Retailers testing same-day delivery service in the Bay Area may soon find that
giving customers what they want as fast as they want it is tricker -- and
costlier -- than they bargained for.
In their scramble to keep pace with online giant Amazon, Walmart and eBay
(EBAY) this month announced plans for same-day delivery in San Francisco and
San Jose. Some analysts caution that same-day delivery -- the latest Holy
Grail for retailers -- is a financial risk and logistical nightmare to most
anyone but Domino's Pizza and the local florist.
"It's incredibly hard to pull off, said Fiona Dias, chief strategy
officer at ShopRunner, a web service that coordinates shipping for retailers.
"We haven't found a way to economically do same-day delivery."
But a lineage of failed delivery services like Webvan, an online grocery
business that became a legendary dot-com failure, haven't deterred retailers
from striving to satisfy the ever-higher demands of consumers who want instant
gratification.
"That's the Internet," said Stephen Baker, vice president of industry
analysis at NPD Group. "We already get instant delivery of our music, our
movies."
Some purchases are still worth a stroll through the mall -- luxury
jeweler Tiffany & Co. isn't likely to send engagement rings same-day delivery, nor would customers want to give up the glitzy, Champagne-filled shopping
experience. But the convenience of quick, home delivery appeals to shoppers
like Lyshone Griffin of Oakland. Standing outside that city's Walmart last
week, she said she would happily pay the extra money for same-day delivery of
large furniture, such as a bed, that she needed urgently and couldn't pick up
from a store herself.
Amazon and Walmart promise customers that for just a few dollars extra
their online purchases will be dropped at their front door within hours of
ordering -- or in eBay's case, in less than an hour. After all, there's
nothing quite as exciting as a knock at the door from UPS delivery, holding
the new flatscreen TV you ordered even before the charge appears on your
credit card.
But analysts note that packages will reach customers within a day only if
companies have enough merchandise and enough stores and warehouses spread
throughout a delivery area. The other snare that often trips up retailers,
said Dias, is that they can't control the delivery. In some cases, the
delivery guy may be a college student trying to earn a few extra bucks working
as a contract driver for eBay.
"It's not a same-day guarantee, it's a same-day maybe," Dias said.
Then there's the cost, which may discourage both retailers and customers.
Walmart charges $10 for deliveries of any size, which Dias expects will cover
less than half the cost of one order. eBay offers three free deliveries, after
which customers are charged $5. Orders must be at least $25.
"The math doesn't make sense," Dias said. "It only makes sense if the
truck is full. It doesn't make sense if there's only one package."
But for a few Walmart customers in Oakland , the delivery fee is too
expensive; they're watching every dollar. Unloading her bags from a cart
outside the store, Maria Rivera of Alameda said same-day delivery was "not for
me." She said doesn't have a computer at home to shop online,
and even if she could borrow a friend's, the extra $10 was too much.
Even Amazon hasn't found a way around the high cost. Chief Financial
Officer Thomas Szkutak said this year that same-day delivery on a broad scale
is not economically feasible. The company began same-day delivery in 2009, but
the service has been limited to a handful of cities. However, Amazon has also
been aggressively expanding other delivery services and has grown to 40
warehouses in the U.S.
But Amazon's efforts likely won't sway Sunnyvale resident Andrey Abutin,
who canceled his Amazon account after the company began collecting sales tax
in September. Add on the $8.99 cost of same-day delivery, plus about a $1
per-item fee, and Abutin said he'd rather save money and shop at a local
store.
"You're looking at way too much overhead for anything costing less than
$150," he said.
Abutin, 28, prefers Google (GOOG) Shopping, which he says allows him to
compare prices across dozens of websites without leaving his computer chair.
But Amazon has raised the bar on retail delivery and competitors are
running to catch up. "Everybody is assessing this -- whether or not they want
to pursue it, and whether or not they can," said Bruce Cohen, retailer and
consumer strategist with Kurt Salmon in San Francisco. "For businesses, it's
innovate or step aside."
eBay's delivery service, currently limited to San Francisco and available
only through a free iTunes app called eBay Now, allows customers to get
purchases hand-delivered to anywhere they want within an hour. If the customer
wants to return the item, the driver will schedule a pickup and the refund
appears in the customer's PayPal account.
On a call with reporters Wednesday, Chief Executive Officer John Donahoe
said the app is part of eBay's expansive mobile strategy to partner with local
retailers and entice more customers to sell and buy from their smartphones.
The company gained about 800,000 new mobile users in the third quarter.
Company spokeswoman Lina Shustarovich said eBay Now deliveries have
included an iPhone charger to a bar and a sweater to a chilly customer in a
park.
She said: "Our goal is to bring the customer the product wherever they
happen to be."
Distributed by MCT Information Services
