Online Delivery: The Battle for Speed

When it comes to fast, online, delivery services, Amazon leaves other retailers in the dust.

When it comes to fast, online, delivery services, Amazon leaves other retailers in the dust. How do they do it? Money! Bloomberg put together a report detailing Amazon's winning approach and notes that the company 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. 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. And while Amazon perfects their service, Walmart is joining the race. This retail giant expects to test online food retailing at up to 50 stores by the end of 2013, said The Wall Street Journal. With this chaining building out it's online volume, the scale and potential of what Walmart could do should create interesting competition. But let's not forget, 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. But is same day delivery really a battle consumers care about? Ultimately, The Lempert Report feels same-day delivery may appeal to only a limited segment of consumers willing to pay extra for such speed, and especially since, according to a new Booz & Co. survey of more than 1,000 U.S., 60% of online shoppers place their orders after 5 p.m. In addition, nearly half of respondents are unwilling to pay any delivery fee, and only 10% would pay $10 or more for same-day delivery. So, maybe consumers are less focused on same day delivery and more focused on quality food?