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E-business Watch
Tracking the
online media to bring you the key e-business trends
December
21, 1999
Delivering
the goods: Online retail's challenge
Amid
the exuberance surrounding online retail looms the challenge of how to move the goods from the warehouse through the doorway.
While ordering products online requires just a few clicks of the
mouse, getting the goods is a much greater challenge.
Several
recent surveys have highlighted online shoppers’ frustration with the
unpredictability, questionable reliability and high cost of delivery. A
recent survey by Ernst
& Young found that shipping costs are the number-one concern of
online shoppers, with 63% considering them to be too high.
Jupiter
Communications noted that most shoppers intend to limit their online
purchases to less than 10 percent of their holiday budget. According to Jupiter, consumers are reluctant to depend too
heavily on online retailers’ ability to fill their orders and deliver the
goods on time. “Consumers are risk averse to gambling with the success of
their holiday shopping," one Jupiter analyst told the National
Post.
Return
of the milkman?
In
response to the delivery puzzle, a new
crop of companies are rapidly developing alternative forms of delivery.
Some analysts suggest that these new delivery options mark a return to an
earlier era of home delivery. Mohanbir Sawhney argues in Business
2.0 that e-commerce is creating new demands for efficient home delivery
and leading to the “reinvention of the milkman. Among the examples of new delivery techniques:
- Online grocers Webvan
and Peapod are spending large
amounts of money to build entirely new delivery systems. Webvan, the
most ambitious
of these infrastructure builders, is planning to spend US$1 billion to
build 26 highly automated warehouses across the United States.
They expect to pay for the investment by becoming the deliverer
of choice for not only groceries but virtually all goods bought online.
- While people usually place their order from home, there is no
guarantee they will be there to receive it.
In hope that they can solve this problem, online grocer Streamline.com
installs a free refrigerator and shelving unit in its customers’
garages, as well as a keypad entry system so that they can deliver when
you are not home
- Need a present in a hurry? SameDayMall.com,
a recently launched company based in San Francisco and Los Angeles, uses
its fleet of vans to provide same-day delivery of gift-wrapped
presents.
- If same-day delivery isn’t fast enough,
Kozmo.com will bring
the convenience store to you. The service, which began in New York and
will be launched in 30 cities by the end of 2000, uses its fleet of
bicycle couriers to delivers products such as ice cream, videos and
chips. Kozmo’s CEO claims that in the last 12 months his company has
delivered 40,000 pints of Ben & Jerry’s ice cream in New York,
making them New York City’s largest retailer of the popular ice
cream.
- In an effort to gain an edge in the
highly competitive bookselling market, barnesandnoble.com
has quietly begun to test 24-hour delivery in the New York City area. This
experiment, if successful, could raise the delivery stakes among
booksellers and force companies such as Amazon.com to develop a similar
service.
The
road to profitability for these innovators, however, will be difficult.
The Wall Street Journal
cautions that there will likely only be a handful of winners in the
area of home-based delivery. They
will be the companies that build the most efficient network, execute
near-perfect quality service and ensure that delivery costs are kept under
control.
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