Will Same Day Delivery Become the New Standard?

The online purchase of articles may have many advantages, such as convenient shopping from the comfort of your home, easy comparison of products and the opportunity of finding the best price and special internet promotions. Apart from not being able to touch the goods, a major disadvantage compared with buying from conventional retailers, is usually the delivery time. More and more people are demanding the "instant gratification" of receiving the goods as soon as possible, so it is therefore hardly surprising that the trend in ecommerce is towards same day delivery.

According to the Mc Kinsey study "Same-day delivery - The next evolutionary step in parcel logistics" (1), same-day delivery is "a game changer because it combines direct product availability from the retail sector with the convenience of ordering from the comfort of your own home. The management consultancy forecasts that 15% of parcel sales (3.1 billion Euros) in the private consumer business in Western Europe by 2020 will be achieved through Same Day Delivery parcels.

Currently, same day delivery in Germany is mainly offered to the food and pharmaceutical industries. Online supermarkets such as Bringmeister (a subsidiary of EDEKA), Food.de, GetNow, REWE and many others not only deliver food on the same day, but also within 90 minutes, in the case of GetNow. Since 2015 Amazon have been offering same-day delivery in Germany for around one million products in 14 cities increasing to 20 cities in 2019. DHL offers a classic courier service that promises worldwide delivery on the same day.

Same day delivery certainly needs to exist in special cases or with special customer groups. The same day service provider Tiramizoo has companies such as Saturn, Media Markt, Conrad and Nespresso in its customer portfolio and supply particularly urgent customers at short notice. It is still debatable whether customers would not be satisfied with a flexible requested date. According to a representative survey conducted by the market research institute YouGov in 2017, in which 2000 Germans aged 18 and over were surveyed, the delivery of goods at the desired date or a free choice of delivery location and time is more important for customers than the delivery of goods on the same day.

It is also questionable whether the nationwide implementation of Same Day Delivery in all industries and all regions is at all desirable economically due to the costs and the environmental impact.

In general, faster service leads to sharply rising logistics costs. As already mentioned, however, customer satisfaction also increases enormously, which gives the respective online retailer an enormous market advantage. According to a survey by the French Capgemini Research Institute (2), "customers ask for same day delivery but hardly want to pay for it". According to Arne Schulke, Professor of Management Control & Leadership at the IUBH School of Business and Management (3), "the willingness of customers in Germany to pay for Same Day delivery is less than five Euros".

The prerequisites for same-day delivery include effective warehouse management, a high degree of automation and flexible responsiveness. Frequently, we cooperate with fulfilment partners (such as Tiramizoo, Lieferando) who take over the delivery of the goods. Here, however, a smooth process and data exchange must be guaranteed. In general, same day delivery is only possible in areas close to the distribution centres and cost-effective only in conurbations, when delivery vehicles cover the shortest possible distances. Especially in cities, this form of supply will lead to increased traffic and environmental pollution. However, this could be reduced by involving local sites (e.g. supermarkets or pharmacies) in some business models. The reduction of the product range can also lead to a streamlining of logistics. The customer becomes part of the logistics chain because they must accept the delivery and that is why, according to Arne Schulke, the evening time slot between 6 p.m. and 9 p.m. - when the customer is at home - is so popular. This can also be used to consolidate deliveries from individual sellers, making the supply model more economical. Other solutions can also include in-home delivery (with intelligent door lock and door opening) and collection from certain parcel stations. Same day delivery has now become a must in the convenience and food sectors. The service is also welcome for heavy or voluminous items as the customer is “spared the lugging and for older people in particular, this is an added value - and it can always be marketed as well," explains Schulke.

According to Dean Maciuba (4), an analyst at Logistics Trends & Insights, LLC - Research Analysis News Consulting, growth in the Same Day Delivery segment is driven by large investments and enormous venture capital. In an interview with an investment banker, he concluded that hardly any of the subsidised start-ups are profitable and that the main interest lies in the acquisition potential of these companies. In addition, the costs for same day delivery are subsidized from the product margin, which cannot be sustained for a long time. Amazon is the trendsetter for both delivery models, with the online retailer taking advantage of many of its own fulfilment centres and the Amazon Prime Air subscription. In any case, Amazon is trying to convert its accepted 2-day delivery standard to Next Day Delivery for the Prime Free One-Day program in the USA by leasing aircraft. For most online merchants, an affordable next day delivery may be the better solution, based on already established regional express services and large local retailers. In general, there are still many unknowns about the emergence of both services, such as the speed of expansion, acceptance of lower profit margins, the use of delivery robots and packing stations, and the influence of the trendsetter.

References

1 Same-day delivery - The next evolutionary step in parcel logistics, Travel, Transport & Logistics Practice March 2014, Copyright © McKinsey & Company, Inc.

2 Capgemini Research Institute, Last-mile delivery consumer survey "The last-mile delivery challenge - Giving retail and consumer product customers a superior delivery experience without impacting profitability ", October–November 2018, Capgemini Research Institute

3 iXtenso - Magazin für den Einzelhandel, Same-Day-Delivery: Tips for small retailers, "Time window delivery in the evening is the big hit": Interview with Arne Schulke, Professor for Management Control & Leadership, Service mit Chancen, 24.07.2018

4 Maciuba Dean, Same-Day versus Next-Day Delivery, Logistics Trends & Insights, LLC - Research Analysis News Consulting, Apr 10, 2019