Shutl CEO Tom Allason states that his company’s same-day delivery services generally cost less than $10 per item. Allason claims that deliveries within a 10-mile radius of a retailer’s brick-and-mortar location can be fulfilled between an hour to an hour-and-a-half. By comparison, Amazon’s next-day delivery service costs $3.99 for Prime members and $8.99 + $0.99 per item for non-Prime members. While AmazonFresh is an interesting niche business for Amazon.com, Inc. (NASDAQ:AMZN) to dabble in, it is not as revolutionary a step as Google Inc (NASDAQ:GOOG) Shopping Express, which seeks to build a whole new e-commerce ecosystem backed by major national tailers.
Wal-Mart
Retail giant Wal-Mart Stores, Inc. (NYSE:WMT) also has its own plans for same-day delivery. It recently introduced same–day delivery services in five markets across the United States, and has been testing same-day grocery deliveries for the past two years in San Jose, Calif.
Unlike Google and Amazon, which rely on other businesses’ brick-and-mortar operations, Wal-Mart has the strength of its 4,043 domestic stores spread across the country. That saturation allows it to deliver its products faster than other multichannel retailers. If Wal-Mart Stores, Inc. (NYSE:WMT) pushes its same-day services nationwide, then it could expand at a much faster rate than either Google Inc (NASDAQ:GOOG) or Amazon, since the fulfillment infrastructure has already been built.
Wal-Mart is eager to push back at Amazon.com, Inc. (NASDAQ:AMZN), which has steadily eroded its brick-and-mortar sales over the past decade. However, that push could come at a steep price, since the costs of same-day delivery might not be widely accepted by customers, which could force Wal-Mart to absorb the costs instead. Like Amazon, Wal-Mart charges $10 for same-day delivery, with no minimum purchase. Yet unlike Google or Amazon, Wal-Mart Stores, Inc. (NYSE:WMT) does not have partners to negotiate shipping deals with – there is only the unpleasant choice of absorbing those costs or passing them on to its customers.
To solve this dilemma, Wal-Mart Stores, Inc. (NYSE:WMT) has considered rolling out a crowdsourced delivery system to compensate in-store customers with discounts to aid with local deliveries. Although this is a creative idea, the idea of making customers accountable for other people’s purchases is a bizarre and risky one. There are major privacy issues, such as Wal-Mart giving out customers’ personal addresses to complete strangers, and security ones, where the participating customers might simply steal the items they were supposed to ship. While I doubt that this idea of crowdsourced delivery will ever become a reality, it highlights Wal-Mart’s desperation to find viable alternative shipping methods that can help preserve its margins.
The Foolish Bottom Line
Regardless of what the future holds for these same-day delivery initiatives from Google, Amazon.com, Inc. (NASDAQ:AMZN) and Wal-Mart Stores, Inc. (NYSE:WMT), one thing is certain: there is a market for instantly delivered goods across America. However, all three retailers would do well to remember the dire fate of online grocer Webvan, which went bankrupt in 2001 when it failed to balance the costs of same-day delivery with acceptable costs. Besides near-instant gratification, consumers have come to expect prices similar to brick-and-mortar retailers from online stores.
It will be interesting to see what experimenting with same-day deliveries can do for these three companies, which focus on very different businesses. Google Inc (NASDAQ:GOOG)’s primary business is display and search advertising, not e-commerce. Amazon is nothing but e-commerce. Meanwhile, less than 2% of Wal-Mart’s top line is generated by e-commerce, despite its recent efforts to boost its online presence.
In my opinion, if large retailers continue standing behind Google and help shoulder same-day shipping costs, then I believe that it has the upper hand. However, if Wal-Mart Stores, Inc. (NYSE:WMT) starts transforming more of its brick-and-mortar locations into online fulfillment centers, then it could seriously challenge Amazon.com, Inc. (NASDAQ:AMZN) by forcing the latter to invest more heavily in fulfillment centers.
Whatever the outcome, one thing is certain – consumers, who could soon be offered faster, more varied online shipping options will be the ultimate beneficiaries of this new battle between these three companies.
Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Google Inc (NASDAQ:GOOG). The Motley Fool owns shares of Amazon.com and Google.
The article Profiting in the Age of Instant Gratification originally appeared on Fool.com.
Leo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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