E-commerce’s Next Frontier: Same-Day Service

One of the competitive advantages to bricks-and-mortar retail may be knocked down soon. The instant gratification of taking an item home immediately after purchasing it has been a big advantage to shopping bricks and mortar.

America’s e-commerce companies are experimenting with different methods of delivering same-day service, which would allow a consumer to order anything from toothpaste to a wedding dress in the morning and receive it by the afternoon—or, in some cases, less than an hour. While most e-commerce operations offer overnight and one-day delivery-service options, same-day service could potentially whittle hours off of their current delivery options and make their businesses even more attractive to consumers.

On Aug. 5, San Jose, Calif.–based eBay Inc. started a limited, invite-only test on a service called eBay Now in San Francisco. With the eBay Now mobile app, a consumer can order an item from one of eBay’s partner stores—such as Target Corp., Macy’s Inc. or Best Buy—and have the item delivered in an hour or less. The item will be carried by a delivery person called an eBay Now shopping valet. The valet will receive the order, pick up the item and deliver it. The consumer will pay for the item with a PayPal account or a PayPal Here device on the valet’s mobile phone, said Lina Shustarovich, an eBay spokesperson.

“eBay has always been about connecting buyers and sellers. eBay Now offers another way for them to connect. It also makes local shopping easier and more convenient than ever, which can help local retailers,” she said.

The current beta test will gauge consumer interest and help the company chart the future of the eBay Now experiment in local shopping,” Shustarovich added.

A Macy’s Inc. executive said during a recent conference call that the multi-channel department store will experiment with same-day service for its e-commerce. 

Seattle-based Amazon.com Inc. is said to be mounting its own same-day-service program. The e-commerce giant is building a number of sprawling warehouses. These warehouses could serve as the foundation for Amazon’s same-day service, which may launch next year—although the e-commerce giant declined to confirm or deny the program.“We do not comment on rumors or speculation,” Amazon representative Pia Arthur said.

But business analysts forecast that Amazon is building the fulfillment centers to launch a same-day-service program. Forrester Research analysts Sucharita Mulpuru and Brian K. Walker published “Why Amazon Matters More Than Ever” on July 26. They noted that same-day service represents an avenue of expansion for the company, which made $48 billion in net sales in 2011.

The new warehouses “will enable Amazon to promise same-day or next-day delivery to metro areas, making buying from Amazon even more convenient,” the Forrester authors noted.Amazon’s standard shipping for U.S. deliveries takes three to five business days. It offers other delivery options, which include one-day delivery.

Same-day service has long been a brass ring for the e-commerce market, and every e-commerce shop wants to offer the service, said Greg Selkoe, chief executive officer and founder of Karmaloop.com, a Boston-based streetwear e-commerce store that is forecast to make more than $200 million in revenue this year. If the goal is in sight, it will take a mighty effort to reach it.

“It’s expensive, and it’s a matter of scale,” Selkoe said.

For Karmaloop, offering same-day service will mean operating on Christmas retail-season footing year-round. November and December are the only times of the year when Karmaloop ships items 24 hours each day. For the other 10 months of the year, the streetwear store ships goods 11 a.m. to 7 p.m. daily.

For Amazon, its new warehouses will be located in places closer to urban centers than they have in the past. One is being constructed in San Bernardino, Calif., located 60 miles east of downtown Los Angeles. The facility, at 1910 E. Central Ave. in San Bernardino, is scheduled to be completed in October, according to vendors working with Amazon.

While there has been speculation on whether the giant warehouses will focus on groceries and household goods, some fashion-industry people recommend retailers to act quickly to protect themselves against this challenge from e-commerce.The 722 Figueroa fashion showroom in Los Angeles’ Chinatown neighborhood recently broadened its offerings from apparel, footwear and accessories to include audio gear, headphones, and cases for smartphones and tablets.

“Same-day service is a great leap forward for consumers. They don’t have to leave their homes,” said Willard Ford, a partner of the 722 Showroom. “It will force stores to become more relevant to their customers.”

Ford forecasts that physical stores will have to drop their past strict focus on particular clothing categories. Instead, they will be compelled to specialize on servicing lifestyles. Similar to American Rag and the Fred Segal compounds of stores, bricks-and-mortar retailers will become mini department stores, where they will offer every kind of product for a specific lifestyle niche. It could range from fishing enthusiasts to burgeoning Wall Street tycoons to hipsters living in neighborhoods such as downtown Los Angeles and San Francisco’s Mission District, he said.

But Fred Levine, co-owner of the Agoura Hills, Calif.–based M.Fredric chain of contemporary boutiques, said physical retailers have nothing to worry about from a same-day-service challenge. He admitted to being anxious for the future of physical retail when e-commerce debuted more than a decade ago.

But since then, he measured the limits and the strengths of both physical and online stores, especially since he opened his own e-commerce store (www.mfredric.com) in 2009. Same-day service could cut into sales of basic items, Levine said. But if a consumer wants the correct fit for their specific build or just something different from what everyone else is wearing, they’ll need to go to a physical store. “Shopping ‘live’ is an experience you can’t get online,” Levine said. “ Chatting with sales associates who know fashion and what’s flattering and socializing with fellow consumers is not something you’ll ever get online."