Same-day delivery: a viable option for retailers?

30 August 2017 (Last Updated November 3rd, 2017 17:02)

Consumers’ expectations surrounding home delivery are constantly evolving to demand faster solutions.

Same-day delivery: a viable option for retailers?

Consumers’ expectations surrounding home delivery are constantly evolving to demand faster solutions. Amazon is at the forefront of delivery innovation, with investment in drones to speed up delivery in the long term and a recently announced trial of ‘instant pick up’ at five US university campuses (i.e. delivery to a pick-up point within minutes of ordering). In the case of same-day home delivery, it is becoming more widely available as major UK retailers such as House of Fraser, Currys/PC World, and Zara (within London) now offer this service. Despite this, consumer demand remains fairly low.

GlobalData’s 2017 survey of 10,000 UK online shoppers found that while 28% have not yet used same-day delivery but intend to in the future, a slightly larger proportion of online consumers (28.9%) do not ever intend on using same-day delivery. Alongside this, the vast majority of online shoppers (77.8%) are unwilling to pay extra for the service – of those who would pay for same day delivery, 70.5% are only willing to pay £1-£5. With consumers not prepared to cover the full cost of same-day home delivery it will be difficult for retailers to make this option profitable.

Same-day home delivery is not all that new. In 2009 ASOS launched same-day home delivery for those living within 50 miles of its Hemel Hempstead warehouse for £16.95. However, fast forward several years and ASOS has replaced same-day home delivery with convenient alternatives such as precise one-hour delivery slots and evening delivery; both are less time-pressured and lower cost, making it more viable. These alternatives have been adopted by many other clothing retailers such as Next, New Look and John Lewis to offer convenience to the customer without the pressure of same-day home delivery.

"ASOS has replaced same-day home delivery with convenient alternatives such as precise one-hour delivery slots and evening delivery."

While retailers that rely on efficient delivery as their USP should continue to invest (such as Amazon and Argos), not all retailers will find it necessary. The requirement for same-day home delivery relies on a sense of urgency that is more prevalent when purchasing essential items such as food and groceries. Sainsbury’s and Tesco have recognised this and are catering to this demand, with Tesco launching home delivery within one hour in London, and Sainsbury’s within 30 minutes (also in London).

Though demand is currently low, clothing and footwear retailers offering same-day home delivery cater for consumers experiencing a last-minute rush to find an outfit for an occasion without the time to shop instore or wait for standard delivery. The increased availability of delivery saver schemes and lower-priced next day shipping options are leading to consumers becoming accustomed to low-cost fast delivery. The shift away from standard fulfilment options may potentially boost demand for same-day home delivery in the long term, though only if it is offered at an accessible price.

Other retail sectors such as homewares, furniture and floorcoverings, and DIY and gardening are unlikely to have this sense of urgency placed on their products, weakening demand for immediate delivery. Also in some cases it would be unrealistic, for example in the case of furniture, where items are often made to order.

With same-day home delivery currently being an unprofitable and unnecessary solution within many retail sectors, retailers need to offer convenience in other, cheaper ways, for example the use of one-hour scheduled delivery or same-day click and collect, where system capabilities allow. These alternative delivery options can help retailers develop the capacity for fast delivery and test demand, without the high costs and time pressure of same-day home delivery.