Free Delivery Still Beats Same-Day, Booz Says

While same-day delivery is an enticing option, a study from global consulting firm Booz & Company says that free delivery will remain the bigger draw.


Online retailers such as Amazon, eBay, and Nordstrom have recently made inroads into establishing same-day delivery services, a development that would erase one of the last differentiators between online retailers and brick-and-mortar stores, as well as increase expectations for all businesses engaged in order fulfillment. But a recent study from global consulting firm Booz & Company, Same-Day Delivery? Not So Fast, suggests that same-day delivery will remain a niche offering.


While same-day delivery is an enticing option in today’s instant-gratification world, the study says, free delivery will remain the bigger draw. Asked how much they would be willing to pay for delivery, survey respondents almost unanimously said nothing or next to nothing. Nearly half said they are unwilling to pay any extra money for delivery, and 88 percent said they wouldn’t pay more than $10 for same-day. “It’s a niche play for at least two reasons. One is cost—it’s expensive,” says study author Andrew Schmahl, principal with Booz & Company’s engineered products and services practice. “Consumers have gotten used to free shipping. Same-day is much harder to offer for free.”


The other factor making same-day challenging, the study says, is that 60 percent of online shoppers make the majority of their purchases after 5:00 p.m., leaving a very small and often inconvenient window for same-day fulfillment; only 18 percent place most orders by noon. And with purchases made so late in the day, next-day delivery is often fast enough: Survey respondents indicated that next-day delivery is only 5 percent less valuable to them than same-day. “The consumer doesn’t even want it same-day,” Schmahl says.


Traditional brick-and-mortar retailers can meet customer expectations through low-cost, overnight delivery of goods if they use stores as distribution centers, Booz suggests. Many larger chains already offer online purchase and in-store pickup; to speed home delivery, the next step would be to offer online purchase and localized fulfillment. With real-time inventory systems in place, a company could identify which local retail stores have the items in stock, pick and package those items in stores, and arrange for a local carrier to pick them up for next-day delivery.


If such efforts are successful, DR marketers with retail shelf space may wish to facilitate online ordering and local pickup and delivery in partnership with participating retailers. Brick-and-mortar stores are so consistently framed as a disadvantage that it’s easy to underrate the value of their physical proximity and convenience, the study adds. Physical stores may be just the advantage retailers need to get an edge over online-only competitors like Amazon.


“When we talk about speed, we’re really talking about why customers go to Amazon,” Schmahl says. “The retailer has to make sure they don’t lose out on speed.”


For full survey results, click here: http://bit.ly/18wVQHn.