Same Day Delivery of Retail Products

Same day delivery of retail goods is an emerging trend. Although the growth of same day delivery is not at near the level of the growth of online retail sales and mobile devices, it bears watching. It deserves attention because delivery cost and speed are closely associated with online sales, which are booming.

Consumer Preferences

If costs are equal, consumers prefer faster delivery as long as they do not want to experience the product before purchase. Many still want lower cost over speed of delivery as discussed in last week’s post.

Free delivery seems to have the edge over same day delivery for many consumers. However, the retail industry is aggressively experimenting with serving the segment of consumers who want their product as close to “now” as possible without leaving the comfort of their home or office.

Millennials, shoppers aged 18 to 34, are the most likely group to use same day delivery according to the National Retail Federation. Already 12% of Millennials have used it compared with about 4% of the general population.

Early Retail Adopters

Several large-scale retailers are investing in same day delivery. None of them have rolled it out nation-wide.

Amazon serves about 15% of Americans with same day delivery. An additional 5 warehouses under construction (in addition to its current 90) could up that to 50%. The cost is $8.99 per shipment plus $.99 per item for express same day delivery in supported cities. The recent news coverage about drone delivery is one of the better publicity stunts of the year.

Home Depot has determined it has reached market saturation with it brick and mortar stores so it is investing in growing online retail sales. The company is investing $300 million in online improvements and to provide same day delivery.

Three new fulfillment centers will be operating in 2014 and Home Depot plans on using existing stores as warehouses to source same day delivery as well as more of its online orders.

This is not just for a few select items. Over 100,000 products will be available for same day delivery. Competitor Lowes has not yet made any announcements.

Walmart has same day delivery in 5 markets. The charge is a $10 delivery fee no matter how many items are in the order. Same day delivery is provided for grocery items in San Jose and San Francisco. Philadelphia, Minneapolis and Denver are test markets for the service. Walmart is starting to use third party delivery or personnel to fulfill orders from its stores.

Third Party Expansion

Third party service providers are investing heavily in test markets. The most aggressive of the group is eBay.

eBay already has same day delivery service in San Francisco, Chicago, Dallas and New York. The service dispatches a courier to the appropriate retailer such as Bed Bath & Beyond, Best Buy, Home Depot, JC Penney, Macy’s/Bloomingdales, or Target. eBay Now will be offered in 25 cities in 2014. The cost is about $5 per item.

Google is experimenting with same day delivery with its Google Shopping Express service in the San Francisco Bay area. The service sends a courier to retailers such as Costco, Office Depot, Staples, Target, Toys R Us, Walgreens, Walmart, or Whole Foods.

The Postal Service is testing same day delivery with 1-800 Flowers. Once again, the test market is the San Francisco Bay area. It calls the service Metro Post.

What This Means to Your Small Business

Same day delivery is a trend to watch. However, so far the trend is not changing the supply chain of retailers in a way that affects suppliers. Whether the retailer provides delivery from its distribution center or local stores is not yet changing where suppliers ship their products.

The growth in drop shipping directly to the consumer that was discussed in several previous posts is not relevant to same day delivery because the goods need to be stored in the same geographic area as the consumer’s location.

Over time, we may see a shift in more direct-to-store shipments as retailers move goods closer to the consumer. However, there is a limit to that demand right now based on the amount of in-store storage space and how fast inventory turns over.

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