Practical Ecommerce

Same-day Delivery by Ecommerce SMBs Viable?

Same-day delivery has the potential to become a significant retail differentiator, potentially raising the ecommerce industry’s barrier for entry, making it harder for new, relatively small ecommerce businesses to start selling.

To clear this possible hurdle, small and mid-size ecommerce businesses will need to encourage the demand for same-day delivery, the development of same-day delivery infrastructure, and cooperation with other sellers and distributors.

The Promise and the Problem

Same-day delivery could remove one of the most significant differences between making a purchase online and buying from a physical store: the customer’s ability to have and use the product purchased immediately or almost immediately.

Same-day delivery could remove one of the most significant differences between making a purchase online and buying from a physical store: the customer’s ability to have and use the product purchased immediately or almost immediately.

Imagine a shopper who visits the mall on her lunch hour. She purchases lunch at food court, and then goes to Pottery Barn to pick up some new plates and glasses for a dinner party at 8 p.m. She hauls the dinnerware to her car, loads it in the trunk, goes back to work, and eventually — when she gets home at about 5:30 p.m. — has the new items to use.

Now imagine the same shopper. But this time, instead of having lunch at the mall’s food court, she gets to eat at her favorite Indian restaurant with a couple of friends. As they are eating curry, she has her lunch mates help her select some new plates and glasses for the aforementioned dinner party. She places the order online, and when she arrives home at 5:30 p.m. the new dinnerware has already been delivered and is ready to use.

In this scenario, one of brick-and-mortar retailing’s greatest competitive advantages is at best nonexistent.

“We launched same-day delivery in 2009,” wrote Amazon spokeswoman, Julie Law, in an email to Practical Ecommerce. “Since that time, we have continued to evolve and improve the shopping experience, adding immense selection, lowering the price for Prime members, expanding the number of cities, and the number of zip codes, where the service is offered and making it even easier to search and find items that are eligible for same-day delivery.

“Customers in the current 12 metro areas where we offer same-day delivery can choose ‘Get It Today’ when searching or browsing and choose from more than a million items available for same-day delivery. This year, we also extended the order cut-off time to noon, and extended same-day delivery to seven days a week – even Sunday.”

Unfortunately, simply because Amazon, which had more than $20 billion in revenue in its most recent quarter, can do something does not necessarily mean that it is something that a small or mid-sized merchant can accomplish.

“There has been a lot of activity and press about same-day delivery in the past 18 months, [but] despite all the attention, same-day delivery is really only feasible for the biggest of the big ecommerce players. It requires massive demand AND [sic] supply in each area where it’s planned. Very few ecommerce players have that. And even with both those, it’s a serious logistical challenge given the speed at which everything has to happen.” explained EasyPost Founder and CEO Jarrett Streebin, whose company provides an application programming interface to help small businesses manage logistics.

Even eBay, with its many resources ,has had to shut down its Now same-day delivery service, almost certainly because of the problems Streebin describes.

Thus, that is the promise or potential of same-day delivery and the problem of actually executing it. If the debate over same-day delivery ended here, it could be very bad news for future ecommerce entrepreneurs.

A Higher Barrier to Ecommerce Entry

If the biggest of the big ecommerce businesses, like Amazon, continue to improve and expand same-day delivery, and if brick-and-click retailers like Walmart expand click-and-collect (the act of ordering online and picking up in store) offerings, it may be difficult for small retail ecommerce startups to compete or for new business to get started when the best they can do is delivery tomorrow, or in a couple of days, or worse yet next week.

It may become the case that in order to start an ecommerce business, sellers will need a much more sophisticated logistics infrastructure and significantly more capital.

However, there may be at least five strategies or ways that small and mid-sized ecommerce businesses can, in fact, successfully offer same-day delivery in at least some form.

Strategy 1: Charge for It

Same-day delivery is expensive. To execute same-day delivery, a delivery person must collect a package at a warehouse or distribution center, travel to the customer’s address, drop off the package, and return to the warehouse. Even if somehow the cost of transportation was zero, a delivery that took an hour to complete, could cost anywhere from $10 to $20 in labor.

So why not just charge that much?

Fancy offers same-day delivery in several markets.

Fancy offers same-day delivery in several markets.

Fancy, an online retailer of mainly home decor items, started offering same-day delivery services in 2013, and charged, in some cases, a $30 per order fee. Now the company is offering same-day delivery for selected products in more than 60 cities.

Strategy 2: Limit Delivery Areas

Amazon, which has nearly six percent of all U.S. online sales and about one percent of total, annual U.S. retail sales, is offering same-day delivery in about 12 markets. What’s more, it is estimated that about 40 percent of people in the U.S. live in just 40 cities.

The point here is that same-day delivery need not be ubiquitous in the beginning, rather it can focus on geographies that a particular merchant can actually service. A small ecommerce seller warehousing products in his garage in Helena, Montana would probably be able to deliver the occasional package to the greater-Helena area, especially, if as Strategy 1 suggests, that delivery includes a $30 service fee.

Strategy 3: Use Couriers, Express Delivery Services, and Carriers

Strictly speaking, same-day delivery is nothing new. Department stores did it. Courier and messenger services did it and do it. In fact, even some of the major package carriers offer some form of same-day delivery right now — such as UPS Same Day and FedEx Same Day.

FedEx and UPS both offer same-day delivery services.

FedEx and UPS both offer same-day delivery services.

A third way that small and mid-sized ecommerce businesses could get same-day delivery to work is to simply work with some of these services. This is, in fact, what Fancy is doing.

What’s more, services like Google Express will pick up from a retailer’s store or warehouse to deliver directly to customers who order using the Google service.

Anyplace that a merchant has a warehouse, there is an opportunity to find and contract a service to deliver packages in hours not days.

Strategy 4: Use Fulfillment Services and Warehouses

Fulfillment services may also play an important role in helping small and mid-sized ecommerce businesses offer same-day delivery.

When online sellers employ fulfillment service providers like Shipwire, Fulfillment by Amazon, eFulfillment Service, Webgistix, and similar to warehouse products, those sellers may effectively distribute inventory.

If a merchant places products in three fulfillment warehouses, not only will its shipping times likely go down for standard orders since one warehouse is likely to be relatively closer to the customer than another, but there is also the possibility that courier services hired as suggested in Strategy 3 could pick up from one of these fulfillment warehouses and deliver to nearby customers. Thus, same-day delivery in three markets just became possible for this merchant.

This would still be expensive, but, with Strategy 1 in mind, it would also be viable.

Strategy 5: Work with Other Retailers and Distributors

Retailers may also be able to work with other sellers, including competitive retailers and distributors, to fulfill for each other.

Several retail segments have large buying groups that help independent retailers enjoy lower product prices. As an example, Mid-States Distributing is a 60-year-old buying group for the farm and ranch retail segment. Its members include hundreds of retail stores throughout the United States and Canada.

If buying groups had an interest and worked together, they could help each other compete even with the biggest of the big in ecommerce.

Imagine that there is an independent widget store in Minneapolis called Mini’s Widgets that is part of a widget buying group. It invests in a truck and begins offering same-day services for deliveries to the Minneapolis area. Another widget retailer, Bob’s Widgets in Dallas, makes a deal with Mini’s for fulfillment. When an online customer from Minneapolis orders from the Bob’s website, Mini’s delivers in hours.

Similarly, distributors that are not buying groups could also help. Many distributors are already drop shipping directly to consumers. Expanding to same-day delivery, possibly via couriers, is not a stretch.

This particular strategy requires significant changes in business relationships, but where there is money to be made, change can happen.

More Same-day Delivery Is Better

As same-day delivery volume and demand increases, more service providers — likely some combination of carriers and couriers — will offer services that small and mid-sized ecommerce business can use, and the service could become much more affordable.

In the meantime, small and mid-sized businesses can employ these strategies to help them get started.

Armando Roggio

Armando Roggio

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  1. Elizabeth Ball October 27, 2014 Reply

    Great list of strategies, Armando. There is definitely demand for same-day metro delivery, such as forgotten anniversary gifts. And people will pay more to get themselves out of a scrape.

  2. Sancho Chakraborty October 27, 2014 Reply

    Great article Armando. SMBs need to have a robust same day delivery option and Shutl.it (https://us.shutl.it/) is currently providing that service in New York. For a price under $10 SMBs can book delivery through Shutl.it.

  3. Anubhav Jain October 29, 2014 Reply

    Good work Armando. The same day delivery will clearly bring a paradigm shift in the perishable goods industry in India.