Retailers’ tighter delivery options put more power in buyers’ hands.
With every move toward the standardization of same-day, or even next-hour, shipping, the transportation industry is moving closer to putting shipping power into the hands of the consumer.
This trend, according to Rob Howard, chief executive officer of Grand Junction, a local-delivery software provider, will require retailers to shift their supply chains, viewing stores as mini-distribution centers, unless they want to get left behind in the race to get goods to consumers when and how they want them.
“It’s been so long since the consumer had the ability to choose new options on delivery,” he said. “Today, you can get a slow-boat delivery, five to seven business days, and you can get a next-day delivery. That’s really you’re only options.”
These options include the gradual rollout in more stores of a “will-call” option where customers can buy online and pick up in the stores. Low-cost, a.m./p.m. delivery options are also evolving, along with reliable, scheduled and one-hour delivery.
Next-hour delivery is currently a reality through the eBay Now program, which charges consumers $5 for shipping with a minimum order of $25. However, Howard said it needs a few tweaks to be mirrored on a larger scale. eBay has a dedicated fleet of drivers in San Francisco, and when a purchase is made on the website through a partnership with a list of online retailers, these drivers go to the store, pick out the merchandise, pay for it, and deliver it to the customer within one to two hours.
“That’s not the end game,” Howard said of the service, which is available in Chicago, Dallas, and New York City, in addition to San Francisco. “It’s a heavy-handed approach to same-day delivery because it’s very costly to have dedicated drivers going into retail stores trying to track down the item and then buying it. It’s almost like the driver is doing the fulfillment.”
Howard said eBay ends up subsidizing the delivery to bring it to consumers, but added that this is only the first step in the movement toward on-demand shipping. The next may include tighter collaboration with retailers, he said. Howard envisions this meaning that drivers simply have to go to the store, and the item is there waiting for them; the purchase has already been completed, and they simply have to pick it up.
“eBay is staking out territory in this so they can attract retailers to use their platform,” he said. “Local delivery is an area that isn’t really solved for a lot of retailers, and that’s why they’re putting their program out there.” He noted Google has a similar program, Google Shopping Express, but said that was enacted to keep customers from bypassing the search engine and simply going to Amazon whenever they want to order goods online.
Many retailers are preparing for these coming delivery demands. From Howard’s office in San Francisco, he sits near a handful of stores which are well positioned to deliver on these instant-gratification shipping options. GAP and CVS have multiple locations near his office that can achieve next-hour delivery.
“With the emergence of these new consumer delivery options, the ones that are really in trouble are the ones that do not have local inventory because they can’t even offer those options,” he said. “Fast forward to when same-day is more and more expected and scheduled is an option as well, and you don’t have any local inventory, you simply aren’t providing as good a service as your competitors are.”
Retailers that can’t properly leverage their inventory and pure-play online retailers will likely be left behind in this shipping shift, Howard said. Properly taking advantage of the shipping trend also requires a change in perspective. Howard explained that retailers still have difficulty understanding the financial benefits of online purchases picked up in their stores, and struggle to know how to categorize and find available inventory.
Most important, however, is being able to get the inventory to customers, and that’s where Grand Junction comes in, Howard said. His company offers retailers a platform that simplifies the $46 billion domestic local delivery industry, which is made up of 4,000 delivery companies. Grand Junction has so far managed more than 100 million deliveries for shippers who need local couriers to complete same-day and scheduled deliveries, connecting them with more than 1,200 companies in the United States and Canada. According to the company, it helps handle 80,000 same-day deliveries each day.
“We’re quite happy about the emergence of same-day delivery because we have this very effective national platform for local delivery,” he said. The option for retailers, of course, is to try to secure delivery companies in every U.S. market, an onerous task, he said. “We service every city in the U.S. and Canada, but that’s 90 percent of the population,” he added, noting that same-hour and same-day delivery really isn’t an option for rural residents.
In a blog on the Grand Junction website, Howard explained that last-mile couriers are really the only options for retailers pursuing same-day shipping, which will be the standard. The larger carriers like UPS and FedEx simply aren’t nimble enough to adapt to this type of service.
“None of these companies are viable options today,” he wrote. “The local delivery and courier industry is a ready-to-go option, very experienced option. It’s full of small, nimble, and highly flexible companies, accustomed to operating nearly 24/7, on most holidays, and meeting their customers’ needs as opposed to requiring their customers to meet their operational practices.”
As with many changes in online purchasing, Amazon has played a significant role in pushing forward these newer delivery options, Howard said. He noted even though Amazon’s distribution center is an hour and a half outside of San Francisco and has a massive inventory available, it won’t be able to deliver on a next-hour promise because of its proximity to customers. Amazon is, however, rolling out same-day shipping, which Howard said is a modified a.m./p.m. delivery service, using a two-cycle UPS model. Currently, same-day delivery rates stand at $8.99 per shipment with a 99-cent charge per item.
But, Howard noted, no matter how popular one-hour delivery may become, it will never become the norm.
“This one-hour delivery is always going to be a premium service,” he said. “It’s like a taxi ride instead of the bus.”
This article was published in the June 2014 issue of American Shipper.