Amazon Opens Pandora’s Box of Same-Day Delivery: Is It Here to Stay?
Same-day delivery seems like a genius idea, right? But the problem is, consumers have to pay for it, and as it turns out, that’s not always something they’re willing to do. More and more, retailers are beginning to offer same-day delivery programs, but industry experts still maintain their belief that same-day shipping won’t stick around for long, because “shoppers don’t want it” or “shoppers won’t pay for it.”
That’s the reality that Fierce Retail illuminated in its report earlier this month when it highlighted Forrester Research’s Sucharita Mulpuru, one analyst who agrees that same-day shipping isn’t a long-term reality. As consumers are unwilling to pay more for the privilege, and most retailers can’t handle subsidizing the costs, Mulpuru believes that many will eventually recognize that same-day delivery isn’t feasible. According to Fierce Retail, most shoppers say they won’t pay more than $2 for same-day shipping, while it costs retailers as much as $20 to offer the service. Booz & Co found that almost half of its survey respondents were unwilling to pay anything for delivery, and only 10 percent said they would pay $10 or more for same-day delivery. So what should retailers do: pull back on same-day shipping programs or subsidize deliveries? For many, the latter isn’t an option.
So far, the only company that is willing to sponsor the same-day delivery program, at least somewhat, is Amazon.com (NASDAQ:AMZN), the king of same-day shipping. Retailers have Jeff Bezos to thank for ever coming up with the idea, but they should at least rest assured that Amazon is now paying the price for it. Amazon Prime subscribers do pay annual fees to enjoy the convenience of the program, but their charges still don’t make up for the amount of money Amazon pays in its high shipping charges.
It’s still a double-edged sword, because now consumers have increased expectations for same-day delivery options, but they’re still not willing to pay high prices for them. According to Multi Channel Merchant, in a survey by Bizrate Insights of more than 100,000 online buyers, nearly 24 percent said same-day delivery was important to them, while 6 percent said they’d consider shopping elsewhere if it was not offered. Now, take those numbers into account while keeping in mind the aforementioned statistic of nearly half of Booz & Co shoppers saying they’d be unwilling to pay anything for delivery. The statistics don’t add up, meaning consumers have increased expectations for same-day shipping but are unwilling to pay for it, resulting in the reality that retailers are going to be the ones navigating the heartburn as they somehow have to convince customers that if they want convenient shipping, they have to pay for the price, even though e-commerce giants like Amazon don’t necessarily require that.
Multi Channel Merchant argues that in order for merchants to make same-day delivery a success, they have to realize seven goals: manage their ecommerce businesses separate from their retail stores, gain real-time inventory knowledge across their enterprise, expand their fulfillment strategy, reevaluate all of their employees’ respective duties, create a network of local delivery companies, offer multiple delivery service levels, and leverage technology to ensure quality.
It sounds like quite the grueling process, and retailers all have Amazon to thank for letting the cat out of the bag, but many companies now have no choice, especially if they want to maintain any hope of competing with the online giant that is Amazon. Right now, the Seattle-based retailer is reaping the benefits of being one of the only companies that can offer same-day shipping, seemingly free of charge, but don’t forget that transportation costs are now rising, so Amazon is navigating its own issues of inflated rates — hence its latest Prime price hike.