Reference no: EM133530004
Case Study
The Future of Same-Day Delivery: Same as the Past? Although home delivery of pizza has been successful for decades in the United States, most other same-day delivery efforts have failed. Around 2012, the same-day delivery battle again heated up with Amazon, Walmart, and eBay launching major efforts to implement same-day delivery and new players like Instacart setting up operations.
In 2017, Amazon claimed to offer same day delivery to its prime members in over 5,000 cities on "over a million items with qualifying orders over $35." While it was not clear whether Amazon was making any profits on such deliveries, some pundits felt that if it succeeded in offering same day delivery at low cost to its customers, Amazon would seriously damage the prospects of physical retailers.
Walmart reacted to Amazon's efforts in 2012 by announcing tests for same-day delivery in a few cities including Northern Virginia, Philadelphia, Minneapolis, San Jose, and San Francisco. By 2017, it had shifted its delivery focus to free same day pickup from its stores along with free 2-day shipping to its customers.
Meanwhile, eBay experimented with same-day delivery for products it did not necessarily stock. The Wall Street Journal reported on a customer order for which eBay sent a courier to Macy's for the purchase and then had it delivered within an hour. The paper reported that eBay had a team of fifty couriers in San Francisco that "fetch and deliver goods directly to customers' doorsteps within an hour of an online order." In 2015, eBay killed its same day delivery service eBay Now, an indication that it was unlikely to be profitable.
Instacart, a San Francisco based company, was valued at over $3 billion with a model where its employees shopped for groceries for customers and delivered them to their door. Instacart operated in most major cities in the U.S. and had over a hundred partnerships with grocery retailers including Whole Foods and Costco. This partnership offered the retailers an opportunity to compete with Amazon in terms of responsive home delivery. While Instacart had grown rapidly, it had not generated profits until 2017.
The Iconic, an Australian company selling clothing, shoes, and accessories, offered three-hour delivery within Sydney for $9.95. It promised to have goods picked, packed, and delivered within three hours to Sydney metro areas, between 7:00 a.m. and 6:00 p.m. on business days. Although the company was young, this service had been extremely well received. Seven-Eleven Japan was another company offering home delivery-in this case, its 7-Meal service, targeting Japan's aging population. The service offered a menu of high-quality meals that customers could choose to pick up at Seven-Eleven stores or have delivered to their homes or offices.
If history was any guide, the profitable implementation of same-day delivery would be challenging. Urbanfetch and Kozmo pursued this business model during the dotcom boom of the late 1990s. Urbanfetch operated in densely populated areas such as London, Manhattan, and Brooklyn, but was forced to shut down in the fall of 2000 owing to a lack of funding; Kozmo, which raised more than $280 million in funding and operated in eleven cities, folded in early 2001.
Opinions were clearly divided about the potential for success with same-day delivery. One writer opined that "this move [by Amazon] will shake up the retail industry," whereas a New York Times article countered that "some retail analysts are questioning whether the expense and difficulty of same-day delivery would be worth it."
Questions
1. Why has same-day delivery of pizza been successful, whereas the practice has failed in other settings?
2. Under what conditions can same day delivery be offered at low cost?
3. What are the characteristics of businesses that can succeed with same-day delivery? Can Amazon, Walmart, or Instacart succeed with same-day delivery? Which model is likely to do better? Why?