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.
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."
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?