News / Amazon and Target aim for expansion as same-day delivery demand returns

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The push for same-day deliveries, which had been largely halted by the pandemic and the ensuing surge in parcel volumes, is picking up momentum again with new drives by Amazon and Target.

Amazon is looking to build up steam with a same-day offering for local deliveries of online orders from retailers’ stores. The e-commerce giant has done some same-day deliveries from distribution and fulfilment centres, but this is the first foray into the store-to-consumer arena.

At this point the service is available in a dozen metropolitan areas in the US, including Atlanta, Chicago, Dallas, Miami, Las Vegas and Washington. When customers place orders with participating retailers and select the same-day delivery option, Amazon sends them to the respective stores for shipment preparation and picks up the goods for delivery.

The service is free to subscribers to Amazon’s Prime service for orders of $25 or more, with a charge of $2.99 for orders below that threshold. Consumers can also select to pick up the merchandise themselves from the stores at no charge.

Amazon’s new offering kicked off with 24 participating stores including Diesel and SuperDry. Naturally, the e-commerce behemoth is looking to boost that number.

“We are excited to see this new model come to life and look forward to adding more brands, stores and locations to the programme,” said Sarah Mathew, director of Amazon delivery experience.

John Haber, chief strategy officer of Transportation Insight, sees promising potential there. “That’s going to be massive growth for them,” he predicted. “It’s from a lower base, but it’s going to be huge.”

All retail stores of the participating retailers in the initial markets are located in shopping malls. This augments the chances that Amazon will have multiple shipments to collect from one location, providing better density of shipments, Mr Haber noted.

Target is looking to generate better density – and margins – for its same-day delivery scheme with the creation of more sorting centres. It is boosting its presence in this sector with the opening of three new facilities – two in the Chicago area and one in Denver. All three are scheduled to open before the end of the year. The addition of these three branches increases its footprint in sort centres by 50%, with altogether nine facilities in place before 2023.

“Setting up more sort centres is about improving service as well as achieving better margins,” remarked Rick Watson, founder and CEO of e-commerce strategy consulting firm RMW Commerce Consulting. “They improve route density and cost of last mile operations, and they take some of the pressure off stores – both in terms of operations and the inventory required to stock there,” he added.

“If you store is a distribution centre, your inventory there had better represent what people are buying online from you,” he further commented.

“There’s so much business from e-commerce, it makes sense to move some of it away from stores,” said Mr Haber. “Target’s ability to deliver from stores makes sense, but stores weren’t built to be mini fulfilment centres.”

The addition of sort centres is part of a broader investment strategy of the retail giant. In March Target management announced plans to spend $5bn in an overhaul of its logistics network. Major planks of this undertaking are the addition of four distribution centres, ten sort centres and 30 new retail locations, as well as the renovation of 200 stores to enable them to handle same-day fulfilment, pick-ups and returns.

For Target management, delivery both from sort centres and stores, is the way to go in order to provide omni-channel services.

“Our goal is to meet the guest where they are, when they want, how they want,” John Mulligan, Target’s chief operating officer, told US cable business news channel CNBC. “And so, if they do want us to ship something to their home, we want to make that as efficient as possible.”

The roll-out of omni-channel strategies includes same-day delivery options for some merchants, although many have found next-day service challenging to operate without taking a financial hit.

The pandemic has given these firms some respite, while the surge in e-commerce volume stretched network capacity. Amid signals that the market is slowing down, the pressure on capacity is weakening sufficiently for some players to resurrect same-day delivery plans.

“Surges in capacity are not a concern this holiday season,” Mr Watson observed. “Labour still is, but it may be less impactful than last year.”