Should Same-day Delivery Be A Priority For Your Business?
Retail Titans are upping the ante by providing same day delivery. Amazon, Walmart, Target and other retailers are giving their customer base the option to have purchases delivered the same day the order is placed. Even the specialty retailers like Best Buy and Macy’s are getting in the game as well. So should your business consider providing same day delivery? Let’s take a look at some strategic and tactical considerations to see if it makes sense to provide the service.
Strategic Considerations for Same Day Delivery
The key question for retailers considering providing same day delivery is, not just “Can I do it?”, but rather “Should I do it?”. Over the years, retailers have struggled with providing the right shipping and delivery options best suited for their business and industries. They have been squeezed between consumer demand for “free” shipping and “fast” delivery. There are three strategic considerations that retailers need to think through regarding delivery: Consumer needs and wants, economic feasibility, and business benefits & advantages. Let’s take a look at these individually in more detail.
Consumer Needs & Wants
The key question here is, “Do consumers want or need same day delivery?” Though same day delivery is still in its infancy, the demand is growing. Just as free 2-day shipping went from being a luxury to an industry standard, same day delivery is making its way in that direction. Let’s take a look at some of the latest stats.
Same Day Delivery was the fastest growing expedited delivery option in the past year. Businesses offering the respective service grew as listed below.
Same Day Delivery offered by 31% of businesses versus 17% in 2017
Next Day Delivery was offered by 46% versus 40% in 2017
2 Day Delivery was offered by 78% up from 67% in 2017
1/3 of consumers indicated feeling “frustrated” when a business does not offer same day delivery
74% of US Consumers say that after receiving same day delivery, it made them more likely to purchase from that retailer again
47% of US consumers say they have paid extra for faster delivery. That number is even higher for millennials with 54% paying extra
These are just a few of the stats that have been found over the past year. As we can see, the need or want for same day delivery is substantially less than that of Next Day or 2-day service, none-the-less it is growing.
Economic Feasibility
Once we have determined that our customers either expect or would like to have the option of Same Day Delivery, just in case they need it, we need to crunch the numbers to see if it makes financial sense to do so. Obviously, you don’t want to lose money offering the service. With that said, let’s consider some of the questions that need to be asked to make the decision.
Do your product margins support “eating” same day delivery costs?
Will offering same day delivery service create an increase in order volume?
Can you charge for the enhanced service level? More importantly, are your customers ready, willing, and able to pay for the service?
Can you subsidize part of the delivery costs to maintain customer loyalty?
Do you have the staffing to make the deliveries?
Do you have the right insurance to cover the liability?
So as you can see, there are some very important questions that need to be answered and only you can make the call. So basically, the questions above can be broken down into two key questions. First, who should pay for the delivery costs: customer, retailer, or share them? Secondly, if you offer the service, should you create your own delivery fleet or outsource?
Business Benefits & Advantages
And finally, do you need to protect and/or capture market share? Is there a competitive advantage or strategic necessity to provide the service, just to stay competitive?
Amazon has made 2-day delivery a staple and made the convenience of shopping…a household necessity. Now that they are offering “Prime Now”, their branded same day delivery for certain items with certain order totals, Amazon is bringing same day delivery to the mainstream community.
Also, with our hectic lives, the ability to shop online is changing from being a convenience to being a necessity. If we look at the stats, then offering same day delivery can help keep your business relevant amongst the competition.
Starting with Amazon, is your business or industry affected by them and their same day delivery? If not yet…will it be in the near future? Keep in mind, that it is not just Amazon, but other major retailers who are also offering the expedited service. As we mentioned earlier, Macy’s, Best Buy, Target, Walmart, and the list continues to increase monthly. If any of these are your competitors, directly or indirectly, then you need to be on “Yellow Alert” and thinking about staying relevant in a changing marketplace.
If you’re a retailer in a competitive marketplace, such as apparel or printing, will providing expedited delivery give you a slight advantage over your competition? When your customers need something “Now” will they think of you? Can you use same day delivery for those last minute purchases and “save the day” for your customer? Most of the time we don’t want to pay the extra cost for shipping or delivery, but sometimes price doesn’t matter because you just don’t have the time, energy, or ability to go and pick something up. Do you think your customer will think of any other competitor the next time they need something fast? I don’t think so…you’ve got them for life.
If you have a customer loyalty program of some sort can you make same day delivery an enhanced part of that program? Say…charge a recurring monthly or annual fee for free same day delivery (Amazon style)?
Whether it’s about staying relevant or getting a step ahead of the competition, just offering same day delivery could give you an edge to stand out among a crowded field.
Tactical Considerations
If the strategic considerations line up with your needs then we need to make sure that the tactical considerations are also reviewed. In other words, is same day delivery physically possible for your organization?
Do I Build or Partner?
This is a very important question. Should you use your own employees to make deliveries or outsource the service? This is a key question as it has to do with cost, liability, and staffing.
You may save money by using your own employees, but will your store(s) be understaffed while they are out making deliveries? Are you willing to take on the liability if they get in an accident while making that delivery? After paying the additional insurance costs, is it really economically feasible?
If outsourcing, should you use a courier or on-demand delivery solution like ZipSendr?
Though you are outsourcing the service and the liability, you are losing a little control over the delivery process. Using your own employees brings your brand directly to the customer while outsourcing is just a third party.
Time is also a consideration. It takes some time for a delivery service to get from where they are to your location to pick up the item and deliver it, while an employee is already there.
And though a minor item, if you outsource, do you need a uniformed delivery person or is a non-uniformed person sufficient?
You can also check out our other blog post Delivery Options for Today’s Small Business for more options to consider.
Physical Aspects
Is my inventory available in the markets I wish to serve? For same day delivery, you have to have inventory available at the location that is serving the area. If you don’t have inventory on hand you can’t deliver it. So if you are always running out of inventory then providing same day delivery may hurt your business if you can’t deliver the goods.
However, if you have multiple locations and adequate inventory you can use this advantage to leverage delivery distance. You can also use same day delivery to transfer inventory from one location to another so you don’t lose a sale. Or deliver a “wanted” item from another store directly to the customer when you don’t have it in stock.
Employee Training
Providing same day delivery, whether in-house or outsourced, won’t make it a success until your employees embrace the idea and promote and offer the service at every turn.
For this, you need to ensure your staff is trained to “push” or at least mention the expedited service: when answering phones, closing a sale, or at the end of a transaction as a BTW FYI.
Marketing Capabilities
Just as training employees is an important aspect of making same day delivery a success, marketing the service is just as important. Whether you send occasional email marketing or physical newsletters, having a banner to mention the service or an article highlighting the service, gives your customers the knowledge that you provide the service. This needs to consistently happen in some form or fashion so it stays on their radar for when they do need the service.
In-store signage at the door and/or by the checkout gives the customer another way to “notice” that you do offer the expedited service.
By keeping the service in front of the customer’s eyes and ears gives higher likelihood that they will remember you when they need your product “Fast”.
The Bottom Line
In closing, retailers should not just make the decision to provide same day delivery just because everyone else is doing it. There are a lot of things to consider and I hope we covered most of those above.
Same day delivery needs to “fit” the business across their products, customers, infrastructure, and make financial sense. The service could enhance a businesses’ competitiveness and customer loyalty.
Merchants may want to test the service in certain areas to see if it fits their needs as well as to learn about demand, logistics, and challenges. This will help identify the key factors to develop a successful model that can be used to enhance the service and roll out to other area/locations.