By Paula Rosenblum, Managing Partner
October 27, 2009
When Amazon.com announced it will be offering same day delivery (“Local Express Delivery”) in seven major US cities I was asked the same question by several reporters. The question was a variant of, “What are the implications of this announcement?” At the time, I thought the implications were greatest for other online retailers, who obviously don’t have the mass to offer the same type of service. And I also believed the story behind the story was actually bulking up home deliveries to support Amazon’s fledgling grocery business, Amazon Fresh.
I’ve had some time to ponder the same day delivery move, and while some thoughts remain the same, I’ve shifted my point of view on others.
What Amazon’s Move Means for Retailers and Customers
While I originally thought this move was a shot across the bow of other online retailers, I’ve come to think it’s a shot at Amazon’s multi-channel retailing counterparts. On some level, it is like “buy on line, pick up in stores” but without the hassle. But is it really? In New York and Philadelphia, for example, you can order as late as 10 am (that’s late?) and your order will be delivered sometime before 8 PM. Let’s compare that offer to Sears “Ready in 5-Guaranteed” policy. Order online, and your product will be waiting for you in five minutes or you get $5 off on your next in-store purchase.
So, as a consumer, I ask myself, do I want to wait around for up to ten hours, or do I want to place my order, go to that special pick-up area at Sears and be on my way? In other words, upon further review, it’s a bit of a yawn. And as a multi-channel retailer, I ask myself, am I scared? I don’t think so. Not if I’ve got my cross-channel act together. While some on Wall Street may think Amazon is the “World’s Best Retailer” partly because it has no stores, I think the lack of stores puts the giant at a bit of a disadvantage.
What Amazon’s Move Means for Amazon
I still think same day delivery is partly about creating more delivery density to bolster profits of Amazon Fresh (and more control for Amazon over those deliveries), but that doesn’t mean it’s a good idea.
Maybe I’m dense, but all I see is more risk. With regular or even next day delivery, the burden really falls on the shipper. For example, when I ordered a TV and HDMI cable from Amazon last year, the TV came promptly, but the shipper sent my cable on a vacation around the country…from Jacksonville to Chicago, to Memphis, and eventually to Miami (when I sent it back…I’d long since bought a more expensive cable locally). I did get my money back, so Amazon seemed blameless. But with same-day local delivery, even though Amazon is using a Third Party Logistics Provider (3PL), the consumer will definitely associate the delivery with Amazon. And ironically, until Amazon builds up delivery density in those seven cities, it will have very little control over when the product is actually delivered. No smart 3PL is going to dedicate trucks or vans to the occasional delivery for Amazon. That means, Amazon product will be co-mingled with items from other retailers. Count on it.
But even gaining control over its own trucks won’t solve all Amazon’s problems. Retailers selling big ticket merchandise, especially furniture retailers, will be familiar with the challenges of meeting delivery windows – most especially in cities like New York. In Miami, most large furniture retailers promise same day delivery, but it’s a pretty safe bet that the delivery point will either be a single floor house or a tall building with a large service elevator. That makes delivery windows reasonable to estimate. New York is a very different story.
One of my retail CIO jobs was with the now departed Domain Home Fashions. My boss, the president, was frustrated with our inability to keep our delivery promises to customers, and spent a day on a delivery truck. The second delivery stop was a fourth floor walk-up. Somehow, a driver and his helper had to get that sofa up those winding stairs without damaging the furniture in the process. They managed, but as you might expect, delivery windows for the rest of the day were way off kilter. And they were lucky enough to escape without damage. God knows we heard many stories of deliveries up those flights of stairs that were not quite so successful.
The Bottom Line
We’ll be keeping our eye on the “same day delivery” promise. I could be wrong by 180 degrees. And if I am, we’ll let you know. At the end of the day, the customer will be voting with her wallet, tweets and Facebook posts.
If I’m right, it won’t be the end of Amazon’s world…but same day delivery will fade into the sunset. I do know I don’t recommend other retailers follow Amazon’s lead – especially in cities with old buildings taller than 2 stories.
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