Article by: Asst.Prof. Suwan Juntiwasarakij, Ph.D., MEGA Tech Senior Editor
One-day shipping initiated by Amazon Prime’s package seems to a norm that sets consumers’ expectation on how products and services should be delivered. Offering the speedy delivery on more than 10 million items, Amazon spends tens of billions of dollars a year and employs 250,000 workers in its U.S. warehouses. Amazon has also ramped up its own shipping capabilities, with at least 50 of its own airplanes, 300 semi-trucks, and 20,000 Amazon vans for last-mile delivery. In order to make it work, the process is incredibly challenging.
A NEW SHIPPING NORMAL PARADIGM
The standards have been re-set by the like of Amazon and several other market leaders, placing increasing more pressure on incumbent players to respond accordingly. As Amazon’s free-delivery window has shrunk, online sales have increased.
According to McKinsey & Company analysis, the pressure on incumbent plyers may appear to be overwhelming, and retailers seemingly have a strategic asset they can leverage in the future: dense store network, which provide them proximity and potentially quick access to their customers. To fully benefit from their network, omnichannel retailers, however, will need to consider changing in four areas: the local fulfillment network, quick and integrated IT systems, new store layouts and processes, and a rethink of business economics.
As online sales have surged, shipping time has gone down. However, in the past two decades, there has hardly been any business success story like e-commerce. Today, people expect to receive their parcels no later than the day after they order, and shopping decision increasingly depend on shipping times. Mass-market consumers have high expectations. Especially in the United States, more than half say they have a general interest in same-day delivery, despite their limited willingness to pay extra for it.
Young, urban, and time-constrained consumers are the most attractive segment in same-day deliveries. In order to secure this consumer segment, the e-commerce super players such as Amazon, Alibaba, and JD, are committed to pushing same-day delivery into the mass market, and this is becoming the next building block in their bid to win consumers on selection, price, and convenience.
TOWARDS FOUR AREAS FOR SHIFTING GEARS
Omnichannel retailers that follow this strategy must upgrade not only their fulfillment but also their store designs and IT systems to adopt a fundamentally different mind-set for their economies.
Entering the race for same-day deliveries can be hard. Initially, most retailers would fall far short of the volumes required for at-scale operations, and their delivery bills would be more than three time higher than they are under the current next-day standard. Subscription models can cross-finance shipping costs but require a high degree of customer relevance and broad benefits. Retailers that adopt the same-day standard must explore a number of paths to cash in on their convenience leadership.
