Amazon and Google are expanding same-day delivery services in major cities. These offerings and similar same-day delivery services from other companies could transform retailers online and off, potentially broadening the mix of products sold online and available to shoppers.
Recently, Google announced that it would extend its Shopping Express service from the Silicon Valley to Manhattan and West Los Angeles. Similarly, Amazon’s same-day grocery service, AmazonFresh, is expanding beyond Seattle to include areas in California. Separately, Amazon also offers same-day delivery of select items in several markets.
Even Uber, the on-demand car service company, is trying its hand at same-day delivery in Manhattan. The company’s UberRUSH service uses couriers — some on foot and some on bicycles — to quickly deliver small packages, including items purchased from local stores.
Others Have Tried and Failed
If Amazon, Google, Uber, and others are successful with same-day deliveries, retail, online and off, will be impacted in a number of ways. But many other companies have tried to offer same-day deliveries and failed, demonstrating just how difficult same-day delivery really is to manage.
There was Kozmo, a same-day delivery service based in New York City, that lost hundreds of millions of dollars in venture capital in just three years before shuttering.
Webvan was another company that attempted to make same-day delivery service work, but the company went bankrupt just two years after it opened. Amazon later acquired Webvan and may have learned something from Webvan’s apparent same-day delivery failure.
Even Ebay, which has been trying same-day delivery since 2012, may have failed. VentureBeat reported on June 10 that Ebay Now may be closed soon.
Nonetheless, Google and Amazon have a lot of money to apply to the same-day delivery problem, and both seem to be addressing the challenges that thwarted Kozmo and Webvan. For example, AmazonFresh is not, seemingly, trying to compete on price. Rather its produce prices tend to aim at the high end of the market where it may be able to maintain some margin and profit. And Google Shopping Express has no warehouses of its own, avoiding many of the expenses and complexities of inventory management that only become worse when you’re trying to deliver in a few hours.
The Ecommerce Product Mix Will Broaden
When same-day delivery services do become successful, they will effectively broaden the mix of products sold online to consumers, allowing online businesses to sell products that are normally purchased last minute or other household consumables.
AmazonFresh sells food and toiletries online for same-day delivery, both of which represent product categories that often are difficult for ecommerce businesses to sell presently. Similarly, you can get Google Shopping Express to deliver laundry detergent in gallon containers, which is again not something that is often sold via ecommerce and shipped with UPS or FedEx.
Same-day delivery makes ordering household consumables online more reasonable. Imagine a professional getting ready for work when she realizes that she’s out of toothpaste, low on paper towels, and in need McCormick’s Montreal Steak Seasoning for dinner. Normally, ordering these items online wouldn’t work, since she has already failed to plan ahead. So her only recourse would have been to find time in her day to stop at a physical store or two, but if same-day delivery was available in her area, she could place the order from her phone on the way out the door and schedule a delivery for the late afternoon.
The Brick-and-mortar Product Mix Will Broaden
In a similar way, same-day delivery also allows brick-and-mortar retailers to effectively expand product lines too.
Brick-and-mortar stores have limited space for storage, and even the shelf space that is available must be allocated for products with the best turn rate, meaning that it sells frequently, or the best revenue-per-square-foot ratios. But when same-day delivery becomes common, stores could “showroom” more unique products that are actually stored at a nearby warehouse. You can imagine a retail sales clerk saying, “I am sorry sir, we don’t carry size 15 running shoes here, but we can choose a style now and have them delivered to your house this afternoon.”
In this way, physical stores can offer customers standing right in front of them products that are not actually at the store, but that will be available in a matter of hours not days, thus expanding the mix of products available for sale.
Price Will Matter a Lot Less
Google Shopping Express and similar services will likely be based on a membership model similar to AmazonPrime and ShopRunner, so that an annual fee will cover the cost of same-day delivery services. This format may mean that shoppers will be less likely to compare prices online, but instead make most purchases from those sellers who can deliver purchased products immediately.
Again, consider that AmazonFresh is frequently priced above the local market. On June 16, AmazonFresh in Seattle listed bananas at 90 cents per pound — more than double the price at some local grocery stores.
Small Merchants Will Have More Opportunity
Same-day delivery services should also provide new, multi-channel opportunities for small or very small merchants. Consider that an ecommerce retailer selling unique products and working out of a small commercial space may open up a new local sales channel selling products via Google Shopping Express or a similar service.