Have you been hearing a lot about same-day delivery lately? Me too.
Same-day shipping and delivery has gotten a lot of press in recent months. In my humble opinion, it’s probably getting a bit more attention than is deserved at this point given the current demand, viability, and offering of same-day delivery for most Americans.
With that said, though, when and where same-day delivery is doable, it’s a pretty cool thing. I’m sure, however, that there are a lot of brick and mortars out there that probably disagree, given the fact that same-day fulfillment of an ecommerce order eliminates one of the final advantages that brick and mortars seem to have over online sellers….instant gratification.
The Consumer Demand for Same-Day Delivery
Aside from the challenges retailers face in actually pulling off same-day delivery, one of the reasons I’m somewhat fascinated with all this attention is the fact that the demand for it is quite low.
In fact, a study by UPS recently showed that online shoppers are willing to wait an average of 6 days for paid shipping, and 8 days for free shipping. Furthermore, 85% of shoppers are willing to wait at least 5 days when the shipping is free, and 98% of consumers are willing to wait at least 2 days, even when they pay for shipping.
Another recent study did show that younger folks are becoming more keen to same-day fulfillment and delivery of their orders. But that same study showed that, of the population living in cities in which same-day delivery is even offered (which is a fairly low number of cities), only 2% of that population has used such services.
Sure, if you’re a young, urban-dwelling millennial male, then yes, you may expect same-day delivery for a niche set of products. But for the rest of the population and the rest of the products out there, we’re willing to wait a couple of days, especially when the cost is lower.
Same-Day Delivery Causing Headaches for Logistics Managers
Even though the demand for same-day delivery is still low, because of the amount of attention it’s getting, it is causing big headaches for a lot of logistics managers who are hearing from their higher-ups that they need to find a way to offer it to their customers.
For most small and medium-sized businesses (SMBs), it’s not easy. In fact, same-day order fulfillment and delivery is not easy for even the biggest of retailers and marketplaces. Take eBay, for example. Back in 2012, eBay launched its same-day delivery program, called eBay Now. Three months ago, they killed that program.
eBay Now was available in four markets: New York, San Francisco, Dallas and Chicago. Why did it die? Simple, really. Lack of demand coupled with high cost. Order fulfillment isn’t cheap, especially when it involves such speed and efficiency.
Another big consideration is quality control. It’s not uncommon for retailers to audit a percentage of their orders before they ship out. For those orders that are slated for same-day delivery, there’s a tiny window of time available, which makes quality control quite difficult.
Another reason that eBay killed their Now program is that they said that most of the products they sell don’t require same-day delivery. And this brings me to my next point….
Focus on Your Target Market
I know it can be difficult to ignore all the noise that’s out there. And, as I’ll talk more about, I’m not saying you should ignore same-day delivery. What I am saying is that it’s important to focus on your target market.
Maybe you sell diapers. In that case, offering same-day delivery could help you generate sales, as some things just won’t wait. But if you sell guitars, chances are most of your customers can wait a couple days before they rock that first jam.
It’s the simple truth that same-day delivery is suitable for some products more than others. This also means that the investment required by retailers to offer same-day delivery will be returned more quickly for some than others.
Depending on where your online business is at in terms of maturity, and depending on your short- and long-term business plans, same-day delivery may be worth exploring now. For others, there may be lower-hanging fruit that first needs to be picked.
What Can SMBs Do to Facilitate Same-Day Delivery?
Same-day order fulfillment and delivery isn’t easy for any retailer to pull off. But for small and medium-sized businesses, it’s even tougher, as they generally don’t have the resources nor the infrastructure that some of the big boys do.
Even still, there are things that SMBs can do in order to make same-day delivery more viable (and profitable)…..
1. Be Selective with Location
It’s not practical for an SMB to offer same-day delivery to 30 metros across the U.S. For one thing, that’d mean they’d need to split their inventory across 30 different fulfillment houses…all in those metro areas…which would result in huge freight bills and substantial inventory carrying costs (not to mention all of the challenges associated with logistics and technology).
eBay focused on just 4 markets with their Now program, and it still failed. But other retailers have seen success with same-day delivery, and they have done so by starting small and growing. Focus on one market to begin with. In fact, you may want to focus on one area of one market. Then launch, learn, adapt, repeat.
2. Be Selective with Products
Just because you have 200 SKUs doesn’t mean you need to offer same-day delivery on all of them. In fact, that too may not be practical.
Identify products that you feel have the most potential. This may be based on consumer demand…..in particular, products that are most often requested with expedited shipping. It may also be based on the feasibility of fulfilling those orders quickly and profitably. For example, if you’re looking at using a bike courier to help with same-day delivery, then mini fridges may not work.
By being selective with products, it will not only help you identify fitting delivery couriers, it will also be easier to perform a detailed cost analysis for your ecommerce business.
3. Use an Order Fulfillment Company
Small and medium-sized businesses don’t typically have their own network of fulfillment warehouses across the U.S. Therefore, to help make same-day delivery more viable, SMBs can look at outsourcing their order fulfillment to companies with more strategic locations.
As an SMB, however, this can still be a challenge, as many order fulfillment companies are not in a location that would facilitate same-day delivery to a major metro, particularly given the extremely close proximity that these warehouses need to be in order to serve that market that same day.
Another challenge is that many fulfillment companies have minimum order volume requirements, and many SMBs may not reach those minimums, especially if they’re splitting their inventory and orders among multiple distribution centers.
While it may be a challenge to find a fitting company, outsourcing your order fulfillment is certainly a strategy worth exploring in order to get products to your customers more quickly.
4. Explore Delivery Options
As I mentioned, same-day delivery isn’t cheap. And when you use the big carriers, it can be even more expensive.
In major metros, there are now more options than ever before to utilize a local or regional carrier. Those carriers may not work in all circumstances, but when they do, they may be a more cost-effective alternative, with fees that are much easier to understand and without all of the surcharges.
5. Charge for Same-Day Delivery
You can find several studies online which show that most consumers want cheap delivery, and they’re willing to wait for it. So when consumers want same-day delivery, it’s okay to charge for it.
For retailers that have implemented same-day delivery and been successful, it’s not uncommon to charge up to $20 or more for it. With the logistical challenges and cost, merchants should not be focused on trying to offer it for cheap. After all, it’s a premium service. Instead, start by focusing on your ability to achieve it, and then charge accordingly.
6. Study & Learn
I’m not generally a fan of the “wait and see” mentality, as I believe it’s important to stay ahead of the curve. That said, though, there’s also value in learning from those that have gone before you.
Because same-day delivery isn’t cheap…nor easy….small and medium-sized businesses can benefit from studying and learning from those that have tried it before them. Take eBay, for instance. Their Now program failed in large part due to lack of demand for their products. Others have failed due to costs and lack of product margins. Others didn’t have the technology nor the logistics to adequately support it.
In summary, I’ll say this. While demand for same-day delivery is currently low, it won’t be that way forever. Consumers want options. Even if you don’t get too many requests for same-day order fulfillment, by at least having it as an option, you’ll occasionally pick up a new customer that you wouldn’t have otherwise had.
Before you jump in, though, do your homework, start small, and make sure you’re not devoting valuable time and resources to same-day delivery when there’s other, lower-hanging fruit for your business.