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[22 comments]

Amazon vs. Google in same-day delivery showdown

August 8, 2014

This week might as well have been named same-day delivery service week. First, Amazon.com announced that it was expanding same-day deliveries to six new metropolitan areas. It didn't take long for news to break that Barnes & Noble was teaming up with Google to offer same-day delivery of books in three cities where Amazon also offers that option.

The six new Amazon markets are Baltimore, Dallas, Indianapolis, New York metro, Philadelphia and Washington, D.C. The e-tailer already offers same-day delivery in Los Angeles, Phoenix, San Francisco and Seattle. Amazon offers a wide variety of items as part of the service including books, health & beauty care, household cleaning products, movies and video games.

[Image: Amazon Same-Day Delivery]

Customers who belong to Amazon Prime pay a flat rate of $5.99 for same-day shipments. Non-members pay $9.98 per shipment plus 99 cents per item. Ordering deadlines vary depending on location: Chicago - 7:45 a.m.; Dallas, Indianapolis, L.A., New York, Philadelphia, Phoenix and San Francisco - 12:15 p.m.; Seattle - 12:45 p.m.; and Baltimore, Boston and Washington, D.C. - 1:00 p.m.

Michael Huseby, Barnes & Noble's CEO, told The New York Times the chain's test of same-day delivery as part of Google Shopping Express is "our attempt to link the digital and physical."

According to the Times, Barnes & Noble orders placed through Google are not processed on the chain's site. A person at designated stores will process the Google orders for books, games, magazines, toys and other products it stocks and pass them off to a courier for delivery.

Google, according to a Re/code report, has $500 million budgeted to expand its same-day service across the country. The tech giant has expanded the service as a logical extension of its search capabilities.

"We have been displaying to shoppers information about locally available listings for five years," Tom Fallows, head of Google Shopping Express, told Re/code. "And throughout that time shoppers had really interesting feedback: 'Thanks, Google, but now you're not helping me do anything about getting that product today.'"

Discussion Questions:

What are the biggest reasons more consumers are not ordering products for same-day delivery from Amazon, Google and others? What will it take for retailers to address these objections?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How likely are retailers to turn consumer trial of same-day delivery services into re-purchases?

Comments:

I don't see the broad appeal of same-day delivery, especially with such a hefty price premium for it. Sure there are some occasions when I just gotta have it at any price, but they are rare; most of the time I am quite content to wait a couple of days for an e-commerce order to arrive.

Retailers shouldn't panic over this news—I see it as a passing fad. And even if I'm wrong and same-day delivery becomes commonplace, it's still no substitute for the times when consumers want to do some real shopping in order to interact with the merchandise, etc. Retailers just need to keep reminding consumers of the appeal of real shopping, and to continually enhance the in-store experience.

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Peter Fader, Professor of Marketing, The Wharton School of the Univ. of Pennsylvania

Shipping costs have always been a hurdle for consumers. Paying a $10 shipping fee for a book that you can download electronically for $9.99 doesn't make a lot of sense. Similarly, the shipping fees make consumers pause before using the same-day delivery option.

Amazon is working to overcome this with Prime membership. As Google adds items, I expect they will do the same.

My question is, how long will this money-losing battle continue?

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Max Goldberg, President, Max Goldberg & Associates

Shoppers are hard wired to expect free shipping. Study after study demonstrates that shoppers value free shipping more than the monetary value of the shipping.

There simply aren't enough consumers that want to forgo free shipping in favor of same-day delivery. In most cases when consumers need it immediately, they opt to visit the store instead.

One thing same-day delivery does do is serve as a powerful trust symbol for a retailer's fulfillment services: "If retailer X is offering me same-day delivery, then I can be sure they will ship my two-day delivery (with free shipping) quickly!"

The high price for same-day delivery can also serve as a price anchor to make less expensive expedited shipping seem like a better value, and shift more sales to that option: "I won't pay $10 extra to have it today, but $4 to have it tomorrow seems like a good deal."

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Jason Goldberg, VP Commerce Strategy, Razorfish

I'm hearing good things about Google Express in Los Angeles, and the people I'm hearing it from are everyday urban people spreading word of mouth.

Ed Dunn, Founder, (Stealth Operation)

It's a combination of cost and not really being THAT into immediate gratification.

The only way to address a cost issue is to reduce (or eliminate) the cost.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

Cost is an issue, but same-day quick delivery service will happen, for a price. Not everyone will use this service, but 15 to 20 percent of the population will, if the service level is high, and the product arrives properly and safe. Yes it will be $10 or slightly more, but again there is plenty of business out there for this niche, believe me. The other 80 to 85 percent will have to fetch their own stuff, through an order system and pick-up, or the old fashioned way. That percent will probably not change much, as many simply believe that same-day delivery should be free, when we all know it is not free.

The larger cities will do well with this service, and surrounding suburbs too.

Like anything else that is new, the bugs will be worked out, but the cost to deliver will be in place, or it simply cannot be done. Even 5 percent of the 120 million households is still 6 million potential transactions, and it will happen, if done correctly.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Same-day delivery—another reason not to go to the store.

An extra charge for same-day delivery—a reason to realize that I don't really need it today, but if I do, even $10 is cheap compared to getting in the car, driving to the store, and spending the time finding the product on the shelf, to get the product.

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Gene Detroyer, Professor, Independent

If this is a step toward free same-day delivery, then it's monumental. If not, I don't think it will have much impact for the reasons Peter and Jason mentioned.

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David Dorf, Sr. Director of Technology Strategy, Oracle Retail

The short answer is; it's too soon. This is all new. There will be a tipping point where the general population becomes aware of the service. It's still being rolled out and tested.

Another issue may be the price. While not unreasonable for same day service, patience (as in, waiting for a day or two) saves the customer money. That said, the price is reasonable for the convenience of the same-day service.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

The tradeoff between the need for immediate satisfaction and the cost: "Customers who belong to Amazon Prime pay a flat rate of $5.99 for same-day shipments. Non-members pay $9.98 per shipment plus 99 cents per item." Personally, I can wait a day or two if it means lowering the cost.

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Bill Davis, Director, MB&G Consulting

In these days when free shipping is more and more often a cost of doing business, consumers are balking at ordering products for same-day delivery at the expense. When they do need products on the same day, the order online and pickup in-store option is often provided free of charge.

There is a limited number of products that consumers need to have same-day, and a segment of convenience-driven consumers will be willing to pay for that right away. Others may wait until same-day goes free, just like the other shipping options have.

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Mark Price, Managing Partner, LiftPoint Consulting, Inc.

If consumers want products on the same day, they go to local stores where the price may be the same as the online price plus the shipping cost. If the product is not available locally or if the price is higher than the price plus shipping, same-day delivery would be attractive. Until that circumstance is commonplace, same-day delivery will not take off.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

At some point soon, same-day delivery will become more of a value to more of the consumer public. Why? I do not know. But to make it rewarding the cost will have to be dropped to close to zero. This seems to be no different than when a new product comes on the market at an excessive cost. The more the competition the lower the cost. Same thing will happen with this.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

Additional thoughts:

Same-day delivery isn't about "same-day delivery." It is about getting the sale. If the customer is enticed by same-day but opts for one- or two-day, it is still a win for the retailer. This is not a binary decision.

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Gene Detroyer, Professor, Independent

Not that long ago, the subject du jour was free shipping, which wasn't really free anyway, and then Amazon raised its threshold from $25 to $35 minimum purchase to receive free shipping, not to mention how many days the free shipping would take, etc. The important point in today's discussion, same-day shipping, again is, how will they meet the costs, and does the consumer really want or need same-day shipping?

One of our blog posts not too long ago had the following information about what the customer really wants:

According to the results of a survey of 1000 consumers (by global design and innovation consultancy, Continuum), the number one reason people choose to shop either in a store OR online is convenience. As a matter of fact, price wasn't the second choice either!

First, customers said they prefer to shop IN STORES for the following reasons:

  1. Convenience (40 percent)
  2. Don't trust the quality online (22 percent)
  3. Don't want to pay for shipping/returns (17 percent)
  4. Better prices (17 percent)
  5. For personal interaction (4 percent)

Second, customers said they prefer to shop ONLINE for the following reasons:

  1. Convenience (43 percent)
  2. Easier to find what they are looking for (29 percent)
  3. Better prices (25 percent)
  4. To avoid interaction with employees (3 percent)

The fact that convenience seemed to matter more for shoppers than price in both instances was a surprise. Note that same-day delivery wasn't even part of the discussion.

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Naomi K. Shapiro, Strategic Market Communications, Upstream Commerce

It's the tradeoff between speed and cost as a percentage of the product ordered and if at line-item or overall order. We're very early in this service and in adoption.

Consider same-day delivery as another convenience perk and although it may remain a niche, it has a halo effect; it communicates agility, responsiveness and innovation for those doing it. It also forces the retailer to push their own internal envelope of possibilities, along systems and cross-organizational processes. Doing same-day delivery well is one step closer to melding virtual and physical retailing.

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Mohamed Amer, Vice President, Global Integrated Retail Unit, SAP

We discussed yesterday the importance of the distinction between the two classes of merchandise, "Surprise/Delight/NOW!" and "Routine/Autopilot/(Frustrating)." Merchandising of stores need to be bifurcated, conceptually if not physically, in this direction.

That second category is the natural province of online, which is prepared to deliver massive long-tail merchandise FAR more efficiently than the typical bricks store can possibly do—without BOPIS—"buy online, pickup in store."

However, just as with BOPIS, the bricks store should NOT cede any business to online competitors, but instead should come over onto their playing field, SMOOTHLY integrating, for the shopper, their online experience with their in-store experience—BOPIS playing a MAJOR role here, and can actually be leveraged to increase in-store sales.

What today's discussion is really about is an online merchant, Amazon, presuming to come over into the bricks world and compete with them on the "NOW!" feature of the bricks-and-mortar world. THIS is a serious assault, and one that the bricks "rat-maze" store does not respond well too—but should! (Amazon's "now" is really just "today," a far cry from the true "NOW!" of the bricks world.)

The beginning of the intelligent bricks response is realizing and leveraging the bifurcated nature of the merchandise, as discussed above. Or, they can just stumble along RESPONDING to challenges, rather than seizing the initiative.

I vote for the second. ;-)

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Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Shopper Scientist LLC

What's wrong with this picture? Amazon, which recently had to tweak Prime—presumably because it's a money loser—now wants to expand to "same day" an enormously costly type of service, which if it's priced to cover costs will be desired by even fewer consumers than now, and if it's not—i.e. if it's priced the usual Amazon way of being a loss leader—will become yet another drain on the coffers? Gee, it must be swell to have the printing press in your back room.

'notcom'

Most consumers are used/expecting to be offered free shipping and return from major merchants they do business with and, in the case of Amazon, pay an annual fee for that benefit. Books are not part of that must-have-it-today consideration mindset.

Costlier same-day delivery of books is also another example of a misguided strategy by a struggling bricks-and-mortal bookseller (B&N) and a digital company that is constantly trying to redefine themselves in a proliferation of loosely connected business ventures (Google). For B&N it is desperation. For Google it's about grabbing consumer attention and fuel the impatience endemic to the consumerism psychosis we all are guilty of these days.

Amazon's futuristic vision of Delivery Drones is not that far off the sanity path—unless they're delivering needed medications to a remote mountainous area, one can wait 1-2 days to get their book or bike rack or whatever. For those cases that can't, there's overnight/expedited shipping.

Dimitris Tsioutsias, VP, Targetbase

It is still about the value of convenience for the added cost. There are some occasions where same day is important, and worth the extra costs to shoppers like a forgotten gift occasion, surprising someone, etc. But most of the time, it's easy enough to buy at the store if we really need it and to make sure the item meets expectations. Next day delivery works so well now, expect the added cost will have to drop significantly to attract shoppers.

Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

As previously mentioned, there is something peculiar about a company that is just breaking even and/or losing money with the delivery business expanding interest into the more expensive same-day service. I suspect that there is more interest in new market development than book sales.

The e-commerce provider that masters same-day delivery will be well-prepared for the grocery business, and on the way to the prepared foods business. And this would certainly be a great leap forward for the e-commerce side of retail. Transportation costs are not only measured in fuel and maintenance costs but the time factors are an additional burden to a family where both parents must work 40-or-more hours. The math is right for this expansion even if the market is a little stubborn about participating. What e-commerce isn't doing very well is enrolling new customers and educating the consumer, which is sometimes referred to as selling and advertising. But the powers-that-be in the e-commerce only world have gotten where they are without a professional marketing group, and are of the mindset that they are no longer needed.

Meanwhile the rest of retail, with its mid-20th century paper- and snail-mail advertising and omni-channel push into the market, is seriously slowing the growth of these new captains of industry. We are all told that social media, e-mail, pop-ups and a lot of likes will get you the market share you need if it is done right. The problem is that getting it right remains elusive for most using these electronic rainmakers, and the features and benefits of ideas like same-day shipping just go unheard. Maybe someday soon there will be a sales and marketing app to fix this dilemma once and for all.

'gjarnoldjr'

Time vs. money. Most consumers do not see the value in paying $6-$10 for same-day shipping when they know they can get it for free if they wait 24-48 hours. Customers have become accustomed to this offering for years now—it won't be an easy battle to change their minds.

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Alexander Rink, CEO, 360pi

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