USPS Delays Same-Day Trial
The U.S. Postal Service isn't starting same-day deliveries for retailers this week after all. The test of the service in San Francisco, dubbed Metro Post, was slated to start on Wednesday (Dec. 12) but has now been pushed back to next week to allow "time for participating retail partner(s) to come online with Metro Post," according to a USPS spokesman.
That's bad news, not just for this same-day test, but for the eight to ten chains that reportedly signed up for the trial who will lose days' worth of deliveries on the critical run-up to Christmas Eve.
Delaying a test for a week or even a month at any other time of the year is usually trivial. But this delivery trial was set to start less than two weeks before Christmas. The first week should have been a shakedown period, with the big push expected in the final days before the holiday. Now the first week will be the final days before the holiday.
The problem isn't that San Francisco will be short of options for retailers who want to try same-day delivery. Right now, eBay and Walmart are already running trials in SF—eBay uses hired-for-the-test couriers while Walmart uses its own trucks. Google is doing a much more limited test that's primarily just for employees. UPS and FedEx both offer same-day delivery in the city, and a U.K.-based company called Shutl will start deliveries in San Francisco and New York early next year, using existing same-day courier services. (Amazon also does same-day delivery in 10 other cities, but not in California).
Put simply, San Francisco is saturated with same-day opportunities. Not really a surprise: The fact that it's a densely populated, affluent and tech-heavy town makes it a best-case scenario.
But there's also a best-case time window for any test like this. December is when the big demand will be, and that's when retailers can determine profitability. If same-day delivery isn't worthwhile during the holiday buying season, it never will be.
That's the window that's closing on the USPS. And there's a hint of more trouble for the trial: The mail agency also plans to release "details about the first partner to sign on to offer Metro Post next week to coincide with the launch," said USPS spokesman John Friess.
Just the first partner? If there's only one retailer who was ready to jump on the service on Day 1, that could explain the delay—it wouldn't make any sense for the USPS to launch the service until someone is ready to use it. But it also brings up the chicken-and-egg nature of any big shift of this kind. Chains appear to feel the same way about same-day delivery that customers feel about mobile payments: They think it's a fine idea as long as somebody else goes first and tests it.
After all, if Amazon really has been doing this for years and hasn't made a big success of it, what's the point of a cash-strapped chain making a big investment to try it?
That thinking may be dangerously wrong-headed.That's nice safe thinking. It may also be dangerously wrong-headed in several ways.
One wrong-headed thought is the notion that Amazon's quick-delivery program hasn't been successful. We don't know if it has, but there's a very obvious reason Amazon might be taking its time with expansion: Unlike brick-and-mortar retailers, Amazon has to build a distribution center wherever it wants to deliver. That costs money and also exposes Amazon to sales-tax requirements.
There's only so fast that Amazon can build DCs, and only so fast that it can cut deals for tax relief in exchange for building those DCs. (That could explain why Amazon isn't doing same-day in California—it just did its tax deal there last year.) Meanwhile, Amazon has more same-day delivery experience than all other retailers combined—except for pizza places, of course.
Another troublesome misconception is the idea that testing same-day should require a big investment. It shouldn't. In fact, it's doubtful how much useful information eBay's same-day tests in SF and New York will generate, because the cost of the trial—hiring its own couriers, paying full price for the products it delivers, offering big discounts for the first few deliveries—will swamp any chance at profitability. The auction giant even admits that its trial is a loss-leader.
However, a brick-and-mortar retailer doesn't have to do those things. In fact, chains really shouldn't. Courier services already exist. Same-day delivery can be an option that only appears on an E-Commerce site depending on delivery Zip code. The hard part is working out the logistics. The prize is learning how much customers are willing to pay for quick delivery and, more important, how many customers will shell out extra for the service.
But the biggest bit of wrong-headedness in this "change is good, you go first" mindset about same-day is the idea that this is like any other tweak to retail. It's not. It's more like trying something different on Black Friday. You can't do that in July—it only makes sense on the day after Thanksgiving. (OK, as Black Friday marches toward Halloween, that's no longer quite true, but you know what we mean.)
Same-day delivery really is made for December. Any tests a chain doesn't make now will have to wait a year for the results that really matter. Any chain that's testing now could have a huge advantage that competitors will literally have to wait a year to catch up to.
And if it sounds like that's not a problem because the USPS may have only one still-unrevealed chain to start its trial next week, think about this: Walmart is already doing same-day on its own, and several other unnamed chains are doing Google's trial.
If you're not one of them, you're already a year behind.