With Amazon, Walmart and eBay all rolling out or experimenting with same-day delivery and a host of start-ups also touting similar services, same-day delivery became a popular theme this past holiday season. But several articles recently exploring the trend ultimately question the value of the service.
The glass-half-empty view harks back to the failures of Kozmo.com and Webvan during the dot-com era due to the exorbitant costs involved. With the going charge to consumers of between $5.00 and $10.00 per order, many articles assume retailers are subsidizing the same-day perk at this point.
The Wall Street Journal points to how eBay, which worked with Toys "R" Us, Macy's, Target and others this past holiday season on the service, is paying couriers about $12.50 per hour, as well as parking fees and 55 cents per mile driven.
On the supply chain side, high-volume, same-day delivery with robot-driven warehouses likely costs $10 an order with one-off offers likely costing $50 each, Yossi Sheffi, director of the M.I.T. Center for Transportation and Logistics, estimated for The New York Times. "It's outrageously expensive," he said.
The bigger question is whether consumers will pay up for same-day or just wait a day or two for free-delivery. Walmart told the Times that its test is showing that consumers often pick next-day delivery rather than same day. Other articles also attested that consumers would wait for free-delivery.
But on the glass-full side, some said consumers will eventually demand same-day delivery after getting accustomed to it.
"People don't need immediate delivery today, but they will need it tomorrow, because as soon as you know it's available, you start expecting it and you start demanding it," Tom Allason, chief executive of Shutl, a British same-day delivery service that will expand to the U.S. in 2013, told the Times.
For online retailers, offering same-delivery removes the "instant gratification" edge that brick & mortar stores have long held over e-commerce shopping.
Pulling products from local stores, closer warehouses, and other logistic efficiencies promise to reduce costs versus the Webvan days. EBay's marketplace President Devin Wenig told the Journal, "To make local delivery work requires scale, there's no doubt about that," but "we think we can significantly squeeze cost and times in local markets."
Regardless, brick & mortar retailers as well as Google and others are said to feel the need to invest in same-day delivery because of the threat of Amazon. Amazon's opening of warehouses across the country are said to be setting the stage for the rollout of same-day delivery that has been offered since 2009 in cities near its warehouses. It costs only $3.99 for "Prime Service" customers.
"Amazon created this monster and everyone has had to jump on board to compete," Kerry Rice, an analyst at Needham & Co., told the Journal.
How likely is it that retailers and delivery providers have cracked the code to offer same-day service profitably?