United States / Analyst Insights
The Cause and Effects of Same-day Delivery Services

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by Nick Masters, Lead Industry Research Analyst
Sep 04 2019

Trends in same-day delivery begin with the consumer and their preferences, which have gradually shifted to be more conducive to such services. From a broad perspective, consumers are becoming conditioned to expect instant, or at least more immediate, gratification due to the proliferation and democratization of connected mobile devices. This expectation is rooted in the highly-accessible digital media buffets that are Spotify and Netflix, as well as in the increasingly competitive delivery standards set by e-commerce titans like Amazon. While immediacy is already the norm for digital media, same-day delivery is expanding this desire from digital libraries to physical products.

Consumer trends and caveats

While the desire to get things faster is nothing new, consumers’ willingness to pay for quicker delivery times is finally intersecting with the commercial viability of doing so at an attractive price point. In a recent PwC survey, 41.0% of consumers said they would be willing to pay more for same-day delivery. However, this increased economic propensity for quicker delivery times is more than just a factor of the underlying desire for instant gratification and convenience, it’s also a factor of macroeconomic growth that has bolstered consumer spending. Over the past several years, rising employment and low inflation have caused per capita disposable income to increase, rising 2.2% in 2018 followed by another 2.2% expected jump in 2019. In turn, the average consumer is not only well-connected, given the accessibility of mobile internet connections, but now also has the means to justify paying more for same-day delivery.

While the trends affecting same-day delivery services are largely positive, their reliance on consumer preferences makes widespread adoption tenuous by nature. Today, same-day delivery is considered a luxury since cheaper next-day or often free three-to-five business day delivery options are widely available. Much like other luxury goods, demand for same-day delivery services is sensitive to consumer incomes and sentiment. In turn, industries currently investing in same-day delivery infrastructure must be prepared to weather short-term shifts in consumer sentiment.

Building the chain

With consumer demand for same-day delivery on the rise, the three main industry clusters capitalizing on this trend are e-commerce, traditional retailers and logistics providers.

On the retail end, Amazon, the progenitor of the trend, is the dominant retailer providing access to same-day delivery services across two fast-growing industries: e-commerce and online grocery sales. The company has established substantial market shares of 21.2% in the E-Commerce industry in the US (IBISWorld report 45411a) and 15.1% in the Online Grocery Sales industry (OD5085). The company is also gradually building out its supply chain to further expand its same-day delivery services to suburban markets. For example, in an effort to expand its operations in Ohio and build a presence closer to customers, Amazon purchased two defunct malls outside the highly populated city of Cleveland where it will build fulfillment centers. These sites are perfect for the company’s goals of being close to both consumers and major roadways, all while being spacious enough to store millions of products and autonomous sorting equipment. Amazon’s strategic placement of fulfilment centers is boosting its ability to offer same-day delivery services to underserved markets.

However, despite being the first, Amazon is now facing significant competition from traditional retailers that are incorporating a multichannel strategy consisting of traditional retail and e-commerce operations. The most notable US retail industries capitalizing on this trend are the Supermarkets & Grocery Stores (44511) and Department Stores (45211) industries, from which Wal-Mart, Target and Kroger are emerging as major players in same-day delivery offerings. Traditional retailers are leveraging their already established networks of brick-and-mortar stores to double as supply chain infrastructure supporting same-day delivery. As a result, traditional retailers are rolling out same-day delivery services faster than e-commerce giants largely because of their established physical presence, particularly in suburban markets. Traditional retail has already seen success in adopting this multichannel approach due to its unmatched reach in underserved markets.

For example, in their latest quarterly filings, both Target and Wal-Mart reported a surge in sales related to same-day delivery and in-store pickup. Over the coming years, retailers’ ability to offer a broader range of same-day options at increasingly accessible price points will prove a significant threat to e-commerce-based contenders.

Logistics and regulations

From a logistics perspective, the final delivery stage, also referred to as the “last-mile”, has become the key to streamlining same-day delivery services. This is due to the last mile traditionally being the costliest aspect of total delivery cost, as well as the most visible aspect of the delivery process. According to a recent survey by McKinsey, the last-mile regularly accounts for 50.0% or more of total delivery cost. Additionally, the last-mile is a key determinant of consumer satisfaction because it is the aspect of the delivery process consumers actually experience firsthand. This is particularly crucial for same-day delivery of perishable and age/identity-sensitive items (i.e. alcohol and pharmaceuticals).

In turn, these issues of cost and consistency are causing operators in the US Couriers & Local Delivery Services industry (49222) to embrace alternative delivery methods involving autonomous vehicles. The promise of autonomous delivery is a silver bullet that, theoretically, will significantly reduce the cost of last-mile logistics and thus make same-day delivery highly affordable. Autonomous ground vehicles (AGVs) are at the forefront of this trend, with AGVs already making deliveries in several test markets.

Last year, Kroger partnered with autonomous vehicle company Nuro to deliver groceries using AGVs. The company has since reported over 1,000 successful deliveries in the Scottsdale, AZ test market and expects to roll out additional services this year. AGVs are likely to represent the first wave of autonomous delivery vehicles given their increased practicality over aerial drones. Nevertheless, widespread adoption of autonomous delivery vehicles is still several years out, not necessarily due to the lack of technology, but to uncertainty surrounding the sound regulation of autonomous vehicles. Currently, only 29 states permit the use of autonomous vehicles on public roads. Overall, regulatory uncertainty represents the greatest headwind facing autonomous delivery vehicles and their use by logistics providers. 




Looking for additional commentary regarding package delivery and logistics trends? Tune into IBISWorld’s podcast episode covering Amazon’s influence on package delivery!





Edited by Kieran Newton
Infographic Design by Sean Egan