Retail Shipping Wars
As a greater share of retail purchases are transacted online - total e-commerce sales in 2013 increased 16.9% vs. 2012, and almost assuredly will grow again in 2014 -- product delivery has grown in importance for retailers. In fact, for many brands fast shipping has become a competitive advantage.
This has been driven in large part by consumers' desire for instant gratification when they make a purchase online. They're no longer willing to wait five to seven days for their order to arrive; they want it that day, the next day or, worst case, the day after that. Channels have been blurred for consumers. It doesn't matter to them whether they're ordering online or making a purchase in-store; they expect the same seamless experience.
As a result, retailers have been forced to adapt.
No retailer has gone further to address consumers' need for fast delivery than Amazon.com. The online giant is in the process of building distribution centers across the country (aided by local tax breaks in exchange for bringing jobs) to enable it to offer customers same-day delivery. Amazon now offers same-day delivery in 11 cities, with plans for more.
While Amazon was the trailblazer for same-day delivery of online orders, other retailers have quickly followed suit. eBay recently announced plans to expand its same-day delivery service, eBay Now, to 25 cities in 2014. However, eBay is leveraging existing stores or "retail partners" as distribution centers in its quest to win the shipping race.
Current retail partners include:
- Best Buy
- Home Depot
- Finish Line
- Office Depot
Customers that order items on eBay's marketplace from any of these retailers can have their order delivered that day.
Even traditional brick-and-mortar retailers Wal-Mart and Home Depot are getting into the same-day delivery race. Wal-Mart is leveraging its extensive physical presence across the country to ship online orders direct from its stores. In addition, the country's biggest retailer is flirting with a radical plan to compete with Amazon in same-day shipping: having its in-store customers deliver packages to online buyers.
The crowdsourcing model would have the retailer renting space in customers' vehicles to deliver packages to others. Wal-Mart would offer a discount on the customer's shopping bill, effectively covering the cost of their gas in return for the delivery of packages. Home Depot announced last December that it will spend $300 million to build new fulfillment centers, a new warehouse management system and a new material handling system to help it offer same-day delivery to online customers.
Not to be forgotten, malls are beginning to offer shoppers same-day delivery. Deliv, a startup that offers same-day delivery via crowdsourced drivers, partnered in December with four of the country's largest mall operators.
Here's an example of how it works:
You have a holiday shopping list that includes clothes, luggage, sports equipment and something for the family pet. You purchase items from several Deliv-enabled retailers, including Chico's, Naartije Kids, Tumi, Sport Chalet and Pet Food Express. Rather than carry all those bags from store to store and to your car, you leave your purchases with the store associates to be delivered to your home that day. You're able to view delivery on a map in real time from pickup to your front door.
Whether same-day delivery is a profitable and sustainable business model is still in doubt. It comes at a significant cost for retailers, both in time and resources, and there's still debate on whether there's enough consumer demand for the service. While convenience is one factor in consumers' purchase decisions, it's not the only one - and often not the most important one.
For most customers, at the end of the day it comes down to price and value. Are they going to be willing to pay for same-day delivery? I believe free delivery trumps same-day delivery for most.