The economics of same-day delivery in eCommerce

Many online retailers have already started working towards building a strong logistics network by making the delivery of products as quick as possible.
Same Day Delivery

In today’s dynamic digital retailing environment, delivery has become a key factor in defining the future of a lot of eCommerce companies. Today economics of every retail business, be it online or offline, is measured on its logistics and delivery mechanism. As the millennial consumers want products/ services in short timelines, the supply chain management and logistics battle is just getting bigger and better for the consumers.

In this competitive online retail landscape, companies working upon logistics features such as doorstep delivery, zero delivery prices and product tractability solutions will win consumers from all age group. Many of these retailers have already started working towards building a strong logistics network by making the delivery of products as quick as possible. The trend has shown a significant outcome in terms of gaining consumer consideration and trust. The same –day shipping has also helped in building that brand loyalty and enhance brand awareness.

Fast…fast…FAST
With the changing consumer behaviour and rising expectations, eCommerce industry is bound to transcend physical boundaries and serve consumers at every nook and corner of the country. Building this robust delivery mechanism requires a good amount of investment and need some sheer evaluation of processes and business model. Supply chain, customer support, updated eCommerce software and warehouse facilities are some of the crucial elements to make this ‘need for speed’ ploy a reality.

Surely, same-day delivery is an elite offering and requires a lot of cash. So it is very important for these eRetailers to figure of which product categories to include in fast-delivery? How the requirement changes during holiday or festival season? How to safeguard products when delivered in rush?

The same-day delivery surely has huge growth potentials, but costing strategy really needs be thought well. For high-ticket items, consumers won’t mind paying extra for speedy-delivery but this is not the case in regular products. Imagine someone paying shipment charge of Rs 100 for a product worth Rs 500. No one would. So, it’s very important to know your consumers and the category. Fast delivery leads to consumer satisfaction and more purchases, thus implementation of this dynamic delivery mechanism requires those online retailers to across a very practical approach that includes a detailed planning, IT investments and strategic partnership with transportation partners.   

The Same-Day Dream
But when it comes to larger masses, like millennial, same-day delivery becomes sporadic. One might need a product delivered within hours, but not always. Even decent amount of research supports that customers actually care about free shipping than same day shipping. Now, pondering upon this aspect of online delivery, same-day delivery becomes a ‘nice-to-have’ option rather than a ‘must-have’ option.

These days many online retail unicorns, including Flipkart, Amazon and Snapdeal, are vigorously building their in-house captive logistics wing. Flipkart’s Ekart, Amazon’s Amazon Transportation Services and Snapdeal’s Gojavas, all of them have made their logistics networks, some from scratch and some by acquiring others. These companies have started building their own logistics network to lower the high margin operational cost involved in it. So, basically the idea for these eCommerce majors is not to gain profit from their logistics venture, but to add value and grow consumer loyalty.

So, with the evolving eCommerce expectations and demands, it is very crucial to understand your TG and their shopping behaviour, while making an online purchase. Not every customer would necessarily need same-day delivery and thus, the question still remains open: Is this really something people want? The jiff in the direction of building a robust same-day delivery network can be less of a great business idea than a by-product. Certainly, there is something consumers exceedingly prefer over fast shipping: free shipping!

Will the cost and difficulty of executing same-day delivery be worth it? Share your thoughts using our Twitter handle: @RetailBizIndia

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