Amazon is growing on-demand services after reporting a 20% sales increase in 2015.
(Page 2 of 3)
For 1-800-Flowers.com, which has offered same-day delivery for decades through its network of florists, working with the new Metro Post service from the USPS provides an opportunity to extend immediate deliveries to products besides flowers, the retailer says. "With the Postal Service's Metro Post service, we're very excited to be able to expand our same-day gift offerings to include some of our great gourmet food brands," Chris McCann, the retailer's president, says.
A 1-800-Flowers spokeswoman says it's too early to comment more about Metro Post, such as how consumers are responding to it. The Postal Service is working with other retailers in the Metro Post test in San Francisco, where service extends to the metropolitan area's 26 ZIP codes, but it hasn't named them. "We're working with major retailers and e-tailers," says Gary Reblin, vice president of new products and innovation for the USPS, declining to be more specific.
Retailers that do participate in these services must be able to quickly provide information about online orders to the delivery companies they're working with. Argos' participation in Shutl was made easier, says Shutl CEO and founder Tom Allason, by the fact that the retailer already offered shoppers the option of in-store pickup of online orders—a service becoming quite common among U.S retailers as well, including 51 retailers among the Internet Retailer Top 500 and 38 among the Second 500.
Retailers that offer in-store pickup already can show real-time updates of inventory and how to locate and move merchandise within stores for pickup by a customer, Allason says. Participating in a same-day delivery service requires the retailer to extend its inventory updates beyond its own network to the couriers who will make the deliveries.
Unlike the courier services offered by Shutl and eBay Now, the Postal Service's Metro Post uses its own trucks and drivers to pick up orders from a retailer's location and deliver them to customers. This allows Metro Post to accommodate web-only retailers such as 1-800-Flowers, which require delivery vans—as opposed to deliveries via cars, bikes or public transportation typically used by couriers—that can pick up a larger number of orders from a warehouse and deliver to several customers. The Metro Post service lets retailers take online orders until 2 p.m., then dispatches a delivery van to pick up orders (with packages generally up to 25 pounds each) from the retailer's location to make deliveries until 8 p.m. the same day. For now, it has four delivery vans in service in San Francisco. The vans use Postal Service software to devise the most efficient routes for each driver.
The Postal Service is determined to help merchants keep the price to consumers close to standard ground shipping, which for many orders is under $10, and will help retailers promote the service, Reblin says. "We're willing to work with any retailer to do some advertising," he says. By comparison, UPS says its average revenue per package shipped in 2012 was just under $8.
EBay Now operates as a shopping valet or personal shopper service, through which a consumer uses an eBay Now mobile app to request a shopping assistant to find a particular product at a retailer and deliver it to the shopper's location. The app's built-in GPS and mapping technology automatically finds the nearest available shopping assistant, allows a shopper track the assistant's location, and lets the shopper and shopping assistant to communicate if necessary about the desired product and schedule delivery.
To show shoppers and shopping valets what's available in stores, eBay Now uses data from eBay's Milo system, which shows mobile shoppers the products available from the nearby bricks-and-mortar locations of participating retailers. For now, eBay is setting a standard delivery fee of $5 and requiring a minimum order of $25, with no extra charge for returns, the spokeswoman says. EBay is also considering a new system that would let retailers set the price, such as in their own promotions, she adds.
As with other same-day services, few participating retailers are commenting. "We're excited to be a part of it, but we have nothing to share on the eBay Now pilot at this time," a spokesman for Target Corp. says. Macy's Inc. and others listed as eBay Now clients also declined to comment.
In the United Kingdom, where Argos has been using Shutl since late 2010, the retailer is still evaluating the best way to offer same-day delivery. It's testing how much to charge for the service and whether to offer it for free or for a discounted rate depending on a customer's order value. In addition to testing same-day delivery for free, Argos is also testing offers of same-day delivery for a fee of 5 British pounds (approximately $7.46) when customers meet minimum order thresholds of 50, 75 and 100 pounds ($74.64, $111.96 and $149.28).
"It is difficult to ascertain exactly the impact Shutl has had on customer conversion," McCarthy says. "The Shutl option is shown to the customer at the very end of their shopping journey and, theoretically, we have already converted the customer. However, from the repeat occurrences and the positive feedback we have received from users, it is both a fast and convenient way of getting goods to the customer, and offers yet another route that gives customers added choice and convenience."
Shutl's cost to retailers varies based on such factors as the size of the ordered product and the distance between the pickup store and the customer's address. Retailers are free to set the price they charge customers. Shutl recommends that retailers charge customers less than 5% of the total order value to get the best response. "When the Shutl price to consumers is less than 5% of basket value, about 40% to 45% of shoppers choose Shutl," Allason says.
But that formula won't necessarily cover the retailer's cost. Retailers must find the right balance of delivery fee and profit margin—and learn from the mistakes of companies like Urban Fetch and Kozmo.com that offered same-day delivery in the 1990s and failed, Sambar of Kurt Salmon says. Their biggest problem, he adds, was offering same-day delivery on too many orders, including those that didn't cover the cost of delivery. "You have to be careful if you're offering same-day delivery on things like paper clips," he says.