Same-day delivery: who’s first, who cares?

September 11, 2013

Giants may seek to lead in rapid food deliveries—but nearly half of online food shoppers won’t pay more for it.

Racing to fulfill online delivery orders fast—increasingly on the same day within hours—Amazon sets a pace that leaves most retailers in the dust.

It accepts lower margins as it develops methods of rapid dispatch, states Bloomberg, in a report that details Amazon’s costly approach: It has spent nearly $13.9 billion to open 50 new warehouses since 2010; five more in 2013 will raise its total to 94.  With just another 12, Amazon could be within same-day delivery reach of 50% of the U.S. population, up from 15% currently, MWPVL International told Bloomberg.

Also, Amazon Fresh is now in metropolitan Los Angeles as well as Seattle, and could be in San Francisco before this year ends. Since new Amazon warehouses will have refrigerated areas for food, according to Reuters, it could possibly roll out AmazonFresh to multiple metro markets.  What the company could then do—which grocers can’t right now—is combine food orders with higher-margin hard goods.

Meanwhile, Walmart expects to test online food retailing at up to 50 stores by the end of 2013, said The Wall Street Journal. Beyond that, it’s the scale and potential of what Walmart could do with food online that rivets attention, since the chain is building its e-commerce volume overall.

They’re not the only names in the online food delivery space. Peapod is well established in 24 markets, FreshDirect is too in areas of New York City, and Instacart has a novel model of personal shoppers in San Francisco who buy desired items at Safeway, Trader Joe’s, Whole Foods and Costco, and assemble and deliver orders in as quickly as an hour.  

Another new idea targeting travelers comes from Ahold subsidiary Albert Heijn in Amsterdam. People can order online, and pick up their food at a designated spot in the city’s Schiphol Airport upon their return from a vacation or business trip.

Ultimately, The Lempert Report feels same-day delivery may appeal to only a limited segment of consumers willing to pay extra for such speed. A new Booz & Co. survey of more than 1,000 U.S. online shoppers concludes the same:  Nearly half of respondents are unwilling to pay any delivery fee, and just about 10% would pay $10 or more for same-day delivery.  This is understandable, since 60% of online shoppers place their orders after 5 p.m.