An Amazon Study Shows Why Same-Day Deliveries Matter

There’s been a lot of buzz lately about same-day delivery, with Amazon, Walmart, Nordstrom, Macy’s, Google, and eBay all launching or ramping up their efforts in this area (see “On Amazon’s Quest for Same Day Delivery” and “Google, Same-Day Delivery, and Container Tracking”).

Here is why it matters: it results in fewer abandoned shopping carts. In a study with its Amazon Prime customers, Amazon found that merely displaying an icon touting same-day availability increased conversions by 20 to 25 percent! Interestingly, of those Amazon shoppers who saw the icon and then made a purchase, most of them ended up not using same-day delivery, opting instead for next-day delivery.

I recently interviewed Tom Allason, the CEO of Shutl, an IT solution provider that links, for the most part, traditional retailers and couriers and enables same day delivery. Actually, the company promises more than that — it promises delivery within 90 minutes of a customer paying for an online order! Or online customers can elect to receive their order within a one hour time window of their choice during that business day. Shutl’s retail clients are typically pursuing an omni-channel fulfillment strategy where goods ordered online are delivered from a store instead of an ecommerce warehouse.

Shutl operates in the UK and plans to begin operations in the U.S. (New York City and San Francisco metro areas) by the end of March.

Tom asked, “If same day deliveries can improve sales that much, how much would same hour deliveries improve them?” This could be a way for traditional brick and mortar retailers to leverage their stores and better compete against the behemoth Amazon has become. Part of the reason for this is that Tom doesn’t believe Amazon can get down to 90 minute shipments with its distribution model. Amazon currently uses huge warehouses that serve a whole metro area. In contrast, a retailer might have several stores in a particular city, enabling shorter delivery paths.

But a more important reason why Amazon would struggle to get down to 90-minute deliveries is that its shipments are generally picked up by FedEx or UPS. These parcel carriers take shipments to their sort centers and then bulk-load multiple orders onto their trucks. With this hub and spoke model, you can’t get down to 90 minute deliveries. In contrast, the couriers that Shutl employs make point-to-point deliveries from a store directly to the customer.

So who needs 90 minute deliveries? It strikes me that there are a few parameters that apply. One is goods that are purchased with a sense of urgency. For example, deliveries from a pharmacy to a patient who feels miserable; a husband who realizes he has forgotten to buy his wife an anniversary present; or someone who wants to buy a last minute present to give to a date.

Also, in urban areas, you don’t want to leave high-value goods on a doorstep. A buyer may know that she will home for the next 90 minutes but be less sure that she will be available during a particular one hour delivery window later in the day.

In addition to couriers, retailers could leverage the United States Postal Service (USPS) to do late afternoon and early evening point-to-point deliveries (see Could Same-Day Delivery Save the Post Office?). The USPS model is that they sort all night and make deliveries during the day, and then most of their trucks sit idle all night. Why not experiment with a new service to more fully utilize their assets?

Omni-channel commerce is still in its infancy. The kind of quick deliveries written about here are only practical in urban areas. Retailers will need to conduct pilots and experiments before they feel confident they have hit on a winning formula. But these developments have the potential to change the way we think about freight. Who, for example, talks about couriers as being a mode of transportation? If Shutl works, we will begin doing just that.