Four Questions Retailers Need to Ask Before Giving In to Same-Day Delivery

The latest retail delivery trend is not without pitfalls

London’s first one-hour delivery service recently provided a unique view of Londoner’s consumption habits. Wealthy West Londoners wanted health foods and champagne in a flash, while the young and trendy East Londoners bought selfie-sticks and yoga mats. This might be the extreme end of 2015’s latest unique retail selling proposition —same-day delivery — but it’s a competitive challenge that is on the minds of many retailers across the world.

However, the real challenge is to ignore the noise and clinically assess whether same-day delivery will support your business goals.

Do your customers demand it?
“Same-day delivery is not a suitable model for all retailers,” said Tom Enright, research director at Gartner. “To determine how appropriate it is for your business, consulting your consumers is a mandatory starting point.”

Retailers must question whether their customers want to receive their orders so quickly that it justifies the fee they will have to charge. Often consumers would rather wait and receive free delivery and even spend the necessary threshold to secure it. For other customers, a range of delivery options is attractive.

Are your products the right fit?
Are your products things consumers cannot wait for? Generally for same-day delivery, it tends to be those ”urgent” items, such as groceries, flowers, medicines or kitchen appliances. Trade professionals, such as plumbers and electricians are also obvious cases, as they often require parts urgently, so they can complete jobs on time.

The nature of the purchase is also important when considering same-day delivery. If your product is particularly trendy, consumers may want it delivered before anyone else. Products relevant to a particular day can also make deadlines especially important — chocolates for Mother’s Day for example.

Does it make financial sense?
Your supply chain, marketing and finance divisions must be aware that same-day delivery implementation requires sweeping change across the business. In order to fully support this practice, every retailer must assess certain criteria to determine the financial impacts.

The profit margin on products must be examined to ensure delivery costs are not just absorbed by the business. You have to assess whether you are gaining a competitive advantage from same-day delivery or endearing higher levels of customer loyalty. You should also examine your customer’s location and whether existing distribution centers can cope without extra investment.

Where would I offer it?
If you have answered “yes” to the previous questions, the next question must be “where to start?” Caution should underline the scale and speed of any trial period. Leading retailers who are already trialing same-day delivery tend to be in dense urban areas where delivery times are short and customer numbers high.

Client Research
Gartner clients can find more information in the report How to Avoid the Perils of Same-Day Delivery.

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