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Fast or furious: the battle’s on for same day delivery

The Consultancy Company’s Adam Fraser explores the evolving dynamics of same day delivery

Adam Fraser, The Consultancy Company

Three of the world’s largest internet shopping providers have launched same day delivery services for cities within the US market. AmazonFresh is offering this to customers in San Francisco, Seattle and Los Angeles.   The service covers around 500,000 items including perishables such and milk and eggs. Google has launched Google Shopping Express and eBay’s eBay Now, offering similar services across other major US cities including Chicago, Dallas and New York. Although these are currently subscription services (around a $299.00 annual fee and free delivery on orders over $35.00) you can be sure these will disappear as the market develops and firms clamour to be the first to offer it for free, to drive more business their way.

So where the US – and in particular Amazon, the firm that has “customer obsession” as its guiding management principle- begins will the rest of the world follow? As computing technology advances and computer algorithms allow firms to ensure prices can be matched to the competition almost instantly Amazon et al will again lead the way by competing on service.

The impact on inventory, stocking points and therefore, working capital, could be immense as firms ensure they have sufficient product to keep service levels at the required levels, staying ahead of the game – or most likely keeping up with the competition. Contradictorily this could actually hand the advantage back to those with a physical presence on the high street. With multiple stocking points around the UK and the ability to serve the customer in-store, click and collect becomes click and receive.

Of course this adds another layer of cost through the additional distribution required from each store, unless a transport provider pops up to fill this niche void. There is an opportunity for the logistics sector to take the lead as the consumer market develops. . You would expect UPS, DHL, Fedex and others will try and fill this space, however it would take a serious re-design of the classic ‘hub and spoke’ distribution model. What’s more, with an initial small scale roll-out, will they have the appetite?

In the US a more innovative approach has emerged for delivery of groceries on a same day basis. Firms such as Peapod and Fresh Direct have been established for some time offering a similar services to the UK big four supermarkets. Early signs of disruption are in evidence already. Take Instacart, a start-up founded in July 2012. Trying to develop this new area, Instacart uses a team of ‘personal shopper’s with smartphone apps to find the nearest ‘shopper’ to you to be able to go and find the products you need. They currently only offer groceries from a range of affiliated supermarkets, but diversification into FMCG products as their network grows will be on the cards, and can be built on to provide a low cost alternative to the existing courier networks.

A distinct advantage is their shoppers do not drive company vehicles and can arrive by foot, bike or car – therefore zero capex on creating or expanding a physical distribution network.  AmazonFresh promises customers “Place your order by 10 am, have it by dinner”. Instacart offer a one or two hour delivery service – their record stands at 12 minutes.

So can the UK logistics market come up with such a solution? It is surely a case of when and not if the same day phenomena hits the UK so watch this space.

 

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