MISSISSAUGA, Ont. — By the end of this year, Amazon will offer same-day delivery service to 23% of the US public. It’s a trend that could revolutionize the transportation industry, according to Marc Wulfraat, president of MWPVL International, who spoke today about same-day delivery services at the Surface Transportation Summit.
“Tomorrow is not fast enough anymore,” said Wulfraat.
However, the question remains, are customers willing to pay for same-day delivery service and if so, how much?
“Everybody loves free shipping, that much is clear. Everybody loves same-day delivery, that much is clear. But what’s not clear is how much people are willing to pay for it,” Wulfraat said.
Amazon charges Amazon Prime members $6 for same-day delivery on top of their $99 annual membership fee.
However, Wulfraat said it’s not viable to offer same-day delivery service for much less than that. His consulting firm has calculated it would take 150 deliveries on a single truck in order to keep the price to $4 per delivery.
“So if you don’t have mass density and volume to support same-day delivery, you can get into the $10-$12 price tag very quickly,” he said. “If you’re doing 30 stops per load for $5, it’s going to
be a money-losing proposition.”
Still, same-day delivery services present opportunities for courier companies willing to dedicate a portion of their capacity to a customer who provides the service, Wulfraat noted. On the other hand, traditional package delivery companies like UPS and FedEx stand to lose if the trend continues. Wulfraat pointed out about 4.2% of packages shipped by UPS come from Amazon.
Amazon is using a broad network of fulfillment centres and sortation facilities to organize packages and then drops them off at local post offices or delivery companies for final delivery to the customer. Items ordered between 7 a.m. and noon will be received by 9 p.m. Amazon’s goal is to offer the same-day service to 50% of the US population.
“To keep up with Amazon in terms of delivery service levels, every other retailer has to keep up with that raised bar, so there’s a mad rush now,” Wulfraat said.
Other retailers offering or planning to offer same-day delivery in the US include:
Google: Through its Google Shopping Express concept, customers can order things from local retailers, which will be delivered to their home by Google within two hours. The program is being tested in San Francisco with 20 retailers.
eBay Now: Since 2012, eBay Now has used couriers as local valets to pick up and deliver items from hundreds of retailers in less than two hours. It charges $5 per order with a minimum order of $25. However, plans to expand the program to 25 cities by the end of this year have been shelved, Wulfraat said.
Walmart To Go: WalMart is testing an online grocery delivery service in Denver. It charges $5-$7 per order with a minimum order of $30 in an aim to convert its stores into logistics centres.
Walmart.com: Operated as a separate business unit, Walmart.com will provide same-day delivery service from its stores.
Target: Not to be outdone, Target is offering same-day delivery in three markets – Minneapolis, Boston and Miami – with a $10 charge for rush delivery. Items ordered by 1:30 p.m. will be received between 6 and 9 p.m.
Macy’s: Macy’s is launching a same-day delivery service in eight markets beginning this fall.
Instacart: This grocery delivery company provides delivery within one to two hours from a variety of grocery retailers including Costco. It charges $4 for two-hour deliveries and $6 for one-hour service.
“We haven’t seen this in Canada to the same extent it’s happening in the US,” acknowledged Wulfraat. “Canadians don’t order online as much as Americans do. But whatever is going on in the US is definitely on its way here, in certain markets where it makes sense.”
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