In the October issue of PARCEL, we discussed the rapid growth of Amazon and its moves into groceries and same day delivery. Feedback from that Red Flag article was significant, particularly from retailers and carriers, with one overriding question: “How do we compete against this juggernaut?”
Amazon has a mighty fulfillment infrastructure, however, if it doesn't have the inventory in one of its 50+ fulfillment centers closest to the buyer, there is often no way the “free second day” is cost free to Amazon unless it has an interest free loan from buyers like me paying for Amazon Prime.
What about everybody else who does not have this kind of marketing, inventory and fulfillment machine? The omni-channel retailers are scrambling because they are getting creamed by “showrooming.” Some reports have indicated up to 60% of consumers who “showroom” end up buying from Amazon.
The other Internet delivery services like Post Mates, Deliv, and Task Rabbit are scrambling too. This group is focused on delivery to consumers in big buying markets like San Fran and NYC, providing one-to-two hour service that includes anything from a sandwich to a 42-inch TV being picked up and delivered. Only a smart phone, a vehicle and a driver license to qualify.
eBay Now was part of this group until it recently announced an acquisition of Shutl and will cover the top 25 markets for same day delivery. Are branded retailers willing to give up a percentage of product value for this? Shutl acts as a marketplace for local courier companies
Google Shopping Express bought BufferBox to store packages for customers to pick up. Google is also offering delivery services in the Bay Area from retailers to consumers. Its program showcases an extensive selection of products available at stores.
Walmart revolutionized distribution while inventing itself for vendor delivery to its stores. Its Ship-from-Store concept has faster delivery than Amazon. Will a stand-alone system like this be the answer? Walmart Labs is working on their hi-tech solution in Silicon Valley.
With Amazon’s rapid expansion, they are offering home delivery on a same day and overnight delivery basis for everything from books to electronics to groceries. Texas, for example, will have three Amazon locations serving 60% of high end Texas buyers. Amazon is predicting 25% greater volume growth this peak season.
Meanwhile, ShopRunner just received $200m in funding from Alibaba, based in China. ShopRunner offers a cool website for consumers to choose a retailer (80 at last count) and automatically receive two day free delivery and free returns. The retailer pays the shipping, handling and of course a healthy fee to ShopRunner. Is this what branded retailers hoped to become? It is co-opetition, but does it optimize their brand and retail space?
FedEx and UPS are both doing extremely well and are never ones to sit on the sideline. They are so competitive that their rivalry has been compared to Coke and Pepsi. DHL was not able to weather the battle against them within the US. They may look like they are on the sidelines, but they will come out strong. Having a major brand, enormous network of air/ground, global reach, package/LTL/mail, powerful IT, very strong customer bases and enormous work forces are all powerful strengths. Recently reported volume estimates because of web orders are impressing the analysts with better recommendations for FDX stock. Both are forecasting early December as its peak day for the year because of CyberMonday on December 2. Previously, the peak days have been a few days before Christmas.
With residential delivery costing the carrier exponentially more than business delivery because of density, distance and volume, how can retailers compete in this increasingly competitive environment?
The retail empire has the best chance to strike back and leapfrog based on their own powerful brands, customer base and 150,000 fulfillment centers called stores. Some are becoming smarter as omni-channel players with store shopping, online orders from the web, catalogs and kiosks. Amazon and Internet players can’t offer this range of channels and never will - or they will have to become brick and mortar retailers too, thus raising their costs.
Retailers already understand co-opetition by the very nature of being adjacent to each other in malls. They have virtually won the “tax battle” with web firms having to actually pay retail sales tax.
Seventy-five percent of retail sales are purchased at stores within 15 miles of the consumer’s home.
If retailers offer a rapid delivery program for items bought online, at a low cost, with high speed and with uniformed drivers that are trained and recognizable, they can have their cake and eat it too. It is becoming evident that retailers need to participate with each other to most effectively compete with a buying volume advantage for delivery to outplay the newcomers.
I can envision a scenario where a consumer will order online at 6 PM on a Monday, have it picked from the store closest to the consumer and be delivered the next day to their home by a uniformed driver - all for something under $6. This is in effect a clever zone drop-ship program that takes advantage of underutilized distribution centers called stores.
Here is a scenario with co-opetition as the powerhouse:
1. Create a branded work force with a uniformed driver for every major mall to pick up, pack, label and drive the combined orders of all the retailers in the mall a few miles down the road to carriers
2. Reverse the logic for online ordering by matching the consumer’s ZIP Code to the closest store, rather than arbitrarily choosing the central distribution center
3. Use a single web based system to weigh, price and label to optimize service and cost
4. Offer a range of speeds from the carriers for specific delivery
5. Make it cost effective so retailers can offer a low nominal fee or free to consumers and still own the customer relationship for less than other options
6. Use the store to reach a continually broader range
7. Focus on the positive aspects:
a. Significant cost savings and increased speed
b. Marketing power of national retail brands and co-opetition advantages
c. Convenience to consumers and retailers
d. High level consistency with full tracking
e. The power of green to help the ecology
8. Malls could win the biggest because volume of store sales being increased by shipping, thus adding to their revenue percentage
A showdown that involves true heavy hitters like Amazon, eBay, FedEx, Google, Mega Malls, retailers, UPS, USPS and Walmart is very exciting.
My experience is better, faster and cheaper are always a winning formula.
Rob Shirley is CEO of ExpresShip, a strategic consultancy in the global supply chain; to contact him use email rsxpship@gmail.com or visit www.xpship.com.
Amazon has a mighty fulfillment infrastructure, however, if it doesn't have the inventory in one of its 50+ fulfillment centers closest to the buyer, there is often no way the “free second day” is cost free to Amazon unless it has an interest free loan from buyers like me paying for Amazon Prime.
What about everybody else who does not have this kind of marketing, inventory and fulfillment machine? The omni-channel retailers are scrambling because they are getting creamed by “showrooming.” Some reports have indicated up to 60% of consumers who “showroom” end up buying from Amazon.
The other Internet delivery services like Post Mates, Deliv, and Task Rabbit are scrambling too. This group is focused on delivery to consumers in big buying markets like San Fran and NYC, providing one-to-two hour service that includes anything from a sandwich to a 42-inch TV being picked up and delivered. Only a smart phone, a vehicle and a driver license to qualify.
eBay Now was part of this group until it recently announced an acquisition of Shutl and will cover the top 25 markets for same day delivery. Are branded retailers willing to give up a percentage of product value for this? Shutl acts as a marketplace for local courier companies
Google Shopping Express bought BufferBox to store packages for customers to pick up. Google is also offering delivery services in the Bay Area from retailers to consumers. Its program showcases an extensive selection of products available at stores.
Walmart revolutionized distribution while inventing itself for vendor delivery to its stores. Its Ship-from-Store concept has faster delivery than Amazon. Will a stand-alone system like this be the answer? Walmart Labs is working on their hi-tech solution in Silicon Valley.
With Amazon’s rapid expansion, they are offering home delivery on a same day and overnight delivery basis for everything from books to electronics to groceries. Texas, for example, will have three Amazon locations serving 60% of high end Texas buyers. Amazon is predicting 25% greater volume growth this peak season.
Meanwhile, ShopRunner just received $200m in funding from Alibaba, based in China. ShopRunner offers a cool website for consumers to choose a retailer (80 at last count) and automatically receive two day free delivery and free returns. The retailer pays the shipping, handling and of course a healthy fee to ShopRunner. Is this what branded retailers hoped to become? It is co-opetition, but does it optimize their brand and retail space?
FedEx and UPS are both doing extremely well and are never ones to sit on the sideline. They are so competitive that their rivalry has been compared to Coke and Pepsi. DHL was not able to weather the battle against them within the US. They may look like they are on the sidelines, but they will come out strong. Having a major brand, enormous network of air/ground, global reach, package/LTL/mail, powerful IT, very strong customer bases and enormous work forces are all powerful strengths. Recently reported volume estimates because of web orders are impressing the analysts with better recommendations for FDX stock. Both are forecasting early December as its peak day for the year because of CyberMonday on December 2. Previously, the peak days have been a few days before Christmas.
With residential delivery costing the carrier exponentially more than business delivery because of density, distance and volume, how can retailers compete in this increasingly competitive environment?
The retail empire has the best chance to strike back and leapfrog based on their own powerful brands, customer base and 150,000 fulfillment centers called stores. Some are becoming smarter as omni-channel players with store shopping, online orders from the web, catalogs and kiosks. Amazon and Internet players can’t offer this range of channels and never will - or they will have to become brick and mortar retailers too, thus raising their costs.
Retailers already understand co-opetition by the very nature of being adjacent to each other in malls. They have virtually won the “tax battle” with web firms having to actually pay retail sales tax.
Seventy-five percent of retail sales are purchased at stores within 15 miles of the consumer’s home.
If retailers offer a rapid delivery program for items bought online, at a low cost, with high speed and with uniformed drivers that are trained and recognizable, they can have their cake and eat it too. It is becoming evident that retailers need to participate with each other to most effectively compete with a buying volume advantage for delivery to outplay the newcomers.
I can envision a scenario where a consumer will order online at 6 PM on a Monday, have it picked from the store closest to the consumer and be delivered the next day to their home by a uniformed driver - all for something under $6. This is in effect a clever zone drop-ship program that takes advantage of underutilized distribution centers called stores.
Here is a scenario with co-opetition as the powerhouse:
1. Create a branded work force with a uniformed driver for every major mall to pick up, pack, label and drive the combined orders of all the retailers in the mall a few miles down the road to carriers
2. Reverse the logic for online ordering by matching the consumer’s ZIP Code to the closest store, rather than arbitrarily choosing the central distribution center
3. Use a single web based system to weigh, price and label to optimize service and cost
4. Offer a range of speeds from the carriers for specific delivery
5. Make it cost effective so retailers can offer a low nominal fee or free to consumers and still own the customer relationship for less than other options
6. Use the store to reach a continually broader range
7. Focus on the positive aspects:
a. Significant cost savings and increased speed
b. Marketing power of national retail brands and co-opetition advantages
c. Convenience to consumers and retailers
d. High level consistency with full tracking
e. The power of green to help the ecology
8. Malls could win the biggest because volume of store sales being increased by shipping, thus adding to their revenue percentage
A showdown that involves true heavy hitters like Amazon, eBay, FedEx, Google, Mega Malls, retailers, UPS, USPS and Walmart is very exciting.
My experience is better, faster and cheaper are always a winning formula.
Rob Shirley is CEO of ExpresShip, a strategic consultancy in the global supply chain; to contact him use email rsxpship@gmail.com or visit www.xpship.com.
