Same-Day Delivery Edition of MythBusters
Same-day delivery might be a hot topic in the press, but in private, most of the executives I know dismiss it. Having spoken with execs across businesses of every type and size, I hear a few myths repeated consistently.
Myth 1: Consumers don’t need or want things within a few hours of ordering.
The myth in this statement is really the phrase “within a few hours of ordering.” When most people think of the future standard for same-day delivery, they think of a service like eBay Now, Google Shopping Express, or Deliv, where the product is delivered within a few hours (not surprising, considering the amount of press these companies have received). The same-day delivery standard will eventually settle into an AM/PM model: order something in the morning, receive it by the following evening, and vice-versa.
Myth 2: UPS, FedEx, or the US Postal Service are the best options to make same-day deliveries.
None of these are viable options today. The local delivery and courier industry is a ready-to-go, very experienced, option. It’s full of small, nimble, highly flexible companies that are accustomed to operating nearly 24/7, even on most holidays, and meeting their customers’ needs as opposed to requiring customers to meet their operational practices. And while they’ve historically been involved in business-to-business deliveries and struggled with quality, over the last few years, couriers have gone “mainstream.” Want proof? Just look at the way Amazon has steadily shifted more and more of its next- and two-day deliveries away UPS and FedEx and onto couriers.
Myth 3: The economics around same-day don’t work because no one will pay for it.
If you look at the “all-in” (i.e., fulfillment and delivery cost) of a two-hour same-day delivery performed by a courier for a package, it can cost more than $30. However, if you consider the AM/PM service level, the cost starts to become reasonable. At higher shipment volumes using couriers, the delivery cost component starts approaching $15. And, while it would certainly require a big change in fulfillment strategy and more cost than fulfilling from a DC, companies could reduce their delivery costs even more by shifting next- and two-day volume onto couriers and off UPS and FedEx by using in-market facilities/stores.
Myth 4: Same-day delivery is something only retailers need to worry about.
If Amazon is doing same-day delivery, everyone should pay attention. As shown by its rapid expansion across categories from appliances to groceries, Amazon has its eyes on everything anyone buys. That even includes business-to-business purchasing, as illustrated by the company’s launch of Amazonsupply.com in 2012, which set it on a collision course with B2B industrial product distributor Grainger. Retailers AND distributors need to start figuring out a same-day strategy now, or they risk losing sales growth and market share.
For a more about these myths, and how Amazon is modeling their same-day strategy on Grainger (and why you should too), please read what I wrote for Talking Logistics.