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This time it is for real

The idea is not new: twenty years ago, before the dotcom bubble spectacularly burst, a handful of internet companies tried to stand out by promising to deliver goods the same day. Back then, the plan failed. Speedy delivery was too expensive and start-ups lacked the infrastructure to stay true to their promises.

Today, same-day delivery is on top of the agenda again. While last year next-day delivery was a powerful and unique selling point, 2015 may very be the year that same day delivery will become the new benchmark.

All the major players in e-commerce work hard on solving the “problem of the last mile”: how to deliver goods all the way from the warehouse to the customer in a matter of hours.

With the heavyweights of e-commerce leading the way and pushing hard to reduce delivery time, other companies face the challenge of having to keep track. While not every competitor has the economic muscle to deploy an army of remote controlled delivery-drones, there are ways to optimize the sales process and shorten the delivery time.

The most logical place to start streamlining the delivery process is in the warehouse itself.

Consumers – expectation vs. behavior

The consumer can be a strange beast! This becomes obvious when we look at customers’ expressed expectations and their actual shopping behavior. When asked, buyers usually state that they want the fastest delivery option that is available: Up to 40% would consider same day delivery, with 25% even stating that they would shop other places when a same-day option was not available. HOWEVER: Statistics show that only 2% actually do choose same-day delivery in areas where it is available. This behavior is further confirmed by surveys showing that the vast majority of customers (more than 90%) are willing to wait up to four days for the delivery of an online purchase.

Obviously, not all companies can cover the last mile and provide a full from-warehouse-to-door service. Nevertheless, all companies are subject to customer demand and competition and thus need to offer speedy delivery options. More often than not, it is the warehouse where efficiency is gained or lost.

Not all goods are delivered equal

There are no two ways about it: E-commerce is here to stay and it is the future. Far from being a niche market everything from flowers to cars can be – and is being – bought online. But customers have different expectations for different products when shopping online. Especially when it comes to delivery time.

Willingness to pay (WTP) for same-day delivery varies widely between products. Not surprisingly, the price customers are willing to pay is almost directly correlated to the size (not necessarily the price!) of the product. Almost 60% of the buyers are willing to pay $10 or more for one-day delivery of furniture, while on the other hand of the spectrum 75% customers deem $5 or less to be a reasonable price for same-day delivery of a book.

Since the WTP decreases with product size, companies offering fast moving goods are in a dilemma: customers will come to expect one-day delivery while the amount that the seller can ask for this service, may well be below the actual shipping expenses. A low cost per pick ratio can help sellers to provide an economically viable solution.

There’s a lot of money to make

1 billion dollars are waiting to be earned. That is the amount of money that US customers will likely spend on shipping alone by 2018. This amount does not even take into consideration the shipping fees generated by slower delivery methods. With growth rates in triple-digits this market definitely warrants some planning and well thought out investment in new and more efficient delivery methods.

Those companies that can offer same-day delivery for relevant products have a good chance of securing a large slice of the business.

The prerequisite is of course a warehouse system that allows a speedy delivery at low cost and without creating a large logistical overhead. The perfect system will not only pick items and prepare them for shipping, it will also allow the operator to add goods to the system easily.

A chance for the underdog?

For the near future, same-day delivery will be restricted to big cities and urban centers. This might prove to be a considerable advantage for the smaller players in the e-commerce game. While the biggest competitors operate with giant warehouses – more often than not located in the countryside far from the major centers – small retailers have the chance to offer speedy delivery for a local customer base.

Obviously, the speediest delivery system can only be as good as the warehouse in the background. But fortunately, same day delivery does not necessarily depend on multi-million dollar hardware and enormous investments in logistics. A small but smart storage system can easily outperform the warehouse juggernauts and provide a competitive edge to online shops of all shapes and sizes.

The perfect warehouse system will plan ahead. By constantly rearranging the goods in the storage area, it will make sure that often demanded items always have the shortest picking time.

AutoStore – built for speed and flexibility

When it comes to tomorrow’s demands on warehouses, it will not only be size that is the deciding factor. Speed, flexibility, and even location will come to play a more important role.

While same-day delivery may never become an option for every product or every single customer, short delivery times can help local shops to win back business from the major players.

AutoStore is the tool that helps speed up the delivery process and reduce logistics costs. It does much more than simply pick goods and deliver them to the shipping area: AutoStore thinks ahead.

Since picking-speed is only one side of the equation, AutoStore also actively optimizes the storage area for efficiency. Using statistics and up-to date analysis of the flow of goods AutoStore automatically shuffles products inside the storage area in order to provide the fastest possible handling.

The system in flexible enough to take consideration to seasonal sales, special offers, or spikes in product demand. A powerful software in the background makes sure that the required products are available fast enough to satisfy the customers’ demand for same-day delivery.

But AutoStore is not only flexible considering goods handling, it is also easy to install in most existing locations. This becomes an increasingly interesting feature because it allows sellers to run multiple warehouses in strategic (inner-city) locations further reducing the delivery time.

 

AutoStore e-commerce features in a nutshell

 

  • Proactive warehouse optimization
  • installs in most existing warehouse locations
  • Lowest cost per pick ratio
  • Simultaneous goods in / goods out
  • Optimized for fast turnover
  • Scalable to accommodate future changes
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