COUNTERING AMAZON IN THE FACE OF NEXT-DAY SHIPPING By Jack McCrum
n April 26, Amazon once again ignited a global conversation when it announced its strategic decision to offer free nextday shipping for Prime members. The announcement left many shippers in the e-commerce space with a challenging question: “How should my organization respond?” Several shippers, such as Walmart and Target, responded immediately with similar announcements of their own. Still, many leaders across the globe continue to grapple with identifying an appropriate, cost-effective response.
8 PARCELindustry.com JULY-AUGUST 2019
Finding the correct answer often depends on honest self-assessment and the careful consideration of two questions: } Is the achievement of oneor two-day delivery times worth the investment? } What other options are available for my distribution network? Consumer experience is undeniably critical, especially when related to time-in-transit expectations. Amazon has offered Prime members free two-day shipping since 2005, and the subsequent popularity of the service quickly made two-day shipping an industry-wide benchmark. The potential popularity of oneday shipping therefore merits the close attention of both shippers and consumers alike. It is a milestone Amazon and other shippers will continue to push and improve on. However, it also represents an associated cost that demands additional mindfulness. Amazon finance chief Brian Olsavsky announced the one-day, enterprise upgrade will include $800 million in infrastructure investments in the first quarter. Achieving one-day shipping will likely require additional expenditures from the organization. Similarly, when Walmart announced its decision to rollout a competitive one-day shipping program, analysts from the UBS investment bank estimated $215 million in incremental investment.
Though Walmart disputes the assessment, both figures indicate one-day shipping will require some degree of capital investment to fully reap the potential benefits. For certain shippers, particularly organizations with well-established distribution networks and balanced inventory levels, investing in one-day shipping might prove valuable. The opportunity associated with one-day shipping certainly exists, notably, with improved customer satisfaction. However, few enterprises command the financial and operational resources of an Amazon, Walmart, or Target. Many will find the necessary investment either cost- or operationally prohibitive. For leaders in this position, it is important to consider the available alternatives that enable e-commerce competition without breaking the bank. Consider the Value of On-Time Delivery Is it worth striving for a one- or two-day commitment without consistency? The answer depends on understanding the targeted market. For some industries, focusing efforts on meeting on-time delivery promises can yield a greater net value than occasionally hitting a one- or two-day target. This strategy directly relates to a full understanding of benefits associated with one-day shipping, and what consumers value.
PARCEL July/August 2019