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On-demand may not be future of online delivery

by Dan Berthiaume, Chain Store Age  /  An increasing number of retailers and third-party providers are offering delivery of online orders same-day or even within an hour.

However, not every shipping expert sees this model as where online delivery is headed. Two executives from Austin, Texas-based virtual shipping marketplace uShip – Matt Chasen, CEO and Dick Metzler, chief marketing officer – recently spoke with Chain Store Age about on-demand online delivery and how retailers can best satisfy the needs of omnichannel customers.

“On-demand is not a proven delivery service,” said Metzler. “It’s hard to see how you can work on demand, zig-zagging across a market for $5 per order. As venture capital money starts to dry up, it will become tougher and tougher to make that model work.”

uShip connects buyers and sellers of goods with shipment providers, on an auction or fixed-price basis. The company handles both business-to-business and business-to-consumer shipments, including deliveries of goods purchased on retail marketplaces such as eBay and Amazon Marketplace. Based on this experience, Metzler said certain factors are needed for retailers to have any chance of sustaining an on-demand delivery program.

“To make it work, you need route density,” said Metzler. “You can get more revenue per vehicle and more revenue per stop. Also, the larger the product you are delivering, the more revenue you can make per individual delivery.”

According to Chasen, there are possibilities for ride-sharing services such as Uber, which has been experimenting with on-demand delivery, to turn a profit.

“Uber could make on-demand deliveries incremental to its core passenger business,” said Chasen. “I haven’t studied it, but it could make sense. For others, it doesn’t.”

Chasen estimated the average price of a single on-demand delivery to the retailer to be between $20 and $30. While he and Metzler have doubts about the long-term viability of on-demand delivery for most retailers and third-party providers, they do have a clear vision for how retailers can meet the demands of customers who buy products digitally.

“Listen to the voice of the customer,” advised Chasen. “More than speed, they want free delivery. They don’t necessarily need same-day or even two-day delivery. They like the option if it’s inexpensive.”

Metzler added that retailers with a brick-and-mortar store network can generate revenue with online deliveries as soon as the day after the order, if they use their stores as local fulfillment centers.

“You can route orders to the store, pick and pack them and get them to the local consumer,” said Metzler. “The inventory input is not easy to do. It’s much more viable if it’s not the same day.”

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