Instant shipping moves in
In the third quarter of 2012, adjusted U.S. retail e-commerce activity hit $57 billion, a 3.7 percent increase from the second quarter, according to the U.S. Census Bureau.
While this total still represents a shadow of overall retail sales, which the bureau said passed $1 trillion in the third quarter, e-commerce in the United States is a steadily rising force. Now, it seems, this online shopping experience is about to be transformed. Shipping will undergo a sea change in 2013 toward instant-gratification shipping.
This year, e-commerce shippers will enter a new world of shipping options, promoting same-day, and even same-hour, shipping over now-dated, passé options like overnight mail. Consumers living in densely populated areas, those in the industry reason, want their goods as soon as they order them, and no speedy shipment time — even, as is the case with one company, a mere 15 minutes after an order is placed — is too quick.
As with most things in e-retail, this all started with Amazon and its decision to begin collecting sales taxes on purchases in some states, a burden the company was able to run away from for years by not establishing a physical presence within the state. The company recently agreed to being charged a sales tax in Massachusetts, and a new-year rule change in Georgia may pave the way for sales tax in the Peach State.
By agreeing to the new guidelines, Amazon has also paved the way to move closer to consumers. This proximity will allow for faster and cheaper shipping, setting the stage for a change in consumer shipping expectations.
The progression to the cities has already started. Just last month, Amazon said it would build a 1-million-square foot distribution facility in Robbinsville, N.J., that will be ready for business by early 2014. The development marks the company’s first project in New Jersey.
Super shipping isn’t Amazon’s for the taking, however, as companies like Walmart and eBay, and service providers like the U.S. Postal Service, have begun experimenting with their own hyper-fast shipping services.
eBay is currently testing eBay Now, a phone app that connects consumers in San Francisco and parts of New York with retailers and promises to deliver items in less than an hour for a $5 fee. Participating retailers include Best Buy, Guitar Center, Home Depot, Macy’s and Toys “R” Us.
A third-party entrant into to the super-shipping game, the British firm Shutl, is rolling out its American services early this year, and it will expand its services from an initial limited offering of New York and San Francisco to more than 10 metro areas by the middle of 2013. Shutl has already permeated the U.K. shipping game, but while Chief Executive Officer Tom Allason said same-hour shipping took a while to catch on in the United Kingdom, the idea has been spreading like wild fire in the United States because of Amazon.
“When Amazon announced they were giving up their sales tax advantage in order to put in local distribution in order to be able to provide faster delivery — potentially even cost-effective same-day in some metros — that got all the major retailers over here moving,” he said.
Shutl’s service works by using a series of couriers routing from retailer distribution points that are less than 10 miles from the consumer, using bicycle couriers and truckers to deliver the goods in no more than 90 minutes. (Allason said the service’s fastest speed has been clocked at a mere 15 minutes.) Shutl can deliver goods so quickly because it connects unknown, regional couriers to a broader, sustainable network. There’s no hub-and-spoke for his company, he said; by using a courier network, he can make this type of super-shipping available at the same price of standard delivery.
The company works within the retailer’s existing shipping options, so same-hour or same-day shipping simply appears as a new option for order fulfillment.
“2013 will be the year that shipping moves to the consumer from the retailer, when it starts becoming about fitting delivery into the consumer’s supply chain, rather than the other way around,” he said.
Allason said this is a unique position because instead of competing with the retailers, he’s offering a service that could work with them. The only potential competition he sees in the arena, aside from Amazon, is the USPS.
The Postal Service’s Metro Post test program — which enables consumers to order goods as late as 2 p.m. and have them delivered by 8 p.m. the same day — was launched in San Francisco during the holiday season. The year-long test phase will initially be capped at 200 packages per day, but officials have the flexibility to adapt the program as necessary by adding a larger handling capability, terminating the program altogether or even bringing it out of the test phase early.
“The explosion of e-commerce is such that we are in a world of instant gratification,” USPS spokesman John Friess said. “We see this as an opportunity to leverage our infrastructure because we already deliver to every address.”
So far, the service has been going well, and Postal Service officials are already looking at the next step.
The viability and sustainability of these services is, of course, still unknown, as are the affects on the average shipper. Also, population density is key to all of this, so rural consumers will continue to have to wait for the next day for their shipments. Officials contend, however, that the majority of the consumers will actually want shipping times that are almost instantaneous. Once consumers realize same-day and same-hour shipping is possible, Allason said it will be difficult to convince them that instant-gratification shipping isn’t really needed.
“We, as a race, cannot live with things that we didn’t even know existed a short while previously,” he said. “As soon as people know that they can start getting things same-day or even same-hour, that’s what they’re going to expect.”