Will same-day delivery shake up the holiday shopping season?

2013-11-24T00:00:00Z Will same-day delivery shake up the holiday shopping season?Sarah Halzack The Washington Post Arizona Daily Star
November 24, 2013 12:00 am  • 

With same-day delivery services, Internet retailers such as Walmart, eBay and Amazon.com are experimenting with ways to give online shoppers something close to instant gratification.

For a $5 fee, eBay Now allows customers to get local goods delivered in “about an hour.” Walmart, which is testing its same-day service in Northern Virginia and other areas, delivers items for up to $10 per purchase. And Amazon’s same-day deliveries cost as little as $3.99 per shipment.

But though such services could upend the way consumers shop over the long term, analysts say these nascent offerings are unlikely to make much of a dent in holiday shopping patterns this year.

“People just don’t really understand what it is and why they need it yet,” said Matt Nemer, a senior retail analyst at Wells Fargo Securities.

According to the National Retail Federation, only 4.2 percent of consumers used same-day delivery frequently during last year’s holiday shopping crush. Just 7.2 percent used such a service once or twice.

Analysts said consumers’ psyche is part of the reason: Most have decided they don’t need their goods right away.

“Same-day delivery is sort of more of a novelty item rather than a structural thing that’s going to make people buy more,” said Adrienne Tennant, a retail analyst at Janney Montgomery Scott.

The growth of same-day delivery services also depends on the size of the potential customer base. And right now, they are only available in a few densely populated urban areas. Amazon, for example, offers same-day delivery in just 11 metropolitan areas, while eBay Now is offered only in San Francisco, New York and Chicago.

“We haven’t hit enough cities with it and enough areas with it,” said Gene Alvarez, vice president and retail analyst at Gartner.

Although Web-only retailers have been early innovators of same-day delivery offerings, analysts said retailers with many brick-and-mortar stores that can supply the inventory for deliveries may benefit most from this model.

“Unless you’re a large brick-and-mortar retailer with a lot of locations, it’s tough to offer that and still make a good margin off that,” said Sean Whitehouse, a partner in the retail practice at consulting firm Kurt Salmon.

While a relatively small share of shoppers are expected to use same-day delivery this holiday season, analysts say it will eventually gain more traction as retailers expand and improve the experiences of those who use the service.

Also, millennials are more likely than other shoppers to use same-day delivery, according to the National Retail Federation. In 2012, 12.4 percent of consumers ages 18 to 34 used such a service, and another 17 percent used it occasionally, compared with 4.2 percent and 7.2 percent for all shoppers. Since this generation is just beginning to exercise its purchasing power, their interest in same-day delivery also suggests that demand could grow for the service over time, the trade group said.

Men are more likely than women to be regular users of same-day delivery during the holiday season, with 6.3 percent of men and 2.4 percent of women using the service last year, the trade group said.

The National Retail Federation forecasts that holiday sales will rise 3.9 percent to $602.1 billion, up from last year’s sales growth of 3.5 percent. Online sales, however, could increase as much as 15 percent to $82 billion, according to the trade group.

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