New York Times
POSTED: 1:30 a.m. HST, Dec 28, 2012
Ivy Wu did not immediately need the navy lace cocktail dress she ordered the other day. But when a representative from Shoptiques, an e-commerce site, arrived at her Midtown office with the dress only hours after Wu, 26, had placed her order, "I was really impressed that it was here," she said.
This holiday season, same-day shipping has replaced free shipping as the new must-have promotion. It's logistically complicated and money-losing — and may not even be a service that consumers want or need, analysts say. But retailers from Wal-Mart to small shops like Shoptiques are willing to take the risk. Even the Postal Service has introduced a same-day option for retailers. And the reason is simple: fear of Amazon.com.
Amazon, the world's biggest online retailer, has hinted that it will expand its same-day shipping service, giving customers the immediate gratification that has been the biggest advantage of brick-and-mortar stores.
For small outfits like Shoptiques, it is not an easy proposition. The courier who showed up at Wu's office was the company's head of boutique operations, who has put aside her regular job this holiday season to make deliveries by hand. Bigger retailers, like Toys "R" Us, Macy's and Target, have worked with eBay to deliver items the same day, as have other old-line stores. Google has begun testing a local delivery service with several chains.
"There's lots going on in this space, and it's all driven by Amazon," said Tom Allason, founder and chief executive of Shutl, a British same-day delivery service that will expand to the United States next year. "It's not really being driven by consumers at the moment."
The same-day delivery idea was a spectacular failure during the dot-com boom. Companies like Kozmo.com and Webvan went under because the services simply cost too much to be profitable. Amazon has offered same-day shipping since 2009, but with limits — only in big cities near Amazon warehouses on certain items ordered in the morning.
The geographical limits exist because Amazon had built warehouses far from major cities to avoid charging sales tax in certain states. But it has now given in on the sales tax fight, and in return, is erecting warehouses near cities like San Francisco, which analysts say is paving the way for faster, more widespread same-day delivery and spurring competitors.
"It's the old idiom, ‘time is money,"' said Lina Shustarovich, an eBay spokeswoman. "How much time are you saving by not going to the store? People want it now, they want it fast."
Wal-Mart, which is the nation's biggest retailer but sells just a fraction of what Amazon does online, is testing same-day shipping during the holiday season in five markets. It gives shoppers a four-hour delivery window and charges $10. The idea is "to give customers convenience, by way of combining our online shopping with the local presence of stores," said Amy Lester, a Wal-Mart spokeswoman for global commerce.
But, Lester said, the test is showing that consumers often pick next-day delivery rather than same-day. She declined to give a specific figure for same-day orders, but said thousands of same- and next-day orders had been placed.
Net-a-Porter, the designer apparel e-commerce site, said its same-day service is quite popular. Its $25 delivery service in the London and New York areas pays for itself, said Alison Loehnis, its managing director. But its clients are accustomed to paying for concierge service, like the customer who ordered clothing to be delivered the same day to her private jet before a vacation.
With the eBay Now iPhone app, introduced this year in San Francisco and New York, customers choose items from physical stores and eBay sends a courier to the store to pick it up and drop it off — at an apartment, office, coffee shop or bar — for a $5 fee.
EBay declined to say whether it loses money on the orders, but analysts who study logistics say it is not profitable.
"The goal with this pilot was never to monetize," Shustarovich said. But in the future it could make money, she said, for example, if retailers pay eBay a fee for bringing them customers.
The Postal Service is testing a same-day service in San Francisco that is meant to offset its declining carrier business, a spokesman said. Consumers can order items until 2 p.m. from 1-800-Flowers.com, the first retailer offering the service, and a Postal Service employee will pick up the package and deliver it between 4 and 8 p.m.
Smaller companies are trying different approaches.
TaskRabbit, which offers a la carte personal assistant services, noticed last summer that delivering items from local stores was the most popular task requested.
Now, it charges $10 for delivery from local stores, starting in San Francisco.
Today's technology — including mobile phones, social networking and location-based mapping services — has forever transformed shoppers' expectations, said Johnny Brackett, a TaskRabbit spokesman.
"People have become accustomed to this idea of instant gratification, where you just type something on your phone and the next thing you know, you have what you need," he said.
Yossi Sheffi, director of the MIT Center for Transportation and Logistics, said he was "skeptical" about same-day working well. Efficient, high volume same-day delivery — with warehouses that use robots and trucks filled with items — costs $10 an order, he estimated, while one-off deliveries could cost up to $50 each.
It's "outrageously expensive," he said.
Not to mention complicated.
Shoptiques, which sells apparel from offline boutiques, already offered free returns and free shipping over $100, but Olga Vidisheva, its founder and chief executive, decided to offer same-day shipping during the holidays in New York to compete with larger retailers.
She could not afford an outside delivery service, though, so on a recent winter day, the task was left to Arianna Simpson, director of boutique operations.
Simpson had spent the morning dashing between downtown boutiques to pick up orders. Now, carrying a large blue Ikea bag full of Shoptiques parcels, she hurried past a costumed Puss in Boots and talked her way past a front-desk attendant in Midtown Manhattan.
After two hours, two subway rides and 3.2 miles on foot, Simpson had successfully delivered four packages. With Manhattan dark and commuters rushing toward the Herald Square subway, Simpson went back uptown for a pickup, took two trains to Bushwick in Brooklyn for a drop-off and went to SoHo for a final delivery.
Despite all that effort, Vidisheva said, though people appreciate the service, it is not exactly essential.
"Some people would rather get it in the mail," she said. "You say, ‘I'll deliver it the same day,' and they say, ‘Listen, there's no rush."'
But Allason said that would change quickly.
"People don't need immediate delivery today, but they will need it tomorrow, because as soon as you know it's available, you start expecting it and you start demanding it," he said.