The pros and cons of same day delivery

Last year, Amazon launched a same-day delivery service in 14 major US markets, and it has already extended the service to another two cities. Showing that it’s deadly serious about the service, the company was reportedly in negotiations in December to lease up to 25 cargo planes to give it greater flexibility and make it more independent of third-party vendors.

Department stores Macy’s and Bloomingdale’s (which are both owned by Macy’s, Inc.) have expanded their same-day delivery service to 17 metro markets. Macy’s is using a crowdsourcing service called Deliv, which ships the products directly from their stores to customers’ homes. The shipping cost is roughly comparable to standard shipping methods that take two days or more to deliver.

Deliv’s other clients include major mall owners and their tenants across the US. Deliv’s model is an outstanding example of disruption by ‘uberfication’ – using private vehicles to whiz merchandise from retail stores to customers along optimised routes generated by routing software.

The most popular products for same-day delivery are clothing, shoes, coffee and fancy dress.
- Allyce Truscott, Wantitnow

In Australia, same-day delivery has shallow roots but an enthusiastic customer base. Wantitnow is a delivery service at the leading edge. It has been operating for about five years, delivering e-commerce orders for its 130 retail partners within three hours of order placement in the Sydney and Melbourne metro areas. The company’s shipment rates have grown more than 50 per cent each year.

Wantitnow’s national sales manager, Allyce Truscott, says the most popular products for same-day delivery are clothing, shoes, coffee and fancy dress. Wantitnow also offers three four-hour time slots through the day and evening to accommodate customers who want a specific delivery window.

While few consumers would turn down the opportunity to have their shopping delivered as quickly and reliably to their doorsteps as a pizza, that doesn’t mean it will ultimately become universal.

There are three main reasons for this. First, the economics don’t make sense to a lot of retailers.

Second, same-day delivery means retailers must maintain sufficient inventory for each area being serviced. This, in turn, requires storage space and extremely sophisticated predictive analytics capable of accurately assessing how much stock is required at any given time.

Finally, there are things that shoppers value even more than same-day delivery. Surveys of consumers done overseas suggest that people are a lot more interested in free shipping and having ‘transparency’ about when the goods are likely to arrive than in outright speed.

Customers want to know their delivery will be made within a fairly narrow window, even if that is five days. They are prepared to wait a little longer and pay a little less (preferably nothing), as long as they have some predictability around which they can plan their lives. They also like the ability to track the item throughout the post-order process.

Still, there is a clear niche for same-day delivery, particularly at those times of the year when shopping centres are very crowded. 

Verdict:

Same-day delivery may seem like the natural progression in the battle to make shipping a competitive advantage. But in reality, it is probably going to be a niche service focused on certain kinds of products in high-density urban areas where the distribution costs are scalable. Same-day delivery isn’t going to be important to everyone and that’s why retailers need to offer a menu of shipping options that provide transparency, convenience and low cost.