5 Ways Retailers Can Compete With Amazon’s Same-Day Delivery Model
When catalog industry veteran Don Libey told attendees of the annual Catalog Conference in 1991 that the country is heading towards same-day delivery models, many seasoned catalog executives in the audience laughed. Now, more than 20 years later, retail giants like Amazon.com, Google, eBay and Wal-Mart are making same-day delivery a reality.
Amazon has even gone so far as experimenting with the idea of using drones to deliver packages under five pounds within 30 minutes. While this is a futuristic idea, Amazon's potential plans represent an underlying shift in consumer expectations around delivery times.
Aside from drone delivery, Amazon is investing billions of dollars in new distribution centers and storage locker pilot programs to reach metro areas, as well as big data and predictive analytics capabilities to understand which items are purchased together. But most retailers don't have the resources to make similar investments in same-day delivery capabilities.
So, how are small to midsized retailers supposed to compete with Amazon's same-day delivery model?
Does the Same-Day Shipping Model Work for Everyone?
Leveraging greater access to big data and more accurate forecasting capabilities, larger retailers will begin to offer same-day shipping to increase basket size, order frequency and convenience for customers. By shipping from local stores, retailers with multiple brick-and-mortar locations can immediately add new distribution points for same-day shipping instead of having to invest in costly warehouse infrastructure in every market.
Wal-Mart, for example, can reach two-thirds of the U.S. population by leveraging its 4,200 stores as distribution centers. Currently, 10 percent of all online orders from Walmart.com are shipped directly to consumers from a retail location.
Most small retailers lack the resources and store footprint to handle same-day shipping on their own. However, it's still possible for small retail brands to offer same-day shipping with the support of a third-party fulfillment and logistics provider.
Next Steps for Competing With Same-Day Delivery Models
The good news for small retailers is that same-day delivery isn't a make-it-or-break-it factor for most consumers. In fact, only 9 percent of U.S. consumers surveyed by the Boston Consulting Group said that same-day delivery is a primary consideration for improving the online shopping experience. However, according to the same study, a mere 6 percent of consumers are satisfied with the range of shipping options offered by retailers, and half of consumers have abandoned a purchase due to long delivery estimates.
Amazon and other big-box retailers will likely fill this gap for consumers unless smaller retailers take proactive steps now to appease consumers’ must-have-now shopping mentality. Here are five ways smaller retailers can compete with Amazon's same-day delivery model:
1. Have a solid plan to scale. If you have the resources, faster delivery times and efficient same-day delivery are great ideas. If not, you may need to invest in additional resources or enlist the assistance of a qualified third-party logistics partner to meet long-term demand and scalability requirements. Either way, plan ahead by forecasting orders by day, week and month. These numbers will help you secure the equipment, technology and systemic support you need to meet customer expectations.
2. Know up-to-date carrier cutoffs. Keep open lines of communication with your carriers. Know the last possible date and time customers can put in orders to ensure that packages will arrive on time. This is especially important during the months leading up to the holidays.
3. Be flexible when setting holiday and Christmas shipping cutoffs. You can fulfill all of your customers’ needs by offering shipping options that vary in cost and arrival dates, especially during the holidays. Just be sure to give yourself leeway by giving customers an earlier cutoff date to ensure packages arrive on time or earlier than expected. A strong logistics partner will help you provide customers with an accurate view of real-time inventory, regardless of location or delivery method.
4. Start negotiations now for dimensional pricing changes in 2015. Dimensional weight pricing is set to sweep the industry next year. Carriers will determine pricing based on a package's weight or size. Put the odds back in your favor by talking to carriers sooner rather than later about the pricing changes to secure terms that will be beneficial for both your business and customers.
5. Implement a vendor compliance program. Don't pay for product vendor mistakes. Instead, create a vendor compliance program that provides a common set of rules to streamline the internal processes associated with each of your vendors and to eliminate bottlenecks along the supply chain. It's also helpful to involve your logistics provider in the quality-control process.
Amazon isn't going anywhere and the push for faster and even same-day delivery is sure to intensify. By evaluating your shipping and delivery capabilities now, you can stay ahead of the game and protect your brand's ability to compete with the major players in e-commerce.
Maria Haggerty is CEO and one of the original founders of Dotcom Distribution, a premier provider of B2C and B2B fulfillment and distribution services. She received her Bachelor of Business Administration from University of Houston, C.T. Bauer College of Business with a concentration in Accounting. Maria plays an integral role in developing and defining all aspects of the business, including sales and marketing, operations, finance and IT. As CEO, she is responsible for providing strategic leadership, establishing long range goals, and developing strategies for the senior leadership team. Maria has developed the systemic and procedural infrastructure necessary to provide timely and accurate analysis of budgets, financial reports and financial trends in order to assist the Board, senior executives and clients in performing their responsibilities while achieving favorable results. She works closely with the leadership team to enhance, develop, and enforce procedures that will improve the overall operation and effectiveness of the corporation. During her tenure at the Dotcom, Maria has developed an environment of continual improvement by supporting the Senior Leadership Team and their department managers on continuous process, space labor, automation, and financial best practices. Prior to founding Dotcom, Maria was a CPA at Arthur Andersen and was later the CFO of GoodTimes Home Video where she helped grow the company’s distribution business. When Maria is not in the office, she enjoys traveling around the world and practicing her photography skills.