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


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. (David Paul Morris/Bloomberg)
November 22, 2013

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

For $5, eBay Now allows customers to get local goods delivered in “about an hour.” Wal-Mart, 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.

Although such services could upend the way consumers shop in the long term, analysts say that the nascent offerings are unlikely to make 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, and only 7.2 percent used the service once or twice.

Analysts said that consumer psyche is part of the reason: Most have decided they don’t need their items 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 also depends on the size of the potential customer base. And the services are available only in a few densely populated urban areas. Amazon, for example, offers same-day delivery in 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 that retailers with many brick-and-mortar stores and large inventories 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.

Although a relatively small share of shoppers are expected to use same-day delivery this holiday season, analysts say it will eventually gain 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 the service, and an additional 17 percent used it occasionally, compared with 4.2 percent and 7.2 percent, respectively, of 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 growth of 3.5 percent. Online sales, however, could increase as much as 15 percent, to $82 billion, according to the trade group.

Amazon.com founder and chief executive Jeffrey P. Bezos owns The Washington Post.

Sarah Halzack is a reporter and Web editor for Capital Business. She covers the local job market and the business of talent and hiring. Previously, she was a Web producer for the Post's daily business and economic news section. She occasionally writes for other sections at the Post, most frequently in the form of dance reviews, dance features, book reviews and obituaries.
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