The case against same-day delivery

This is an excerpt from Thursday’s (1/28) Point of Sale retail supply chain newsletter.

According to recent survey data from Bringg, same-day delivery will become a status quo offering from retailers in 2021. One-in-three retailers plan to add same-day delivery services in the next six to 12 months. Including the 38% of retailers that already offer same-day delivery, this means that two-thirds of retailers plan to offer same-day delivery by the end of 2021. 

While I’ve written ad nauseam about how retailers should incentivize the more cost-effective fulfillment methods, they must also prioritize the most in-demand services, including same-day delivery. That is not to say they should subsidize delivery and offer it free or below cost to the customer. Rather, it should be made available and paid for accordingly, should any customer desire it. And even then, not every retailer should offer same-day delivery. 

In its 2021 State of Retail Delivery and Fulfillment report, Bringg wrote, “The question retailers should be asking is not whether to offer same-day delivery but how to implement it affordably, how to launch quickly enough to grab market share and how to coordinate it efficiently as part of an omnichannel approach.”

I disagree. Same-day delivery doesn’t make sense for every retailer and the potential demand must be analyzed carefully. It should only be prioritized if it is highly demanded, but even then retailers should be wary of playing into their competitors’ strengths. 

“Don’t get caught in the Trojan horse of Amazon,” Satish Jindel, president of ShipMatrix, told me in a recent interview. “Amazon is pushing for faster delivery because that is how they differentiate their value.

“Consumers don’t want speed, they want certainty,” Jindel added. ShipMatrix conducted surveys suggesting that 85% of goods ordered from Amazon (NASDAQ: AMZN) using one- or two-day shipping are not used/consumed for several days after delivery. Jindel believes estimated delivery time accuracy is more important than delivery speed. 

He’s not alone here. Online retailer Zulily was once one of the fastest growing e-commerce companies in the world and it grew exponentially while delivering goods two to three weeks after purchase. Why? Zulily figured out if you offer the best prices and have accurate estimated delivery systems, consumers are willing to wait as long as shipping is free. Budding Chinese e-commerce behemoth Pinduoduo (NASDAQ: PDD) has realized a similar trend via a slightly different strategy. Pinduoduo is a platform built for browsing, rather than searching, something quite foreign to most American online shoppers. When shoppers browse, as opposed to intentional searching, they are willing to accept longer delivery times for the lowest prices. 

While two-thirds of retailers expect to offer same-day delivery by the end of year, it hasn’t been the most popular fulfillment method rolled out since COVID began. Nearly double the percentage of retailers have added more profitable options like curbside pickup, and a third also enacted BOPIS. 

(Chart: Bringg)

Same-day delivery is not every retailer, nor should it be seen as a requirement to compete online. For many retailers, same-day delivery demand is high enough and their geographic footprint large enough to warrant offering it. But for the vast majority, it’s not feasible and it’s just not smart. 

If you’re afraid of being Amazon-ed, don’t play to their strengths! Recent survey data from Convey indicates one-in-five Americans don’t trust estimated delivery times from retailers. Why shorten it, making it even more difficult to meet and sow further distrust? That’s exactly what Amazon wants. 

There are many other areas in the supply chain thirsty for investment, including visibility and tracking, demand forecasting, automation, the list goes on. More than 50% of retailers still do not work with technology partners to streamline their in-store fulfillment. MORE THAN HALF!

Retailers ought to focus on improving their current customer experience while balancing the need for long-term efficiency and profitability. Same-day delivery isn’t necessary for every retailer because consumers don’t want to pay the additional costs. Keep shipping costs free and center efforts around accuracy and certainty, not speed.

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