Dec. 1 2014 01:18 PM

The developments and attention to the topic of Delivery has risen to a fever pitch over the last year. Spurred by ecommerce and the drive to provide customer convenience, nearly every player in the delivery industry is touting new services and new entrants are flooding in for their share of the market.

Same day delivery has been at the top of the list driven by US retailers responding to Amazon’s multi-billion dollar investment into rapid delivery infrastructure. Google has stepped in the fray with Google Express that sits between brick and mortar retailers offering customers a single shopping website and same day delivery. eBay Now is working with merchants to provide same day delivery through their acquisition Shutl. New entrants such as Deliv and Zipments are providing traditional brick and mortar retailers with the ability to deliver same day and even hour definite while allowing retailers to use their own websites protecting their brand and customer relationships. Amazon Fresh has pre-dawn delivery of groceries. The US Postal Service is also piloting same day delivery as are Uber, Lyft and Sidecar.

Traditional players UPS and FedEx, while dabbling with same day delivery, have focused on providing delivery on the recipients’ terms through My UPS and FedEx Delivery Manager respectively. This recognizes that although shippers make the carrier decision, it is ultimately the recipient who must be satisfied in an ecommerce consumer transaction. By effecting delivery when and where a recipient requests, UPS and FedEx are building loyalty with customers and in due course may drive carrier selection on the part of the ecommerce retailers.

Amazon has taken the lead in the U.S. with parcel lockers, offering a convenient repository for deliveries when delivery to home or office is not suitable. Parcel lockers have been quite successful in Europe with Keba developed DHL Deutsche Post’s PackStation being a standout example with over 2,700 units installed providing 230,000 delivery compartments. The US Postal Service has a trial, Go Post, currently underway. Perhaps the most novel delivery approach of late is the use of unmanned aerial vehicles (UAV) or drones as they are commonly called. Amazon wowed the public with their announcement of Amazon Prime Air last year, but in fact other companies are further ahead including DHL which is using UAVs to deliver medicine to Norddeich, Germany. However, due to regulatory issues, don’t expect UAV delivery anytime soon in the US but watch for developments internationally.

So where is Delivery heading? To gain insight in answering that question one needs to consider two important drivers; convenience and cost.
From the convenience perspective, consumers need their products delivered when and where they want them. Demand for same day delivery is really driven by circumstance. A forgotten birthday, critical medication, missing part all are circumstances in which same day or even same hour delivery is needed. In the short term, demand is being generated because delivery can be made the same day. As an alternative the growth of click and collect in place of actual delivery is becoming popular with retailers. 

The novelty and yes, convenience, of ordering groceries online this morning and having them delivered this afternoon is enticing. Yet would it not be more convenient to build your grocery order by having a running list of needed items that is compiled into shopping list by your refrigerator, smart phone app or other device in conjunction with merchants to be filled efficiently and delivered on time to your desired location. 

Consumers have yet to realize the real costs associated with the same day delivery models. Incremental charges currently being paid by consumers do not cover the costs to provide the service so merchants are subsidizing the costs in an effort to gain market share. So while same day delivery will certainly remain an offering into the future, focus will increasingly be on delivery meeting consumers’ real preferences at a price that can be both affordable for the consumer and profitable for merchant.

Last mile delivery costs can constitute up to ¾ of overall supply chain costs so delivery companies are heavily focused on implementing the most efficient processes possible. One of the keys to this efficiency is route density. This means increasing the number of items or orders per stop and increasing the number of stops per mile or hour.

This explains in part why Amazon is delivering groceries along with a wide variety of other items (more items per stop) as well as why they have employed parcel lockers ( more stops per mile or hour).

The US Postal Service has the densest routes in terms of stops per mile or hour and items per stop (albeit very low priced items). FedEx Smart Post and UPS SurePost certainly realize this advantage through their increasingly successful services that make use of USPS Parcel Select. Yet even with the increase in ecommerce parcel traffic growing at an annual rate of over 9%, USPS is looking at cost cutting measures such as eliminating “to door” delivery and implementing cluster boxes instead. While this certainly can improve efficiency, it does so at the expense of consumer convenience and erodes on the unique differentiators of USPS. Unfortunately, USPS faces legislative impediments in its quest to be the delivery solution of choice.

Clearly there is no one solution that serves all consumers so the future lies in a mix of alternative delivery solutions that suits both cost and convenience. Parcel lockers work well in terms of convenience and delivery cost in high density, urban residential settings but are less convenient in safe, suburban neighborhoods. 
We have yet to see much on the possibilities of unmanned (driverless) vehicles deployed as a delivery fleet. Imagine if the US Postal Service or other delivery company could dispatch UVs during late night and early morning hours, outside of peak traffic periods to make deliveries to purpose built residential delivery receptacles.

More likely than a fleet of drones departing warehouses with their orders is a surface base vehicle capable of replenishing and charging drones as they go about their low level delivery flight down a block…perhaps something that could be of interest to USPS who already has this stop density.
There are many more possibilities around the evolution of delivery. The coming year should prove quite interesting as we see what is new, what is gaining traction and what fails to meet expectations.

About Ursa Major Associates
Ursa Major Associates, LLC provides consulting services throughout the rapidly transforming global postal, parcel and logistics delivery ecosystem. Ursa Major Associates is the producer of PostalVision2020. The next conference , “PostalVision2020/5.0 – Customers-Connections-Collaboration” will be held in Washington, D.C on March 10 and 11, 2015. For more information go to:PostalVision2020/5.0