Can Same-Day Delivery Scale Outside of Metro Areas?
Today marks the start of Amazon's free same-day delivery service in 14 metro areas around the United States. The expansion covers only members of the company's Prime subscription service and follows its February roll-out of Prime Now, which provides one-hour delivery across all of Manhattan.
The same-day service guarantees delivery by 9pm in cities including Seattle, Baltimore, Tampa Bay and Phoenix, if an order is placed before noon. It is one of the most widely available same-day fulfillment solutions and brings online stores a step closer to the elusive "need it now" factor that drives some shoppers.
With the rapid development of same-day or better delivery services, it's tempting to think that we're only a short while away from seeing such lead times across the country.
As we've examined in the past, online ordering has become a fact of life and the position of e-commerce companies has never been stronger. Major retailers like JC Penney and Macy's also announced same-day delivery earlier this year, again for specific metropolitan areas in which the offering will serve a high-value, concentrated set of shoppers.
At the same time, the fulfillment challenges for retailers have never been greater. At the same time as they look to online orders for future profits, declining store visits have investors worried about the prospects of both JCP and Macy's. Even the juggernaut Amazon has raised some eyebrows with its skyrocketing shipping expenditure, despite its unparalleled dominance.
So, with customer expectations growing and order volume increasing, should we expect to see delivery lead times tumble from days to hours before the decade is out?
Unlimited Appeal, Limited Ability
All things being equal, consumers will certainly embrace almost immediate delivery. Flexibility is a fine thing to offer and service options that range from hours to days provide an attractive reason for customers to come back. It is certainly a provider's dream to offer that same range to clients, as lead times play an important part in selecting a fulfillment partner.
The operational reality is very different, however, and the ability to meet these delivery options varies according to price tolerance and geography.
Amazon is able to scale its same-day services to major metropolitan areas due to its massive distribution network, but even that has limitations. There are plenty of products that won't be available for these urgent iterations of Prime, and several cities that have proved difficult to develop, including key cities like Chicago and Houston.
The company will most likely overcome these hurdles but its ability to move beyond major metropolitan areas is questioned by industry experts, including Capacity's Thom Campbell. On the subject of Prime Now, in particular, he believes the limitations will remain, saying:
"I hate to be a skeptic, but except for super-dense, super-wealthy places like midtown NYC, I think this is a lot of hype.
I think of this as something like drones. Amazon can’t foreground major strategic initiatives easily. If they do, then they are then signaling to the rest of the industry, which swerves to keep up or adjust, irrespective of most others’ inability to bring a fraction of the economies of scale to bear on these issues."
--Thom Campbell, Chief Strategy Officer, Capacity LLC
Amazon has a unique position in our industry but it should not have a monopoly on the news coverage. While these delivery developments are undoubtedly newsworthy - and eye-catching for customers, of which Amazon Prime has 40 million, forecast to grow to half of U.S. households by 2020 - the headlines often overlook other potentially valuable services.
Cutting lead times is just one aspect of our industry. Bringing access to individuals, transparency to shipping costs, simplifying the shipping process and improving tracking capabilities are all areas in which innovation is rampant, yet receiving far less attention from the mainstream media.
Companies such as Shyp are trying to simplify shipping for individuals, while Shipping Easy offers similar benefits to eCommerce merchants. Elsewhere, apps like Slice and Out of Milk are seeing a lot of traction with the tech press for the attractive way they aggregate online shopping and help customers to track deliveries. We could go on, but that's a whole article in itself (and one you can expect to read on these pages during June, so stay tuned!)
For now, it's important to remember that for all the talk of slashing lead times and racing to reach customers that bit quicker, there are still certain fulfillment fundamentals that are the bedrock of a trusted brand.
We spent a lot of time last month examining why they keep customers coming back for more and how to develop these traits in your own business, which you can review on YouTube or follow our expanded blog series on the subject for a deeper dive.