The future of same-day delivery

March 11, 2020
StoreShippers - Nienke van Meekeren
March 11, 2020
StoreShippers - Nienke van Meekeren

Amazon recently announced another step that it’s taken to speed up same-day delivery. The company has installed what it’s calling “mini-fulfilment centres” closer to where customers live in select U.S. markets. The new facilities allow Amazon to reduce same-day delivery times down to just a few hours for Prime members in those areas. It’s the latest move in an ongoing delivery war involving other retail giants like Walmart and Target, both of which leverage their local stores to make online ordering more convenient for customers.

To remain competitive, the delivery speed has become an important spearhead for many retailers worldwide. Next-day delivery has become the norm in a short time, but it needs to be even faster. The standard is therefore shifting from next-day to same-day or faster delivery. What does the future of same-day delivery look like?

Retailers with an online channel can’t ignore the consumers’ demand for fast delivery services

What do consumers say?
In a continuous struggle to remain competitive, retail giants are increasingly determining consumer expectations. Consumers are becoming conditioned to expect instant gratification. This expectation is rooted in digital media platforms, as well as in the increasingly competitive delivery standards set by ecommerce giants like Amazon. As a result of developments in the area of delivery speed and options, consumers have become increasingly demanding. A few years ago, consumers found it normal to wait multiple days for their products ordered online. Nowadays, retailers can no longer permit a long delivery time. Retail giants who are able to deliver their products faster and faster have introduced consumers to a better alternative and changed their expectations.

Purchasing products online must be easier and, above all, faster. 80% of consumers want to receive their package at least the next day, and 49% of consumers even state that same-day delivery makes them more likely to shop online. Young consumers in particular have high expectations with regard to delivery speed: 56% of consumers between the age or 18-34 years expect retailers to offer same-day delivery. The fact that online shoppers attach great importance to speed of delivery is also apparent from the fact that 61% of consumers are willing to pay for same-day or faster delivery.

Polluting and high costs
Retailers with an online channel can’t ignore the consumers’ demand for fast delivery services. Same-day delivery increases customer satisfaction and can give retailers a lot of repeat business from customers. Moreover, offering same-day delivery can help retail businesses gain a competitive edge over 85% of other players, according to research of Go People.

However, various studies point to the high costs that same-day delivery entails and the consequences for the environment. To efficiently provide same-day delivery, volume is needed, it is claimed. Due to the great time pressure between the time of ordering and delivery, delivery vans are not loaded optimally, or extra journeys are needed to deliver products to the end customer the same day. In addition to more transport costs, this also results in additional carbon emissions.

Change the supply chain
The big winner of the delivery war seems to be the online shopper with added convenience. However, to meet the delivery standard expected by the consumer and to prevent high costs and negative consequences for the environment, businesses in ecommerce (logistics) must adjust the way they work.

The future or same-day delivery depends on how this is carried out. As explained above, same-day delivery with traditional forms of ecommerce logistics is difficult to realise due to high costs and pressure on the environment. It is therefore necessary to change the supply chain as a whole, in order to structurally reduce costs and carbon emissions per package. Two elements are important here:

1.         Local sourcing of products
It is important that products are sourced locally. Amazon does this for example by opening min-fulfilment centres and other retailers, such as Target, Walmart and Zara, use stock from their brick-and-mortar store estate to fulfil online orders. Local sourcing of products helps to reduce carbon emissions as drivers won’t have to travel as far in order to make fast deliveries.

2.         Less transport movements
To reduce costs and pressure on the environment, it is important that the number of transport movements with polluting vehicles is kept as low as possible. Again, this can be achieved through the use of brick-and-mortar stores or min-fulfilment centres in cities. In this way, products can travel in bulk to the store before they are packed for delivery to the final consumer, while parcels travel thousands or at least hundreds of miles when shipped from a distribution centre.

Our opinion
We at StoreShippers often hear from people from the retail or supply chain side that consumers actually don’t want same-day delivery. They keep on saying that the industry has made them belief that this is what they want. Of course we understand that same-day delivery or instant delivery is not easy and costly for the incumbents in supply chain. However, ignoring the consumer and the most valuable player in the world is not an option. Things have to change and we are ready to help retailers make that change. Sustainable-Sameday-Worldwide.

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Blog by: Nienke van Meekeren
Sources used: Invesp, Small Business Trends, Inventiva, ABN AMRO, Thuiswinkel
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