Is Same-Day Delivery Overblown?

Some logistics experts are skeptical that the expense is worth it for retailers in the long run

ENLARGE

Same-day delivery has retailers scrambling to get their products to customers faster. PHOTO: GETTY IMAGES/ISTOCK

By 

LORETTA CHAO

Updated April 29, 2015 6:44 p.m. ET

3 COMMENTS

NEW YORK—Do you REALLY want that product right away? Enough to pay a premium?

A growing number of same-day delivery offerings from U.S. retailers is sparking debate over whether consumer demand for speedy service is overblown.

Retailers are scrambling to get their products to customers faster, with same-day delivery offers from Wal-Mart Stores Inc. and a one-hour delivery option fromAmazon.com Inc. for $7.99. Macy’s Inc. offers same-day delivery through a service called Deliv Inc., which connects a network of drivers through a smartphone application similar to the popular ride-sharing app by Uber Technologies Inc.

WSJ LOGISTICS REPORT

WSJ’s new digital offering delves into the supply-chain issues at the heart of global commerce. Visit the site atWSJ.com/Logistics , and sign up for the newsletter.

• A Radical Idea: Own Your Supply Chain
• Internet of Things Reaches Into the Trucking Business
• Nepal Earthquake Response Challenges Logistics Experts

Some logistics experts are skeptical. Satish Jindel, president of SJ Consulting Group Inc., said same-day service is the most expensive type of delivery to provide, and something customers aren’t willing to pay for. “People don’t have a need for speed, they have a need for predictability,” said Mr. Jindel, who helped establish small-package carrier Roadway Package System, or RPS, which was acquired in 1998 by FedEx Corp.

A 2013 survey of online shoppers by researchercomScore Inc. showed 92% were willing to wait four or more days for free delivery. The shoppers said they choose the most economical shipping option three-quarters of the time and the fastest option only 1% of the time.

Rich Thompson, head of the supply-chain and logistics consultancy for Jones Lang LaSalle, agrees, saying research on offerings such as the 10:30 a.m. next day delivery guarantee from FedEx are ways to market and differentiate from competitors. But “same-day delivery is not a requirement by consumers…If you offer it, people will accept it,” he said. But while people do expect next-day or second-day delivery, same-day is just “a marketing differentiator.”

FedEx Corp. CEO Fred Smith weighed in recently on the buzz around same-day services, too, saying Uber, Lyft and similar services that can be used for same-day delivery areunlikely to become major players in the logistics business. FedEx itself offers same-day deliveries in more than 20 markets, but Mr. Smith said the bulk of e-commerce ordersrequires moving things long distances the following day rather than locally on the same day.

Still, retailers see a market for same-day service. Macy’s spokesman Jim Sluzewski said the department-store chain now offers same-day delivery in eight markets, with plans to expand to more cities this year, for $5 on orders that qualify for free shipping, and $14.95 on orders that don’t. Although customers may not have a need to receive their products immediately, “they like the certainty that the item is in hand and ready,” he said.

Sean Monahan, partner at A.T. Kearney Inc., said there are some “irrational” offers being made now as retailers are trying to grab market share. But eventually, third-party providers of same-day delivery services could become the norm because retailers will likely find that offering the services themselves is too costly to be scalable.

While same-day deliveries are a hot topic now, things eventually will settle and the service “will be a commodity,” he said. “Pricing will stabilize to a normal level”—one that doesn’t cost too much to offer—and such services will no longer be a differentiator.