Game 7 of the World Series was a few hours away when Fanatics tech chief Matt Madrigal met me in the Manhattan office of his sports-gear company. His voice was filled with excitement as he talked about an expected surge in customer sales that late October day after the new champion won — he just wasn’t yet sure which team it would be.
“It is truly the most unpredictable business,” he said about selling sports apparel, mentioning how players can reach celebrity status in seconds thanks to one clutch play. And fans aren’t patient about wanting this new stuff. “You want it now,” Madrigal added.
Madrigal’s job of fulfilling digital shoppers’ demands will get tougher this holiday season, with the two biggest names in retail, Amazon and Walmart, both diving headlong into one-day online delivery. Walmart’s service is free for orders over $35 and Amazon’s comes at no additional costs for its Prime members, who pay $119 annually.
I interviewed five e-commerce executives, including Madrigal, about this trend to next-day shipping and how it’ll impact their holiday sales. Most acknowledged it’ll make things harder for them, since their customers may come to expect such speedy deliveries. At the same time, they outlined several strategies they hope will help them survive against the two juggernauts of shopping and keep us shoppers coming back, even if we have to wait a little longer to get our stuff.
One-day shipping, by the way, isn’t something smaller players can easily replicate, since it typically requires a whole lot of well-stocked warehouses placed strategically across the country to pull off these fast shipping times. Fanatics operates 10 warehouses in the US, and the other execs I talked to run one to three warehouses, compared with Amazon’s network of over 400 US delivery locations.
“We’re never going to be able to compete with Amazon [logistics], so we’re not trying to compete with them directly in a shipping-time war,” said Richard Greiner, co-founder and co-CEO of Huckberry, which sells men’s clothing, boots and camping gear.
If these companies don’t find ways to stand out against Walmart and Amazon, they risk going the way of RadioShack and Toys R Us, joining a long list of companies that couldn’t cut it in the brutal world of retail. That outcome could hurt customers, since they’d have fewer shopping options and less selection. With the biggest players facing less competition, they could even push prices higher.
It also may not be environmentally conscious to ship you a $2.42 box of tea so quickly. Amazon, however, says one-day shipping is actually more environmentally friendly than other options because it requires the company to store more inventory closer to customers, instead of hauling items in from faraway warehouses.
Plus, it’s likely a bad look for Amazon to use faster shipping times to nab more of its rivals’ sales, since it’s already under antitrust investigations from Congress and regulators.
Still, the benefits of next-day shipping are obvious: You get your stuff faster, and that pressures other retailers to keep up. Amazon forced the rest of retail to respond after it introduced Prime two-day shipping in 2005. The program was so successful and copied so much by rivals that Amazon moved to one-day shipping to stay ahead of the crowd. A standard of same-day shipping, then 30-minute drone deliveries, could be next.
Amazon has already seen signs that one-day delivery is a winner with customers, with increased demand pushing Amazon’s quarterly sales growth to its highest level in a year.
“The long-term benefits that they stand to gain are substantial,” Gartner analyst Oweise Khazi said about Amazon and Walmart……Read More>>