Same day delivery services have been recently launched by E-retailers like Flipkart and Amazon in major cities across India. These services were already present in some B2B segments like industrial distribution of important machineries part and medical products. In US, Amazon started same day delivery services in 2011 followed by Walmart, e-bay and Google. In India, E-retailers like Jabong, Myntra, and Yebhi had already been offering same day delivery service in their home locations but never gave guarantee on such services.
Indian E-retail market is expected to touch $70 billion by 2020 at an estimated CAGR of over 60%. A primary research was conducted to study shopper buying habit and following factors were found to influence online purchase decision of a buyer (Arranged on the basis of priority)
1. Cost of product
2. Price and discounts available
3. Ease to return products
4. Delivery time
5. Faster checkout time
Research shows that the cost of product is the most important influencing factor in this respect.
Success of same day delivery services depends on following factors:-
Location: Same day delivery services are more feasible in densely populated areas as these shipments cannot go through regular hub and spoke delivery model because of compressed timeline. So it is better to focus on larger cities initially.
Type of Product: It is very difficult to deliver certain large size products like home furnishing items on same day basis. Customer’s expectations about delivery time also varies depending on the product category. Food, grocery & flowers need faster delivery followed by apparels, electronics and other items.
Product margin: Delivery cost is not completely recovered from delivery charges. A part of it is also recovered from product margin. Same day delivery on low margin products will have an adverse impact on the profitability of the company.
Customer: Customers of different demographics have varying expectations on delivery time.
Some of the challenges in implementing same day delivery services are:-
Managing Vendors: Vendors are required to pre-ship inventory to the E-retailer warehouse.
Location: Extending service beyond major big cities is a major challenge.
Cost: Same day delivery services are more costly compared to traditional delivery services.
Logistics Provider: Forging a partnership with a reliable logistics provider is the key to success in this business. Various parameters like cost, customer experience, reliability, scalability should also be considered while selecting the right logistics partner.
IT Infrastructure: IT integration with logistics service provider would be required so that service provider can be notified early and he can consequently plan the delivery route.
Inventory: Stocks are needed to be procured in advance to provide same day delivery service which would increase the warehousing and inventory cost of E-retailers.
E-retailers are developing various techniques to meet the above challenges. Flipkart is integrating merchants, vendors and courier partners extensively to reduce delivery time. Myntra uses remote handheld devices at their warehouse to improve fulfilment time. Tradus has tied up with large number of brick and mortar retailors and uses their available stock to offer same day delivery. Amazon is developing self-delivery locations from where customers can pick up their orders.
Free shipping policies were already eating into the profits of e-retailers and now same day delivery services are going to erode it further. However, policies like these have become a necessity for e-retailors to differentiate themselves and survive in the market.
In today’s scenario, customers are becoming a key factor in the success of any organization. Same day delivery service will help E-retailers to differentiate themselves and also compete against brick and mortar retailers. Let us hope, it spans out best in the interest of the end consumer.
About the Author:
He is presently pursuing his MBA from Indian Institute of Management, Indore