by Calvin Cheng -- January 06, 2015
Last month my family visited relatives in Taiwan, and during our visit we made a number of online orders. I must confess that one of those orders was for a selfie stick. We ordered the selfie stick via mobile web, and in less than 6 hours the package was delivered to our door. Granted, it might have helped that we were in Taipei, the country's largest city. Nevertheless, since 2007, Taiwan’s online shopping giant, PCHome, has guaranteed 6 hour delivery across the small island county. In fact, most orders from PCHome are delivered in less than 5 hours because the retailer wants to enable busy workers to place orders in the morning and have them delivered before they leave the office for the day.
The Jimmy John's slogan "Freaky Fast Delivery" came to mind. I began to think about the pursuit for same day delivery with US retailers. Over the past several years, a number of players have enter the fray for same-day delivery, and not all of them have been successful. Here are 5 examples from the recent past:
1) WebVan and Kozmo were early entrants who learned how hard it is to make money delivering on tight timelines.
2) In 2013 eBay acquired Shutl, which was already doing same day delivery in the UK. eBay Now introduced "personal shopping valets," a partnership ecosystem with large retailers, and delivery within hours – all for a flat fee of five dollars.
3) A great deal of buzz in early 2014 was made around Uber, and their Uber RUSH service in Manhattan that uses Uber cars as delivery couriers.
4) Amazon continues to experiment with drone deliveries for Amazon Prime Air. Technology aside, it's the one hour AmazonNow delivery program with bicycle messengers that is the latest play from the ecommerce giant.
5) Google Express offers same day delivery (free for orders over fifteen dollars) for local markets with a wide network of assorted retailers.
Same day delivery remains likely to continue being a popular battleground for retailers to differentiate themselves with customers. Below are some of my thoughts about potential impacts from same day delivery. What are yours?
Everyone has a Personal Shopper: As one former eBay Now valet said, "It’s so much more than just a delivery service. It’s a personal shopping service. As such, it requires a special touch on each and every order." Personal shoppers have long been available at retailers like Nordstrom and Neiman Marcus, and now large and small retailers alike are finding creative ways to individualize each order and to provide that “special touch” on every shopping experience.
The Last Mile: Historically, the proverbial "last mile" of order fulfillment rested in the hands of third party logistics companies like FedEx, UPS, and the US Postal Service. Retailers, startups, and their resulting ecosystem of partnerships increasingly rely on shipping and delivery brands to positively enhance their own customers' experience. When done well, retailers can leverage this last mile experience to surprise and delight their customers. However, eliciting last mile excellence from shipping partners is not always easy. As Greg Sterling describes from working with Target’s eBay store and Target.com, "few retailers truly seem to recognize how ‘last mile’ problems with shippers and delivery people (not UPS and FedEx) can damage a brand experience."
Back to the Stores: Will same day delivery cannibalize physical store traffic? Previously, instant gratification for shoppers meant going to the brick and mortar store. With online orders being delivered within hours, incentives to shop across digital and physical channels may decline. I will be interested to see how retailers reconcile the “threat” that instantaneous delivery poses to brick and mortar with the fact that "omnichannel shoppers spend 71% more than single channel shoppers." (Deloitte Consulting, 2012) According to AdAge, this trend may have its greatest impact on the "corner store" (including retailers like CVS and Walgreens). This suggests that retailers interested in encouraging those omnichannel opportunities that result in greater spend will need to ensure that the in-store deals and experience are even more compelling than before, for example by augmenting the store experience with mobile-in-store features.
Empower the SMBs: I am also curious to see what further insights will arise from an increase in same day deliveries. What products do shoppers need "right now?" Will (or can) small and medium businesses (SMBs) benefit from partnering with large players like Google Express and AmazonNow? Partnerships such as these offer one way that SMB’s can mitigate the size and scale advantages that large online retailers like Amazon and eBay have traditionally enjoyed when offering same day delivery. Inevitably, this is good news for customers, who will increasingly be able to enjoy the near instant gratification of same day delivery for any purchase, regardless of the size and scale advantages of the retailer.
Data and Insights: How would Google and Amazon benefit from partnering with SMBs, and helping them with same day delivery? The answer lies in the data collected by those large platforms from the SMB customer. As the Economist suggests, "Firms such as Google and Amazon may be willing to lose money on deliveries if the data they glean about people’s shopping habits let them aim their online ads more effectively." In this way the entire partnership ecosystem benefits: SMBs are able to quickly deliver orders to customers, and Google and Amazon continue to collect and analyze customer trends and behaviors.
Continued innovation in digital technology, retail and delivery partnerships, and the in-store experience present new opportunities for brands to engage with customers. Retailers have an opportunity like never before to discover new, creative ways to surprise and delight customers - all the while differentiating themselves from their peers. As we look to the year ahead in 2015, I have high hopes for the future of retail, not to mention for my family photos (thanks to our new selfie stick).
What inspires you about the future of retail in 2015?