Retailers scrambling to provide shoppers #samedaydelivery
This holiday season, as giant shipping operations once again struggle to handle the e-commerce explosion, some mall retailers have found a surprising way to compete: same-day delivery.
Last week, Target said it would pay $550 million for Shipt, a fast-growing firm in Birmingham, Ala., that operates a $99-a-year grocery delivery service. In August, Target acquired Grand Junction, a San Francisco transportation technology company that connects retailers to a same-day delivery network of more than 700 drivers.
Best Buy expanded same-day delivery to 40 cities this month using Deliv, a crowdsourced service in Menlo Park.
“Same-day delivery is a service that our guests are asking for more and more often,” Target Chief Operating Officer John Mulligan said in an interview posted to the Minneapolis company’s website.
“By acquiring Shipt, we’ll be able to take advantage of our network of stores and Shipt’s technology platform and shopper community to quickly offer same-day delivery to millions of our guests,” Mulligan said.
Traditional retailers are trying to tap what some experts call the instant gratification economy.
“We can get our news instantly,” said Anthony Dukes, professor of marketing at the University of Southern California’s Marshall School of Business. “We can have food delivered instantly. We can stream programming instantly. That has given us higher expectations for retail.”
The catalyst may have come in February, when statistics showed that fast-delivery king Amazon.com accounted for more than half of all ecommerce growth in the previous 12 months, said Tushar Patel, chief marketing officer at Kibo, a Dallas company that helps merchants more closely tie their online and brick-and-mortar operations.
“That was a tipping point,” Patel said. “That was news to other retailers that they would have to constantly push the delivery envelope. Sameday has become the new retail standard.”
Immediate gratification wasn’t always so important. Mail-order catalogs came with the caveat “allow six weeks for delivery.”
But the time customers are willing to wait for satisfaction continues to shrink, from a week to two days to overnight to the same day. They also don’t want to pay for it.
“We have had studies that show 70 percent of consumers expect free shipping,” Patel said. An even higher percentage, he added, “said free shipping is compelling enough to make a purchase and not abandon a shopping cart.”
To manage all that, Amazon’s competitors have “to play both sides of the aisle,” said management Professor Jay Prag, by offering the rough equivalent of same-day shipping but with a little effort by the shopper: buy online, pick up in store. (Many also offer buy online, return in store.)
“Target wants to be a hybrid,” said Prag, who teaches at Claremont Graduate University’s Drucker School of Management. “Have the fastdelivery options but keep the brick-and-mortar presence.”
Los Angeles resident Danielle Kent, 23, said Amazon.com raised her expectations, with its quick delivery and ability to track shipments.
“Coming home from a long day of work and finding what you ordered that morning waiting for you on your doorstep when you get home — it’s almost like someone sent you a gift, even though you bought it yourself,” said Kent, an account coordinator for the Konnect Agency in Los Angeles.
Kent said she never felt as comfortable with smaller retailers “where you still have to wait weeks, or it even sometimes gets lost in the mail.”
That type of feeling — and figuring out how to tap into it — was part of what drove Daphne Carmeli to create Deliv in 2012. Her quandary: how to jump on the fast-delivery train without an expensive investment in warehouses, vehicles and customer base.
Deliv borrows some of the philosophy behind Uber and Lyft by relying on a small army of independent contractors who drive their own vehicles. Each has to pass a background check and have a valid driver’s license and insurance.
“We all have a GPS source in our pockets with our smartphones,” Carmeli said, “so we can mobilize a group of drivers, know exactly where they are and who can get the job done first.”
Deliv now serves 4,000 merchants in 23 states, ranging from big retailers like Walmart, Home Depot and Best Buy to small merchants.
“We are their same-day delivery option,” Carmeli said. “The shortest delivery window we will do is 45 minutes to an hour. We do returns as well.”
Prag said economies of scale matter greatly in whether companies such as Target will succeed with high-speed delivery.
“This will work in Los Angeles, New York, Chicago, other big cities, where there is enough demand density to justify the delivery costs,” Prag said. “It won’t work in Oklahoma.”
Still, the hashtag #samedaydelivery has acquired a life of its own. Plug it into an Instagram search and nearly 58,000 shopping offers from around the world will show up, plugging everything from high-heel shoes from Nigeria to flowers from Ireland, all offering same-day delivery.
With mainstream delivery providers UPS, FedEx and the U.S. Postal Service struggling to keep up with record online shopping, Kibo’s Patel said delivery services such as Shipt and Deliv will remain in high demand.
“Companies like Target don’t have a lot of confidence in the capacity of the traditional logistics providers,” Patel said. “They want to control their own destiny.”