Same-day delivery Innovating to meet demand

From groceries to electronics, more and more retailers are offering customers the option of same-day delivery. But is speed really of the essence? And what are the environmental costs?

Founded in 2014 and based in Berlin, Liefery already has 500 employees and specialises in same-day deliveries throughout Germany and Austria. (Photo: Hermes)

The rain is hammering down outside. After unexpectedly travelling all week for work, there wasn’t time to visit the supermarket to shop for the dinner party you’re hosting tonight. Instead of braving the weather outside, you turn on your laptop and order what you need online. Delivery at 4pm? That should leave plenty of time to prepare. What was barely imaginable just a few years ago is fast becoming the norm. Consumers, it seems, want things quickly, and more and more businesses, from supermarkets to fashion stores, electronics retailers and even online pharmacies, are prepared to give it to them.

British supermarket chain Sainsbury’s, for example, says it can now offer same-day delivery to 40% of the UK, while its ‘Chop Chop’ service in London promises delivery within the hour. Amazon Japan announced in 2017 that it would offer same-day delivery for prescription medicines, adding another string to its bow. In its April 2018 annual shareholder letter, the online giant said its Prime one-day delivery service is now available in more than 8,000 cities across the globe to its 100 million-plus Prime subscribers.

Innovative new players

The question is – Who is taking care of all these deliveries? As incumbent parcel and logistics firms work hard to fulfil a variety of demands, space has opened for agile start-ups to handle some of the fastest deliveries.

In the United States, retailers such as Macy’s, Target and Walmart are partnering with various young companies to ensure their products reach customers more quickly. Some operate in a traditional way on a purely local level, while others are employing more innovative methods: Roadie connects those with objects to send and drivers already going in the same direction; while Deliv adopts a similar method to Uber, crowdsourcing independent drivers who use their own vehicles to make deliveries.

Incumbents stand to benefit

Approaches such as these can bring fresh impetus and new ideas to the sector, something Hermes has already recognised: in 2017, it announced it was increasing its stake in German start-up Liefery to 68%. Founded in 2014, the Berlin-based company already has 500 employees and specialises in same-day deliveries throughout Germany and Austria.

But shouldn’t incumbent parcel services be worried about this new generation of delivery providers? Not according to a 2017 study from McKinsey. The consultancy says incumbents stand to gain at least 80% of the future same-day market. “Only they have the critical capabilities that retailers will seek: proven expertise in consolidated network operations, synergies with significant base volume and the commercial capabilities and standing big-customer relationships to support such deals.”

Delivery companies should be wary not to overstretch themselves, however. A note of caution can be found in Japan, where delivery services had to limit their business with online retail in the past, due to too demanding fast delivery schedules.

What’s the rush?

Same-day delivery seems a classic case of supply meeting demand. But according to Deloitte, speed might not actually be as crucial to consumers as retailers think. In a survey of the 2017 holiday period in the United States, it found that 88% of respondents said free shipping is more important, compared with just 12% who prefer ‘fast shipping’ of two days or less. A further Deloitte report says more accurate predictions of when deliveries will be made could be a greater priority than same-day delivery.

For Liefery founder Nils Fischer, same-day delivery is simply one part of a holistic service, comprising “speed, convenience, flexibility, predictability and transparency over the last mile”.

Environmental considerations

Possibly the biggest consideration of all, though, is the effect same-day delivery has on the environment. Despite research showing that online shopping has a smaller carbon footprint than driving to a local store, express delivery negates this. The quickest way is not necessarily the most efficient for suppliers and delivery firms, and can result in extra packaging, more journeys and increased emissions.

However, there are many innovative technological solutions to this issue under development, from smart traffic lights for free-flowing vehicles to electric-powered trucks. But the real power lies with the companies selling the goods and the consumers buying them. What if companies encouraged their customers to select a slower, greener delivery option? And what if we, as consumers, thought twice about selecting express delivery?

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