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From SCDigest's On-Target E-Magazine

Oct. 16, 2012

Logistics News: Here Come the (Same Day) Delivery Wars

Amazon, Walmart, eBay, USPS all Have Programs Under Way

SCDigest Editorial Staff

As Amazon.com continues to grow at extraordinary rates and emerge as the single most serious challenger to Walmart's US retail dominance, a new front has emerged in the battle: the same day delivery wars.

Riding the e-commerce wave and aggressively building out its capabilities and fulfillment infrastructure, Amazon's sales rose another 29% in Q2 (Q3 results will be announced shortly), as Amazon is likely to finish the year with something like $70 billion in sales. Fueling that growth has been not only aggressively pricing, but aggressive delivery policies.

SCDigest Says:

Meanwhile, even the US post office is looking to get into the same day market, as its traditional mail volumes continue to decline - and given its existing infrastructure and home delivery routes, that just might make some sense.

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That includes a growing network of distribution centers (18 or more will be added in 2012 alone, according to the company's CFO), which enables Amazon to get orders to customers faster and at lower cost, since the shipping distance is shorter. Its Amazon Prime service offers free two-day shipping on all orders for a modest one time fee that also includes a significant amount of streaming video content (television programs and movies).

More recently, news came out about the "the Amazon Locker" program, in which Amazon installs storage lockers in certain retail outlets (e.g., 7-11 convenience stores) in major metro markets so apartment dwellers and others who aren't home in the day and can't have the package left outside are able to retrieve their orders securely. (See Amazon.com Continues to Up the Fulfillment Ante with Nascent Locker Strategy.)

Then just a few weeks ago, Amazon confirmed long standing rumors that it had previously denied that it would soon offer same day shipping services in some market, but without a definitive timeline.

Well, last week Walmart itself upped the ante, saying it was involved in a pilot program around same day delivery in the northern Virginia, Philadelphia, and Minneapolis markets. Under the program, called "Walmart to Go," customers are able to place an e-commerce order by noon, and have the product delivered some time that same day. The pilot is scheduled to last through the 2012 Christmas season.

The new service will for now at least cost just $10.00 per delivery, and the orders will be "picked" in-store and delivered by UPS. It is not clear whether these are special Walmart dedicated deliveries or will be intermixed with other non-Walmart packages.

It would certainly seem that with those handling and delivery costs, Walmart is at best breaking even on the service if not losing money, but that may be just fine in a pilot or even beyond, just as traditional e-commerce merchants increasingly have to give away the shipping themselves to get the order. Customers naturally are looking at the lowest total delivered cost.

Interestingly, Amazon of course for now would be fulfilling same day orders - if and when it does finally start such a program, which Walmart's announcement would seem likely to accelerate - out of its distribution centers, while Walmart will use it stores. There are pros and cons to either approach. Of late, Amazon has started to construct DCs closer to large metro markets, versus a bit more in the hinterlands but still near major highways through most of its history.

But the delivery wars are far from isolated to Walmart and Amazon. Target, for example, announced it will be putting QR bar codes on some 20 of the best selling Christmas toys, and customers scanning the codes in-store on their smart phones can have that toy shipped to anywhere in the country for free.

eBay has also thrown its hat in the ring, eBay is piloting a same day service in San Francisco it calls eBay Now, with what appears definite plans for an expanded roll out.

(Transportation Management Article Continued Below)

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Customers can order something from the eBay site and have it delivered by a valet service . The app also has a section that lists goods from area retailers such as Target or Best Buy so that eBay Now users can have things delivered from those stores as well. The app suggests possible uses for the service, such as calling in for emergency diaper or pet food deliveries. The app even suggests having eBay deliver picnic supplies directly to a local park.

The minimum purchase for delivery is $25.00, though users can elect to pay the difference.

The USPS will begin testing such a service, which it calls Metro Post, again in San Francisco sometime after Nov. 12.

Under the program, the Post Office would pick up packages at e-commerce DCs within a defined distance from select local markets and deliver them later that day.

This is all part of the significant battle over multichannel commerce generally, and in part reaction to the substantial growth in e-commerce sales versus traditional brink and mortar. In addition to Target's move to make its traditional stores more relevant with the QR code service, Best Buy has also recently announced it will match any on-line price for an item in an attempt to combat the common consumer habit of using brick and mortar stores as a showroom and then buying at a lower price on-line.

We will keep you posted.

What is your reaction to same day delivery and the delivery wars generally? Can this be profitable? Let us know your thoughts at the Feedback section below.

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