Competing in the age of wicked fast delivery

Discussion
Apr 20, 2015

Through a special arrangement, presented here for discussion is an excerpt of a current article from Commerce Anywhere Blog.

Amazon announced one-hour delivery for Austin, so I had to give it a try. My daughter needs a larger camera bag, so I decided that would be a great item to order. You have to order via the PrimeNow mobile app and it offers a reduced set of available items, but I had no problem finding what I wanted. I waited until 8 a.m. to start my order, which took six minutes because I used my office address and had to verify my credit card.

Two-hour delivery is free, and one hour is $7.99. It also recommends a tip of $5.00. Between the delivery charge and tip, I guess they cover the cost. It might even be cheaper than two-day shipping, according an articled penned by RSR’s Paula Rosenblum for Forbes. I chose the one-hour delivery and received a text message at 8:11 a.m. stating, "Your Amazon Prime Now order will arrive soon." Then at 8:21 a.m., I received a second text message stating, "Your Amazon Prime Now order has been delivered." Yep, it was delivered in 15 minutes.

You can see in the map that the DC is very close to my office, but it’s still impressive how fast I got my order. I can definitely say I’ll use the service again.

Retailers have the opportunity to offer similar services by partnering with delivery companies. The key is managing in-store inventory and the picking process. I expect to see this service from local stores in the next year.

Will partnering with delivery companies work well enough for retailers to compete with Amazon’s one-hour or two-hour delivery promise? What further steps or investments may be needed to match one-hour or two-hour delivery?

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17 Comments on "Competing in the age of wicked fast delivery"

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Max Goldberg
BrainTrust

Managing in-store inventory and the picking process are two important components. Hiring a competent, efficient delivery company is another. Developing the necessary app is a third. It’s not going to be easy to duplicate what Amazon is doing. Amazon has the scale and financial wherewithal to pull this off, and few retailers will be able to match their skill.

Retailers need to think long and hard before jumping into the one-to-two hour delivery arena. With so few successfully employing an omnichannel strategy, how can they be expected to implement fast delivery?

Joan Treistman
BrainTrust

Zowie! That’s impressive. There needs to be precise coordination between inventory management, fulfillment procedures and the delivery company. Careful oversight and focused management will be critical. I’m guessing that there will be more or fewer challenges depending on the location and its roadways.

However, if promises are based on what is realistic, retailers can meet those expectations and impress. I live in Manhattan and I’m willing to wait more than 20 minutes. And I’m sure my neighbors feel the same way.

Ian Percy
BrainTrust

No question this performance is remarkable. But really—Why?

If I’m figuring it correctly the camera bag was $24.99, delivery was $7.99 plus a $5 tip. So the delivery in this case was 52 percent of the product cost. Now this was done as an experiment and it makes a very interesting article. Thanks for doing it David. And again … remarkable.

On a sociological level, we’ve come to a place in society where we want what we want and we want it now. At least thanks to Amazon, if you want this level of entitlement you can have it, as long as you pay for it.

Diana McHenry
Guest

For retailers to compete against Amazon on delivery speeds, in addition to leveraging transportation partners and picking prowess, retailers will need to invest in supply chain design and optimization.

Gene Detroyer
BrainTrust

I question how often someone really needs something in an hour or two. I am guessing it is infrequent. However, up until this moment, it was the one advantage a brick-and-mortar store had over online. If I needed it now, I could always go to the store and have it within a couple of hours.

If this works I no longer have the need to get in my car, find a parking space, walk to the store, make the purchase (if it is in stock) and come home. I believe brick-and-mortar retailers have to be prepared to offer this service. I don’t think they should have a concern, I can’t imagine it will be used much.

Verlin Youd
BrainTrust

Continues to show that Amazon remains committed to pushing the envelope to gain first-mover advantage and “fresh” competitive differentiation. They also know that unless they consistently push boundaries they are likely to fall victim to other smaller, quicker, nimbler competitors.

Others who don’t have the scale and physical distribution presence of Amazon need to be looking at approaches to drive similar value, most likely through logistical partnerships.

Bob Hilarides
Guest
2 years 5 months ago

This is a wonderful anecdote for spurring conversation, but I still wonder about the breadth of reach Amazon can deliver. It’s one thing to deliver fast across short distances—retailers have been doing that forever. It’s a whole different animal to get that “last mile” delivered efficiently across broader geographies. I wouldn’t think camera bags are a fast enough moving item to merit stocking in many small storehouses, so ultimately either the time or cost has to go up to deliver this item to an enduser destination further away.

Will it work effectively in certain geographies or for certain categories? Yes. It will impact brick-and-mortar. But it will also allow forward-thinking chain retailers to slip stream on their approach, leveraging their existing store base to offer more economical delivery of their more limited product assortment to that last mile, whether it’s delivery options like the UberESSENTIALS test in DC or mobile app feature refinement.

Lee Peterson
BrainTrust

Two retail initiatives here are now becoming clear: 1. You have to have strong private label goods—Amazon can’t do that—and 2. if you have stores, you HAVE to make them more interesting. You need to have customers that will want to go to your stores versus having to go to them. Those days are over. No one has to go to your stores without numbers one and two above.

I still have to go back to the old Sam Walton quote and apply it to the Amazon competitive issue: “It’s easy to compete with us, just do what we don’t do.”

Ken Lonyai
BrainTrust

Wet blanket alert!

I don’t believe this has sustainability in a real long-term way. Someone somewhere is eating a lot of cost. Sure it’s great for an experiment in some cities, a great investment in PR, but at the scale Amazon, Macy’s, Walmart etc., have to operate and with their tight margins, this is not ultimately feasible. There’s also something unnerving about the suggested tip request.

It sounds like a lot of ambition and hype to maybe get attention or shake up the competition, but I’m betting against this being around for too long.

Joel Rubinson
BrainTrust

we have gravitated towards an instant gratification mentality. One-hour delivery puts online on equal footing with physical (takes an hour to get there and back). I think this is big at moving a greater percent of retail to online.

gordon arnold
Guest
If you are a small retailer, you might want to consider joining with Amazon to become part of the solution for guaranteed solutions. In fact, this might be a good time for a large to very large retailer to think of joining Amazon in some fashion to increase sales. In order to fulfill a consumer need, the first step is to determine relevant priority needs. If time is the most significant factor, then logistics is the supporter of the nearest supply of the expressed need or alternative solution. This means that access to inventory locations and quantities is very important to the Amazon software solution for this type transaction. These solutions need large dollars for creation debugging and implementation as well as a real time inventory solution with lots of stuff the consumer needs and wants now on a regular basis. Knowing what consumers need and want now on a regular basis is important for making return on investment and you can be sure Amazon spent real dollars to capture this info and keep it up to date. With this in mind it may be a better idea to join in rather than joust with Amazon. If making money is… Read more »
Vahe Katros
Guest

A ride sharing company like Uber came to mind. Perhaps the idea of democratizing services can extend to “uber-runners” who can get the product and bring it out to the car. Here is some movement in this direction from today’s TechCrunch.

Ed Rosenbaum
BrainTrust

I wish I could find a diet that would guarantee results like this. I will bet David did not work up a sweat waiting for the delivery. Okay…enough frivolity. This does not guarantee Amazon will roll this out nationally. But it does show they are not taking their “foot off the pedal” when it comes to staying at least a step ahead of everybody.

Naomi K. Shapiro
Guest
Naomi K. Shapiro
2 years 5 months ago

I don’t know if they should try (to compete with Amazon’s one-hour delivery—which is breathtaking). I hope, for the other retailers’ sakes that all of the people won’t expect instant gratification all of the time—and I am also skeptical—surprised—if Amazon can deliver enough of certain products that just might not happen to be “stocked” at the fulfillment center? And I very much like the Sam Walton comment that was quoted: If you want to succeed, do something that we’re not.

Shep Hyken
BrainTrust

It’s not just the delivery, but the warehousing and logistics. It appears that Amazon may take care of its own warehousing and logistics, so Amazon will just need to partner with established one-hour and two-hour delivery companies. I know what I’m charged for quick deliveries. For the price to work, I’m sure that Amazon will be cutting special deals with delivery companies. The margins may be thinner, but the volume could be substantial.

Peter Charness
BrainTrust

Perhaps an Uber for delivery? Technology enabled free lance drivers who deliver Pizza AND your retail order. They can accept the delivery order through a bid and accept solution, or clever routing software can set them up with an efficient route that starts with pick-ups interspersed with drop-offs along the way. Let’s face it the food delivery system in most cities is mostly a traditional and outdated captive setup.

Kai Clarke
BrainTrust

Perhaps. The key to great deliveries lies in utilizing seamless software and systems that allow for consumer choice while empowering rapid delivery. Amazon has it available in a limited concept, but the real question is if it will be available in a mass concept, and when.

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