Consumers Looking For Deliveries at the Speed of Light

With the holidays fast approaching, and sales during November and December accounting for an estimated 30% of retailers’ annual revenue, retailers are pulling out all the stops in the ongoing fight for customer dollars, with multiple retailers offering overnight and same-day delivery options and free shipping and one online retailer even offering a shipping guarantee backed by a credit reimbursement. As a result, retailers are in fierce competition for more and more demanding customers, who now expect purchases to arrive on their doorstep by a specified date and time, with little to no added cost for shipping. GeekWire, a technology news website, even went so far as to have a shipping competition among Google, Amazon and Postmates, an online delivery/courier service, to inform its readers which same-day delivery service was best.

Retailers generally only offer same-day delivery service in select urban areas, with the rest of the country relying on FedEx, UPS or similar delivery services, which can be delayed due to poor weather and overloaded systems, as they were last holiday season. FedEx and UPS stated that only a small percentage of packages were delivered late last year, but already there is some concern that FedEx and UPS will again be unable to handle on-time delivery of online orders during the upcoming holiday season. With intense competition for each sale, retailers cannot afford to have dissatisfied customers. As a result, some larger retailers have begun utilizing stores as mini-warehouses during the holiday season, shipping items from local stores, rather than from the retailers’ larger but more remote warehouses, in an attempt to both shorten delivery times to customers’ homes and also to decrease the possibility of weather-related delays.

Many retailers also offer customers the option to shop online and then schedule a time to pick up purchased items from a local store. Having a purchase and pick-up option can be attractive for repeat customers who know the retailer’s product, customers who do not have time to peruse a store but do not want to wait for delivery, and for customers who have procrastinated so long that they are unable to wait out even the greatly abbreviated delivery times being offered by retailers. However, as today’s time-stressed customers continue to push retailers to provide faster service than their competitors, it seems possible customers could eventually refuse to be inconvenienced by any visit to a bricks and mortar store.

Nevertheless, the high cost of free and same-day delivery service has been off-putting to some retailers, and the current competitive market may be providing customers with only a fleeting opportunity to demand that purchases be immediately available at low cost in the final days before the holidays. Smaller businesses are often unable to pay the upfront costs required to create shipping algorithms similar to those being utilized by the big box chains to calculate delivery routes that ensure packages arrive on schedule, and they also do not have the luxury of being able to ship items to other stores to shorten delivery or pick-up times for customers. Several local and regional malls are attempting to circumvent these disadvantages by collaborating with online delivery services such as Deliv to provide same-day delivery of merchandise in order to offer customers the opportunity to inspect or try on merchandise in a store and then have purchased items delivered directly to their homes. Customers can determine which size pants or shirt they need while at the store, and if certain sizes or colors are not in stock, they can order those items online when they arrive home--confident that they are ordering the correct size and any additional purchases will be delivered to their home later that day. Returns should be greatly reduced, and demands for efficient service would be appeased by customers not having to either make a second trip to the store to return items or contend with a multi-step return process on a website. Retailers also should see a commensurate reduction in return shipping costs. This type of collaboration could be a valuable weapon for brick and mortar malls as they continue to battle online retail giants--since time-constrained customers likely will continue to demand faster, cheaper and more convenient delivery options until that convenience results in additional costs to retailers that are substantial enough to compel an increase in prices.

What is abundantly clear is that consumers have now grown accustomed to fast and inexpensive delivery service, and that is unlikely to change. What remains to be seen is how retailers will meet these expectations and still maintain their profit margins.

Related topics: Holiday, Retail, Retail Sales