Guest Column | January 14, 2019

How Can Retail Executives Win The Same-Day Delivery Game?

By Andrew Chung, Innovo Property Group

Direct Store Delivery Deployment

Retail executives are struggling in a changing world, with consumers that want their goods faster than ever before. It’s possible to fulfill delivery promises if you get your strategy right.

According to courier service Dropoff, 74 percent of U.S. consumers said that after ordering same-day delivery, they would be more likely to purchase again from that retailer; and 47 percent of consumers said they’ve paid extra for faster delivery. It makes sense to offer same-day delivery to increase loyalty and sell more. But in congested urban areas, from New York to San Francisco, how can retail executives win the same-day delivery game? The answer is simple: be close to the urban consumer.

As consumers demand product in same-day time frames, physical product proximity to the end-consumer will be more important than ever before. It’s about a new era of modern warehouses that are located near customers, making the last mile—usually the most fallible portion of the delivery process—a lot more streamlined and profitable. For a winning last mile strategy, retail executives should keep the following three ideas in mind:

Position Your Inventory Close To The Consumer

When it comes to last mile, proximity is not measured in miles but rather time to reach the consumer. Rural warehouses may look close on a map, but retail executives should understand that traffic patterns and transportation to urban locations can have a major effect on a company’s ability to deliver. Customers who don’t get deliveries in the promised window can lose trust in the retailer.

Operate In A Modern Facility

According to a recent CBRE report Old Storage: Warehouse Modernization in Early Stages, U.S. warehouse inventory is too dated to meet the needs of today’s logistics tenants. Furthermore, almost 1 billion square-feet of the country’s warehouse inventory is over 50 years old and has ceiling heights of less than 20 feet, far less than today’s standards require.

Use The Most Up-To-Date Technology

Technology for logistics is exploding. From advancements in trucking capabilities like apps that allow shippers to book nearby vans and trucks, to warehouse technology, the urban warehouse is one of the fastest-advancing environments in the real estate world. Pairing the right property with the best technology available will ensure the lowest cost to serve.

Retail executives may maximize sales through taking considered action in a few areas. First, they need to leverage their presence with their stores and marketing campaigns to drive store traffic. In addition, they need to leverage their inventory in stores to provide same-day shipment, or a nearby urban warehouse to ship and deliver same-day or next-day to satisfy customer demand. For today’s consumer, getting it fast is half the purchase decision.

Picking a logistics property is a critical part of the puzzle for retail executives. In urban locations, one wants to be geared to service higher-income areas and follow through on promised delivery times, but this can be harder than it looks. For example, in New York City, Manhattan, Brooklyn and Queens are several locations that the typical New Jersey warehouse—which historically serviced these areas—cannot reach in two hours or deliver for a reasonable logistics cost on a same-day basis. This is due to traffic congestion and availability of local carriers. Retailers serious about delivering on a same-day or multi-hour basis should pick a solution in the city. Due to the higher throughput, with the right volume the retailer would make the most profit with the least headaches.

Location is extremely important when it comes to logistics, both from a cost and reliability standpoint. Being farther from the consumer means spending more transporting their goods, while also reducing the reliability of delivery estimates. Same-day delivery will be the norm by 2022-2023, so location will be critical to be able to compete effectively. Retail executives should have a plan that considers this new norm, and secure properties accordingly.

The future of retail will continue to evolve as the consumer is becoming increasingly mobile. There will always be a need for the retail store, but a continued shift toward e-commerce and rapid delivery will continue. Mobile orders and same-day delivery will be the norm in a few years. Urban warehouses will become a new staple in urban markets to meet same-day delivery requirements, in addition to providing easy returns and other benefits.

From food to consumer goods, customers want products immediately after they see them, and this mentality will only increase down the road. Armed with this knowledge, retail executives can win the same-day delivery game with preparation and selecting the right logistics solution.