Macy’s enters same-day delivery fray

Discussion
Nov 17, 2014

Do you need same-day delivery for a sweater or a pair of stilettos? Macy’s and J.C. Penney believe so: one is testing the service now and the other is rolling it out to about a quarter of its stores next year.

In late October, Macy’s began trialing same-day delivery to online customers in eight major U.S. markets: Chicago, Houston, Los Angeles, New Jersey, San Francisco, San Jose, Seattle and Washington, D.C. Bloomingdale’s, its sister chain, will offer the service in four: Chicago, Los Angeles, San Francisco and San Jose.

Delivery costs a flat $5 for orders over $99, while smaller orders are charged standard shipping rates plus $5. Orders must be placed by 1 p.m. Monday through Saturday and by 11 a.m. on Sundays with options for two-hour delivery windows available.

The service will be supported by Deliv, the crowdsourced same-day delivery upstart, in collaboration with major mall owners including General Growth Properties, Macerich, Simon and Westfield Corp.

Macy’s said same-day delivery is "built on an operational foundation" that led to the full rollout this fall of BOPIS (buy online, pick-up in-store) across its network of stores, and was mentioned as part of several moves to support its omnichannel push.

Crain’s Chicago Business noted that omni-channel customers who shop the web, mobile and in-store are expected to spend an average of $592 this holiday, 66 percent more than those buying exclusively in brick-and-mortar stores, according to Deloitte’s holiday shopping survey.

Said Terry Lundgren, Macy’s chairman and CEO, in a statement, "Our goal remains to help our customers shop whenever, wherever and however they prefer, and to use the entire inventory of the company to satisfy demand."

On its third-quarter conference call, Macy’s CFO Karen Hoguet added that Macy’s has "a huge advantage, given where the Macy stores are located and the technology that we have built and have in place to utilize our stores to fulfill internet orders."

J.C. Penney told analysts last week on its third-quarter conference call that it plans to roll out a same-day delivery option in 250 to 350 stores sometime in 2015 although no more details were provided.

Macy’s fees are comparable or in many cases lower than other same-day delivery options.

Amazon’s same-day service, now in 13 cities, costs $5.99 for Amazon Prime members. Non-Prime members pay $9.98 for the first item and 99 cents for each additional item. At least in Chicago, orders must be placed by 7:45 a.m. to guarantee delivery by 9:00 p.m.

Google Express charges $4.99 per order or $10 a month and $95 per year. Walmart To Go costs $10 regardless of the size of the order

How appealing will same-day delivery be to department store customers? Is same-day delivery becoming a necessary component in efforts to reach the omni-channel shopper?

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13 Comments on "Macy’s enters same-day delivery fray"

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Dick Seesel
BrainTrust

Same-day delivery presents obvious logistical challenges—especially if the local store that is meant as a source of the order is out of stock—but will become an important partner of BOPIS in the next few years. Macy’s has many omni-channel initiatives in its arsenal, and this is just one of them. For the customer too time-starved to “pick up in-store,” this becomes a viable option—especially as competitors like Amazon and others join the same-day fray.

Kelly Tackett
BrainTrust

I’m convinced that it could be a point of differentiation for upmarket department stores with their more affluent shopper base in highly urban markets. That said, I’m not sure that most shoppers are going to be willing to forgo free shipping to get J.C. Penney merchandise the same-day. Ditto for the vast majority of Macy’s shoppers who don’t shop one of the retailer’s ritzy flagships but rather shop the mid-market retailer’s stores in the suburban mall. Furthermore, while I can see same-day delivery working in a handful of urban markets, the logistics just don’t make sense to me for a wide swath of America. Do you really want to pin your shopper’s experience on a crowd-sourced delivery service?

Joan Treistman
BrainTrust

It appears that the cost of entry for retailers who want to generate omni-channel attraction is becoming same-day delivery. Of course before I knew it was possible I didn’t want it. Now that I know that I can have instant gratification I’m going to make that a criterion for where I purchase.

In truth that may not apply to me just yet, but I can see where it will be easy enough for me to one day experience same-day and decide I like it enough to want it for all the shopping days ahead.

The experience will parallel the once traditional in-store experience of bringing something to the cashier and walking out with the purchase in hand. What a concept!

Chris Petersen, PhD.
BrainTrust

Same-day delivery is NOT fast enough in major cities in India and China. Major metro areas in Asia are now offering four-hour delivery or less.

For major metropolitan cities in the U.S., same-day delivery will have an appeal to many consumers. If the cost is a mere $5 additional fee, that is extremely reasonable compared to parking or taxi cab fares in order to visit a store.

The most compelling stat in the article is: “mobile and in-store are expected to spend … 66 percent more than those buying exclusively in brick-and-mortar stores.”

Macy’s has been a leader in omni-channel retailing in the U.S. They realize that same-day delivery is a necessary step to differentiate and compete for the most profitable omni-channel purchasers who buy much more.

Max Goldberg
BrainTrust

I love Terry Lundgren’s statement, because it’s the future of retailing. Macy’s wants to make it easier and more satisfying to shop their stores. Many consumers would pay $5 to have an order delivered the same day. That’s cheaper than UPS, USPS or FedEx ground delivery. Same-day delivery, like BOPIS, gives consumers options they want. Macy’s is far ahead of its competition in this regard. J.C. Penney is wise to give it a try. So should other retailers.

Mohamed Amer
BrainTrust

Very appealing! Customers want options and convenience, value and immediate gratification. The more options and capabilities that a retailer offers across their channels (and executes solidly this holiday season), the greater the positive perception will be along the convenience and service dimensions. Those customers that interact with the retailer via multiple channels spend more and drive more margin dollars to the bottom line. These omni-customers demand and expect more.

The angle for the department store is to continue to prove their relevance and Macy’s has done a brilliant job of doing so by redefining the shopping experience and catering to the omni-customer. That means giving their customers all the options they could want is not only a step in the right direction but a differentiating one.

Same-day delivery adds to the rich menu that customers are expecting and it is a very visible way for the department store to behave as a single brand across all available channels.

Jason Goldberg
BrainTrust

There is a small niche of shoppers that will pay an expensive premium for same-day delivery, but the bulk the the market wants free AND fast shipping.

$5 fees for same-day delivery will get some adoption but will not be a game-changer.

Cathy Hotka
BrainTrust

Not only does Terry Lundgren truly understand where retail is going, he’s got the infrastructure to back up the vision. Macy’s has invested significantly in technologies and processes that will ensure that the right merchandise is in place, and in getting it to the customer is easy.

Now if we could only cut down on those “one day” television commercials.

Lee Peterson
BrainTrust

Super appealing, especially in urban areas, you know, where it’s feasible. The element to talk about in terms of the other version of same-day is Buy Online, Pickup In-Store (BOPIS). Consumers really like that idea because the timing is more flexible, you get it that day and you pay no shipping.

I’d look for BOPIS to be more popular AND feasible in suburban areas. In any case, both will become a fact of life in the new compete-with-Amazon retail world.

Jeff Hall
BrainTrust

Same-day delivery, including two-hour delivery windows, will be hugely appealing, as it crushes so many of the inconveniences of shopping in-store: drive time, parking, traffic, etc. Macy’s is at the forefront of an emerging customer expectation that will be growing exponentially in the next few years.

Craig Sundstrom
Guest

I don’t see any harm in offering this, but nor do I see it being some big competitive advantage (largely because other retailers can presumably offer it in a similar way without much effort). Necessary? Perhaps in the same way that a department store having restrooms is necessary—they’ll be noticed only if they’re not there.

Carol Spieckerman
BrainTrust

The big breakthrough is department stores finally coming around to the reality that not everyone loves to shop (a premise that most have myopically held onto despite evidence to the contrary). Department stores’ stubborn store-centricity may have held them back in the digital realm, but now Macy’s is showing everyone how to play a mean game of catch-up on multiple fronts. The trick will be to resist over-promising, particularly as so many mega-betas launch during the make-or-break holiday season.

Ed Rosenbaum
BrainTrust

I have two takes on this. First, same day delivery will become more prevalent over the next few years even though it is probably not as necessary as the retailers want us to believe. Next is Penney’s is so far behind other retailers that they have to do what the others are doing or face being left further behind in the race for the consumer dollar.

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