition.
All retailers cannot offer same day delivery as business model would require unique warehousing strategy to meet the low volume sales, at the same time having a responsive supply chain. They shall need to establish warehouses that could adapt the requirements of growing customer base. Their warehouses shall be designed to achieve higher efficiencies and keep storage costs low. Capital expenditure required establish the infrastructure shall cost them more and hence they could outsource same day delivery operations to 3PL parties to achieve economies of scale.
I do feel that if one company ends up doing it, then the rest will follow suit. I don’t feel that it’s a necessity though. If you want instant gratification, just go to a store. Same day delivery would expensive, stressful, and dangerous for drivers and other employees.