Is same-day shipping dead on arrival?

          Laura Heller

Retailers are facing a future, a very near future, when shoppers expect to have everything, and receive it immediately. They will click and ship and use it that day. Or will they?

Increasingly it seems that same-day shipping will be dead on arrival.

Certainly Amazon.com (NASDAQ: AMZN) is advancing the initiative, expanding its same-day service to new markets. In January, Google (NASDAQ: GOOG) announced the expansion of its Shopping Express pilot to Southern California in addition to San Francisco. Walmart (NYSE: WMT) and eBay (NASDAQ: EBAY) are also getting into the same day delivery game and niche players such as Silicon Valley-based Deliv are raising funds to expand third party same-day delivery services.

But behind the scenes the conversations are quite different. "Shoppers don't want it," or more to the point, "shoppers won't pay for it."

Forrester Research's Sucharita Mulpuru believes that same-day shipping is not long for this world. Most shoppers say they won't pay more than $2 for the privilege, but costs to retailers run as much as $20. Booz & Co. found that nearly half of its survey respondents were unwilling to pay anything for delivery and just 10 percent said they would pay $10 or more for same-day delivery.

Unless you're Amazon, willing to subsidize delivery and able to lose money into perpetuity, same-day delivery isn't feasible.

Mulpuru believes that shipping is the Achilles heel of retail. Shoppers have come to expect free shipping and aren't going to settle for anything less. Meaning, they won't pay a premium for same day (or even next day in many cases). Reigning in traditional shipping costs will be a continuous struggle for retailers — just today FedEx announced it would raise freight rates by an average of 3.9 percent — absorbing the costs of same-day delivery will be almost impossible.

Sure, there are small corners of the marketplace where same-day could make sense. Niche markets and categories such as grocery delivery in dense urban areas, or luxury categories where shoppers see value in paying a premium. But for the rest, it likely will be dead on arrival. -Laura

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