AND THE RACE GOES ON

As the so-called omnichannel trend swiftly marches on, an increasing number of retailers are trying to position themselves to compete in the last—mile delivery race. Most are quite competent in traditional delivery methods, but are finding themselves noncompetitive in the rapid delivery of items purchased through the internet. So far, Amazon seems to be the “American Pharaoh” in the same day delivery competition. With 100 plus distribution centers, they are well equipped to make same day deliveries in a number of markets. Not to be outdone however, another leader in supply chain innovation, Walmart, is moving toward the use of it 4500 store network for delivery of on-line purchases. With such a widespread array of stores they will be well positioned to compete in a number of markets. Although space constraints could be a problem in some of them, already they are using about 80 stores for this purpose. Also, they are opening new dedicated fulfillment centers and retrofitting other conventional distribution centers to handle more on-line shipping. I believe these two behemoths will continue to try to outdo each other in the race toward internet customers. Amazon will be a formidable competitor at least for the next few years, but Walmart should not be counted out. Even American Pharaoh lost last weekend.

Shipping costs will be an issue for both firms. Amazon’s Prime program offers free shipping for two day delivery of most items for $99 annually, and Walmart has a pilot program underway that offers free shipping within three days for $50 per year. Wherever these programs finally end up, shipping will not be inexpensive.

One would think that these two giant competitors would discourage further entry into the race, but enter Jet.com. Jet.com will charge $50 annually for access to an on-line marketplace that will offer reduced prices on all the items it sells – they claim 10-15% lower than anyone else. The company plans to derive its profit from the fees.

Delivery will be free for orders of $35 or more, and smaller orders will incur a charge of $5.99. Most products will arrive in 3 to 5 days, although some will arrive in two.

Clearly, this is a different approach than that of either Amazon or Walmart, and the consumers will no doubt set the tone for this particular race. Which do you prefer? Cheaper products or faster delivery? That could depend on a number of things, i. e. price, the necessity of the product, the circumstances under which it is ordered, etc. If the truth be told, probably few of us really need same day delivery, and it will be interesting to see if we are willing to pay the price when other options are available.

Written By: Clifford F. Lynch