Fear of Amazon Pushes Stores to Offer Same-Day Shipping

This holiday season, same-day shipping has replaced free shipping as the new must-have promotion. It’s logistically complicated and money-losing — and may not even be a service that consumers want or need, analysts say. But retailers from Walmart to small shops like Shoptiques are willing to take the risk. Even the Postal Service has introduced a same-day option for retailers. And the reason is simple: fear of Amazon.com.

Amazon, the world’s biggest online retailer, has hinted that it will expand its same-day shipping service, giving customers the immediate gratification that has been the biggest advantage of brick-and-mortar stores.

For small outfits like Shoptiques, it is not an easy proposition. The courier who showed up at Ms. Wu’s office was the company’s head of boutique operations, who has put aside her regular job this holiday season to make deliveries by hand. Bigger retailers, like Toys “R” Us, Macy’s and Target, have worked with eBay to deliver items the same day, as have other old-line stores. Google has begun testing a local delivery service with several chains.

“There’s lots going on in this space, and it’s all driven by Amazon,” said Tom Allason, founder and chief executive of Shutl, a British same-day delivery service that will expand to the United States next year. “It’s not really being driven by consumers at the moment.”

The same-day delivery idea was a spectacular failure during the dot.com boom. Companies like Kozmo.com and Webvan went under because the services simply cost too much to be profitable. Amazon has offered same-day shipping since 2009, but with limits — only in big cities near Amazon warehouses on certain items ordered in the morning.

The geographical limits exist because Amazon had built warehouses far from major cities to avoid charging sales tax in certain states. But it has now given in on the sales tax fight, and in return, is erecting warehouses near cities like San Francisco, which analysts say is paving the way for faster, more widespread same-day delivery and spurring competitors.

“It’s the old idiom, ‘time is money,’ ” said Lina Shustarovich, an eBay spokeswoman. “How much time are you saving by not going to the store? People want it now, they want it fast.”

Walmart, which is the nation’s biggest retailer but sells just a fraction of what Amazon does online, is testing same-day shipping during the holiday season in five markets. Generally, it gives shoppers a four-hour delivery window and charges $10 for same- or next-day delivery. The idea is “to give customers convenience, by way of combining our online shopping with the local presence of stores,” said Amy Lester, a Walmart spokeswoman for global commerce.

But, Ms. Lester said, the test is showing that consumers often pick next-day delivery rather than same day. She declined to give a specific figure for same-day orders, but said thousands of same- and next-day orders had been placed.

Net-a-Porter, the designer apparel e-commerce site, said its same-day service is quite popular. Its $25 delivery service in the London and New York areas pays for itself, said Alison Loehnis, its managing director. But its clients are accustomed to paying for concierge service, like the customer who ordered clothing to be delivered the same day to her private jet before a vacation.

With the eBay Now iPhone app, introduced this year in San Francisco and New York, customers choose items from physical stores and eBay sends a courier to the store to pick it up and drop it off — at an apartment, office, coffee shop or bar — for a $5 fee.

EBay declined to say whether it loses money on the orders, but analysts who study logistics say it is not profitable.

“The goal with this pilot was never to monetize,” Ms. Shustarovich said. But in the future, it could make money, she said, for example if retailers pay eBay a fee for bringing them customers.

The Postal Service is testing a same-day service in San Francisco that is meant to offset its declining carrier business, a spokesman said. Consumers can order items until 2 p.m. from 1-800-Flowers.com, the first retailer offering the service, and a Postal Service employee will pick up the package and deliver it between 4 and 8 p.m.

Smaller companies are trying different approaches.

TaskRabbit, which offers à la carte personal assistant services, noticed last summer that delivering items from local stores was the most popular task requested.

Now, it charges $10 for delivery from local stores, starting in San Francisco.

This article has been revised to reflect the following correction:

Correction: December 27, 2012

A photo caption with an earlier version of this post misspelled the given name of an employee of Shoptiques.com who was making a same-day delivery. She is Arianna Simpson, not Arriana.

Bits Blog: Google Is Testing Same-Day Delivery for Shoppers

Google is now in the same-day delivery business. In San Francisco, some people affiliated with Google can buy a product, using their phones or computers, and have it delivered to their homes in a matter of hours.

Plans for the new service have been under way for more than a year. But it recently went live for some Google employees and their friends, according to two people briefed on the service who were not authorized to discuss it because Google has not yet publicly introduced it. At least one national apparel chain is involved, one of these people said. A Google spokesman, Nate Tyler, declined to comment.

Google is just one company tackling same-day delivery. So are Wal-Mart Stores, Amazon.com, eBay and the United States Postal Service.

Though the service propels Google into commerce, the company does not intend to operate warehouses or a shipping service but to team up with retailers and delivery companies. Several San Francisco retailers, including national chains, are participating in the program already.

For shoppers, the service means they can avoid the trouble of driving to the store and some of the wait for items ordered online.

Same-day delivery could help physical retailers, which have been under siege from e-commerce companies that offer the convenience of shopping without leaving home. But online retailers offering same-day delivery could make life even harder for physical retailers, because letting people own something the same day has become physical retailers’ biggest remaining advantage.

The reasons that Google is interested in same-day delivery are less obvious.

Retail ads are a huge portion of Google’s business, but they are under threat from companies like Amazon, where shoppers increasingly go to search for products, bypassing Google. Also responding to the threat from Amazon, Google recently tried to improve its comparison shopping service by charging retailers to list their products there. It says retailers are more likely to list accurate and up-to-date items if they are paying.

Additionally, Google has been trying to bridge the gap between the digital and physical worlds to better understand and profit from mobile ads. On computers, Google and advertisers know if a user clicks on an ad and visits or buys on another Web site. But they lose track of customers who look up a business or product on their phone and then put their phone away, walk into the store and buy something. Online ordering and delivery could help solve that problem.

Wal-Mart Tests Same-Day Delivery

Wal-Mart said Tuesday it had begun testing same-day delivery for online purchases in a handful of cities across the country.

The near-instant delivery is possible because the merchandise is being shipped from Walmart stores.

The first retailer to master same-day delivery on a wide scale could attract customers who have avoided online purchases because they wanted items immediately, and encourage current shoppers to add products that they usually buy from supermarkets or drugstores, including celery and toothpaste.

But some retail analysts are questioning whether the expense and difficulty of same-day delivery would be worth it.

Amazon is the world’s largest online retailer, and in an interview last month, Jeff Bezos, its chief executive, said that the company was striving for same-day delivery in metropolitan areas. Its Web site says same-day delivery is available in limited cases. Mr. Bezos said Amazon would soon be able to cut as much as a day off its shipping times, raising the possibility of same-day delivery in cities where it has distribution centers.

If Wal-Mart expanded its same-day shipping across the country, it could essentially transform the more than 4,000 Walmarts, along with Sam’s Club and other divisions, into distribution centers. Amazon, by contrast, had fewer than 40 distribution centers in the United States at the end of last year and has plans to add about 20 worldwide this year.

“Everybody in retail is terrified of Amazon, and they’re terrified of losing more wallet share to Amazon,” said Sucharita Mulpuru, an analyst with Forrester Research. The Wal-Mart move is “to try to get ahead of the curve if Amazon does introduce something like this.”

Wal-Mart and Amazon once operated in separate spheres — Wal-Mart’s offline, Amazon’s online. And Amazon’s sales, at $48 billion in 2011, are more than a tenth of Wal-Mart’s, which were $419 billion in 2011. But increasingly, they are competing for the same customer and the same turf.

For instance, in a move that probably hurt Wal-Mart, Amazon last year offered customers a discount on items they scanned in physical stores, letting it pluck shoppers as they strolled the aisles of stores like Walmart. And its subscription Prime service, offering free two-day delivery on many items, has gotten customers buying staples like toilet paper from it rather than from nearby groceries and Walmarts.

Wal-Mart, meanwhile, has been building up its e-commerce site as it tries to do things that Amazon cannot, such as allowing customers to pay for online purchases with cash. “Connecting our Web site to our stores gives us a unique advantage, so customers can shop anytime, anywhere,” said Amy Lester, a Wal-Mart spokeswoman.

Both retailers have the same goal: to be the general store where customers will buy apparel, food, home décor and just about everything else, no matter how they want to order and receive the goods.

Yet same-day delivery may not make financial sense, Ms. Mulpuru said. “If you don’t care about losing a lot of money, sure, you can pull this off,” she said. “The question is: Can you pull this off profitably? I’m not convinced.”

She pointed to retailers that already offer same-day delivery in some areas, like Barnes & Noble, and said that the service had not been a game-changer. People who live in dense urban areas and who do not have cars might find same-day delivery useful, but for those in suburban or rural areas a short drive to a Walmart is easier than waiting for a delivery, she said.

Physical retailers have been trying to figure out how to turn their stores into competitive advantages. With staff, inventory and real estate, stores have many costs that online retailers do not have. Wal-Mart and a few others have started using the stores to offer services to online shoppers, including shipping items (but not same-day), free returns, ordering online and picking up in a store and payment centers. However, few offline retailers offer same-day delivery. They rarely have enough locations to make it feasible, and there are logistical hurdles.

The Wal-Mart tests, the first of which started last week in the Washington suburbs, let customers order toys and other popular gifts, and have them delivered to their homes the same day. Ms. Lester, the Wal-Mart spokeswoman, said the company chose which items to include based on what was popular in its order-online, pick-up-in-store service. The same-day service costs $10, with no minimum purchase.

Wal-Mart has been testing same-day grocery delivery for more than two years in San Jose, Calif., and now offers it in San Francisco, too. But this is the first time it is trying to ship general merchandise within a day.

To receive goods on the same day, consumers must place an order before noon, and select a four-hour window when they want the items delivered. United Parcel Service is handling deliveries. The current test includes toys, sports equipment, home décor and electronics — all popular holiday items.

Amazon has offered limited items, in limited areas, for same-day delivery since 2009, its Web site says. Its Prime service, which costs $79 a year, is popular. “Prime members buy at a faster rate in all categories,” Mr. Bezos said this year. “One of the big advantages of Amazon for consumers is that they can get one box with a lot of things in it from different categories.”

The Wal-Mart program is already running in Northern Virginia and Philadelphia. It was introduced Tuesday in Minneapolis, and the San Jose and San Francisco areas that are already part of the grocery test will join the toys-and-gifts test this fall.

“This is definitely a holiday test, but we don’t have an end date at this point,” Ms. Lester said. An Amazon spokesman declined to comment.