Delivery time is one of the top three factors influencing buying decisions in e-commerce today. Would you rather touch, feel and instantly get the product you want. Or would you order online and wait impatiently until it arrives? E-commerce players are leaving no stone unturned to minimize the disparity between online shopping and traditional retail. Starting with one and two day deliveries, to same day delivery, and now deliveries within a few hours or less, customers are being coaxed to “skip the trip” as Amazon puts it. By paying a few extra dollars, Amazon Prime subscribers in the US get deliveries at their doorstep within one to two hours; and this allows Amazon to now compete with a new set of peers in the traditional retail world – convenience shops and corner stores. And that’s not all. Amazon is working on a concept called Amazon Prime Air, a delivery system designed to deliver packages into customers’ hands in 30 minutes or less using miniature unmanned air vehicle (Miniature UAV) technology, which utilizes GPS to autonomously fly individual packages to its customers’ homes. On the other hand, a British company is exploring the possibility of using a vast underground network of pipes for freight deliveries. The concept, currently in its pilot phase, is essentially a capsule which would be powered by electricity, producing magnetic fields that propel them along the pipe. The concept relies on magnetic levitation, or Maglev, which is responsible for propelling the world’s fastest train, the Shanghai Maglev train.
However, in the quest for fulfilling the need for instant gratification of customers, e-commerce companies are facing multiple challenges in meeting their commitments of super quick deliveries:
(A) Cost: Typically, same day fulfilment costs around 4-5 times the normal delivery charges as goods need to be shipped by air. Compared to brick and mortar retail, where the final leg of the delivery is done by the customer, who picks up the product from the store and carries it home, in e-commerce, the last mile fulfilment is done by the e-commerce player. Since delivery cost is also an important criteria influencing purchase apart from delivery time, it presents a challenge to e-commerce players to increase the speed of fulfilment with little additional cost to buyers.
(B) Volume: Today, same day deliveries happen at a premium. One of the primary reasons is that e-commerce players are unable to strike the right balance between the number of orders from a common region and the carriers to make the economics of the same day delivery model work effectively. This could probably change in the future with complex algorithms and delivery networks at play.
(C) Distance: Majority of the fulfilment centres are not located near buyers, making it difficult to deliver goods on the same day that the orders are received. Since moving inventory closer to customers often involves storing it in multiple expensive locations, the trade-off in storage/capital costs must be weighed against the service/sales impact.
However, there are alternatives.
To optimize delivery time, there are multiple concepts and ideas that have been implemented, some quite successfully, to ensure delivery within a couple of hours.
One of the most recent ones is the “hyper-local” model. A hyper-local model basically enables customers to buy anything from grocery and apparel to medical supplies and consumer durables from their neighbourhood stores. Their USP is delivery within 2-3 hours. Key benefits of this concept are higher efficiency, better service levels and lower logistics costs. Since the beginning of 2015, about half a dozen hyper-local start-ups such as PepperTap, ZopNow, Jiffstore, Grofers, Woolpr and Zopper have raised venture capital. Amazon has also started a service called “KiranaNow” in Bangalore to deliver supplies from mom-and-pop stores to residents. This offers a win-win situation to all stakeholders – customers get quick deliveries, kirana stores are empowered with tools and technology to transform their growth in the digital economy and the e-commerce player gets a commission out of the transaction, which varies between 5-15%. Having said that, competition in this segment is intense and includes Google Express, Walmart To Go and eBay Now amongst others globally. But traditional retailers having offline (brick and mortar) stores are leveraging the omni-channel fulfilment channel, by accepting orders online and having customers pick up products from the store nearest to their location, or having products delivered at the customers’ doorstep from the nearest store. This means e-commerce will not kill traditional retail, but help them grow and use them to deliver products as fast as a pizza!
The author is the Co-Founder & COO of Centralmart.in, a first-of-its-kind, organized and dedicated home improvement portal in India offering 50,000+ products with everyday low prices and assisted buying service for real estate interior projects. You can follow him on Twitter @visheshdalal