strategy+business Winter 2013 : Page 7

leading ideas leading ideas How long are customers willing to wait? Survey respondents indicat-ed that overnight delivery was only 5 percent less valuable to them than same-day delivery, and three-quar-ters agreed or strongly agreed that they would be more likely to pur-chase goods from a retailer that of-fered free next-day delivery than from one that did not. The survey also revealed that 60 percent of on-line shoppers place most of their or-ders after traditional working hours (5 p.m. or later). Only 4 percent of shoppers make their purchases by 9 a.m., and only another 14 percent do so by noon. Given these findings, the future may not bode well for several new, high-profile shipping offerings. They are either too expensive or too limited in their ability to accept orders after business hours—or both. For example, eBay Now’s ser-vice levies a $5 fee. AmazonFresh uses a subscription model, charging customers in Los Angeles $299 per year for “delivery by dinner” of or-ders placed by 10 a.m. Some tradi-tional retailers are also throwing their hats in the ring. For a fee of $15 per order, Nordstrom will de-liver goods to customers in La Jolla, Calif., Seattle, and Bellevue, Wash., by 7 p.m. if they are purchased by 1 p.m. that day. But these and other attempts at same-day delivery are likely to struggle to expand beyond their narrow geographies. Illustration by Edward McGowan sity in a single, planned dispatch minimizes the fuel, capital, and la-bor costs involved in a delivery. Tra-ditional low-cost delivery models achieve density in two ways: long line-haul moves (typically by trac-tor-trailer) that allow companies to use large depots to aggregate supply, and overnight sorting at local deliv-ery stations where incoming supply can gradually amass from multiple sources to fill delivery trucks. But both of these models tend to slow down delivery times. E-tailers continue to wrestle with this density problem, but tradi-tional retailers—particularly na-tional and regional retailers—have a secret weapon that’s hiding in plain sight: their retail storefronts, which they can use as mini distribution centers and sources of fulfillment for local online demand ( see Exhibit, page 8 ). For example, a national retailer with several outlets in the Chicago area might receive hundreds of on-line orders from local customers af-ter its warehouses are closed. But with the right systems in place, the company could identify which local retail stores that have those items in stock are still open. The company could then direct sales staff to select and package those items, and ar-range for a local carrier to pick them up from the store before the doors close. The packages would go from the store to the local delivery station that evening, and the next morning be loaded onto trucks in time for the carrier’s normal local ground-deliv-ery route. Even a smaller retailer without the necessary sales volume to justify a late-night, in-store carri-er pickup could make the same over-night guarantee if, for instance, an employee dropped off the packages at a local delivery station on his or her way home from work. 7 The Storefront Advantage The trick for traditional retailers is to understand their positional ad-vantage with regard to density (the number of packages being handled in a given geographic area). Free de-livery depends on low delivery costs, and low delivery costs depend on density. This is because greater den-

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