How to Make Same-Day Delivery Possible
May 10, 2021
As the e-commerce industry continues to grow, so too are customer expectations. E-commerce has been replacing traditional brick-and-mortar purchases more and more over the last several years, and the COVID-19 pandemic has only further accelerated the trend. That's why more and more medium and large businesses are aspiring to provide same-day delivery.
To really understand what's going on: let this statistic sink in. E-commerce sales went up 44% in 2020 alone. This figure is staggeringly high, especially when e-commerce was already booming in 2019 with a comparably paltry growth rate of 15.1%.
Much of this growth has come at the expense of traditional brick-and-mortar retail stores. According to Forbes, e-commerce jumped from around 15% of retail sales in 2019 to a peak of 25% during the scary second quarter of 2020.
As customers defect to e-commerce though, they mostly give up one kind of convenience (effort) for another (time to receive items). Online retailers and their customers alike are now asking, "does it have to be that way?"
Why offer same-day delivery in the first place?
According to research conducted by McKinsey, 53% of Americans are willing to pay more for same-day delivery. Meanwhile, 46% of people will abandon their shopping carts entirely if shipping times are too long or not provided. Something is definitely going on here.
Cutting cart abandonment rates is a really good way of improving overall site conversion rates and retaining customers. Both cart abandonment rate and retention rate are two of the most powerful levers an e-commerce business can use to increase its profitability.
With those facts in mind, the case for providing same-day delivery is clear. Unsurprisingly, a lot of retailers have already caught on to this as well. As many as 51% of retailers offer same-day shipping already, and 65% plan to do so within the next two years.
Finally, it helps to understand why customers are in a rush in the first place. Half of customers who opt for same-day delivery do so because they need the order immediately. They want it in their home that day without having to go out to a store.
Requirements for Same-Day Delivery
There is a reason why not every e-commerce store offers same-day delivery. Many small businesses cannot afford it or the drawbacks outweigh the benefits. This is because same-day delivery has to be implemented at scale or not at all.
With that in mind, here are four basic requirements that a company must meet in order to be able to offer same-day delivery service.
#1: Items eligible for same-day delivery must be stored in multiple local warehouses.
Take a moment to imagine the shipping process. Items are stored in warehouses until ordered. When ordered, they're picked and packed into boxes and then turned over to mail carriers where they are delivered to customers.
Imagine for a moment that the warehouse workers are infinitely fast. Even under that scenario, UPS, USPS, and FedEx can only move so fast. To send items straight from Point A to Point B is not very efficient, and that's why it can cost a lot of money to overnight a small package. For example, it costs $54.85 to send an envelope 600 or more miles (within the US) via FedEx Priority Overnight.
Per McKinsey, the only practical way to provide same-day delivery service for a sensible price is to have multiple fulfillment centers located close to your customer base. They recommend having "urban fulfillment locations within 90-minute drive time from customers." This can be a high bar to clear!
#2: Items eligible for same-day delivery must be sold frequently enough to justify storage in multiple locations.
Of course, having multiple warehouse locations does not make sense for every business. For small businesses, in particular, it typically makes more sense to have one or two warehouse locations. That way, inventory management is simple and warehousing fees are low. Meanwhile, small businesses can still offer consistent two-day delivery, which is what most customers expect by default.
For medium and large businesses, this strategy won't cut it. That doesn't mean that every individual item in a store needs to be eligible for same-day delivery. Amazon, for example, only offers the service on commonly ordered items. For obscure items, there simply are not enough orders to justify putting them in multiple warehouse locations across the world.
For example, I'm writing this article in Chattanooga, Tennessee at 10 am eastern time. I can have men's razors and AA batteries shipped to my house today from Amazon for a small upcharge. That option is not available for the air filters that my home needs, which come in an inexplicably obscure size.
Long story short, if you want to offer same-day delivery for items, you need to be selling them consistently in large quantities.
#3: Companies offering same-day delivery need accurate demand estimation by geographic location.
The next part of the same-day shipping puzzle comes down to demand estimation. It's not enough to simply have a lot of warehouse locations - you need to be able to predict with a reasonable degree of accuracy how much each item is going to sell in a given area.
This differs based on a lot of different factors, including price, geography, seasonality, and special events. For example, you're simply not going to sell a lot of sunscreen in Minnesota in January. You will sell tons of it in Texas in July.
In addition to being able to estimate demand, you will need a way to transfer inventory between multiple warehouses. That means you will likely need a dedicated freight broker to help manage inventory levels at different locations.
#4: Fulfillment centers need a network of couriers for quick delivery.
One of the most notoriously difficult parts of the order fulfillment process is last-mile delivery. That is exactly what it sounds like - the last few miles before an item is shipped to your customer. This part of the process is typically handled by postal carriers like UPS, USPS, and FedEx.
If you want something shipped quickly, though, you need a courier. A courier service is a company that specializes in time-sensitive shipping. Technically, USPS, UPS, and FedEx all have courier services, but they are not the only ones in the game.
Luckily, you don't need to find all the local couriers in the world. You just need a fulfillment company that can easily connect to those courier networks, giving you multiple shipping options to exceed your customers' expectations.
The Future of Same-Day Delivery
The future of same-day delivery is a bright one. It's going to become increasingly more common and it's bound to change consumer behavior as well. It's already fairly common, with 51% of major companies offering same-day delivery service at a modest upcharge.
Nowhere is the future of same-day delivery more clear than in the world of groceries. The COVID-19 pandemic introduced millions of people to the magic of having groceries delivered, and many of those customers are going to stay. That's why companies like Kroger are spending a lot of money building fulfillment centers.
As customers become more used to same-day delivery service, medium and large businesses will increasingly need to provide it by meeting the requirements spelled out above. Smaller businesses will eventually need to as well. This may be made possible by the advent of new services that will help them stay competitive.
Finally, this is going to force postal services like UPS, FedEx, and USPS to keep improving their service quality. This is arguably already happening with the latest ten-year plan for the US Postal Service.
Same-day delivery is here to stay! Multiple warehouse locations, good inventory management, and local courier connections are the backbone upon which same-day delivery service can be provided. Fortunately, there are a lot of B2B services out there which can help medium to large businesses make this happen.
Medium and large businesses that take steps early to provide same-day delivery service stand to increase their profits by acting early. Why not start now?
Need a quality fulfillment partner in the New York City area? Fulfillrite can quickly ship to customers in the most populated region of the USA. If you want to learn more, request a quote from Fulfillrite today.