A picture shows an Ipad with an “Amazon” logo. AFP/ Getty/ Lionel Bonaventure
Google started testing its online delivery system Google Express on Thursday to compete with rivals Amazon and eBay. Shoppers in San Francisco will be able to order items from participating stores (Target and Babies “R” Us are two) and have them arrive at their house on the same day during a time period of their choosing. The three ecommerce giants have been working on launching same-day delivery services in the past year, in hopes of gaining an edge by providing the instant gratification shoppers get when purchasing from brick and mortar stores. They anticipated a strong, positive response from customers, but it was lukewarm. Research from Boston Consulting Group showed that only 9% of online shoppers plan to use same-day delivery.
Cost could be a deterrent, since the shoppers polled said they preferred free and lower delivery prices to same day services. eBay and Amazon charge $5 to $10 per order, which is similar to the range of mail order prices. Individual delivery prices can be lower with annual memberships.
Customers could be shying away from same-day delivery because very few companies offer a truly convenient solution. Without a courier service, same-day home delivery is little improvement on overnight or two-day. The delivery window, which is on average two hours, is an inconvenience (especially for the busy/impatient group likely to order the same day service). The same goes for delivery cutoff times that can be as early as 2pm. And as those who have experience with FedEx packages can attest, the requirement that a package be handed to a person can end up being more complicated than expected. Even when the recipient has a doorman, fetching them would require a stop at home, which defeats the purpose of ordering same-day for some items (for example, a tie or a pair of shoes for post-work event, or a cellphone to replace a broken one). True value-added for same day delivery would be removing these barriers to seamlessly receiving packages.
With so many mobile devices that track location, home delivery (except for bulky items and furniture) should be on its way to extinction. eBay’s courier service, which delivers to customers in any location within an hour, has the right idea. Once the order is placed online, a messenger picks it up and delivers it to the person within an hour to any location specified. The concept could even go further, with the courier being able to track the recipients if they move to a nearby bar, or step out to renew the parking meter. The problem with this type of service is the high cost of providing it. Many have pointed out that eBay cannot sustain its $5 shipping prices (on a minimum order of $25) since couriers cost more than $12 per hour. That argument is not without reason: Kozomo, a startup that delivered items of any size within an hour for free, was founded in 1998 and went out of business in 2001.
The statistics about same-day delivery becoming a mainstream option are just as pessimistic. The report from Boston Consulting Group, narrowed down the interested segment to 18 to 34-year-olds making more than $150,000 a year, which consists of 2% of the population. A look at the companies that have managed to make same-day delivery work echoes that. Net-a-Porter, the e-tailer of luxury clothing items that can cost $1000 or more, says that its $25 same day delivery service pays for itself. Perhaps the way to make same day delivery profitable is to keep it a niche business. After all, the delivery fees from the 2% can generate $425 to $850 million. While the internet can render some things, such as knowledge and news, more accessible, it cannot democratize everything.
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