Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
E-retailers have stepped up their efforts to ship goods quickly to consumers.
When it comes to same-day delivery for e-commerce orders, it helps to sell high-end merchandise. That’s the lesson offered so far by Southern California apparel chain Planet Blue, which this month began working with a local courier service to launch same-day deliveries.
The retailer, No. 867 in the Internet Retailer Second 500 Guide, charges $19.99 per same-day delivery. That seems risky, given that 88% of respondents in a recent survey of 1,000 online shoppers from consulting firm Booz & Company said they will not pay more than $10 for same-day delivery.
But here’s the catch: The retailer’s average order value is roughly $200, according to the Second 500 Guide, which means the fee represents only a 10% premium on top of the price of the average order. The cost to Planet Blue ranges between $20 and $30 for each same-day delivery—a fee it negotiated with the courier based on how far the courier has to travel, says Eugene Kang, vice president of e-commerce for Planet Blue.
Planet Blue determined that it would offer same-day delivery to addresses within a 50-mile radius of its distribution center, and then updated its site checkout page to present only the same-day option to shipping addresses in that region. So long as an order is placed by 11 a.m. local time, it is fulfilled by 6 p.m.
“By offering this option, we can serve our customers in a new and better way—for that last-minute date or that evening or weekend event that they need the perfect dress for,” Kang says. “We also have a loyal celebrity clientele that may want to shop in private and receive premium service.” The retailer’s celebrity fans include actress Heather Locklear and supermodel Alessandra Ambrosio, he says.
Planet Blue says within a few weeks of launching the service shoppers were choosing the option—even though the retailer had yet to promote it. The retailer expects more shoppers to use it when the retailer starts its promotional campaign,
One reason that e-retailers are willing to absorb the high cost of same-day deliveries is because Amazon.com Inc. is doing it. It launched its same-day Local Express delivery service in seven major metropolitan markets in 2009. Since then, it has added four more markets and although the retailer has said publicly that is doesn’t believe it can economically offer same-day delivery nationwide, it helped trigger a surge in the number of merchants testing same-day delivery.
“Every retail or transportation client we work with mentions Amazon.com’s same-day shipping program in the first paragraph of our conversation,” says Andrew Schmahl, principal at consulting firm Booz & Co.
Retailers’ rising interest in same-day delivery is leading more regional couriers that specialize in same-day service to market their services to multichannel merchants, says Rob Johnstone, president of the Customized Logistics & Delivery Association, or CLDA, which in May changed its name from Messenger Courier Association of America to better reflect that the association is more than a group of bike messengers. He says the association’s some 450 members are beefing up their services to help retailers deliver items either the same day they are ordered or the following day.
63.2% of respondents in a 2012 poll conducted by the CLDA of same-day couriers said they deliver retail orders to homes. Still, retail accounts for a very small portion of the couriers’ businesses, with 68.9% of the couriers saying residential home deliveries made up between 1% and 10% of their business in 2012.
Kang says the hired couriers for Planet Blue come to the retailer’s Los Angeles distribution center at the same time each day to pick up orders. All the couriers wear uniforms. That helps reassure consumers that the delivery person is legitimate. “It is a premium ‘white-glove’ service,” Kang says.
For more information about the pros and cons of same-day deliveries for e-commerce orders, check out the upcoming September issue of Internet Retailer magazine.