Amazon, the leader of Domino rethinks free delivery

As much as the “one click, order and ship” exercise has become the norm and the biggest enabler of e-commerce, with packages magically arriving at your doorstep – in some cases just minutes after you order them – it’s also one of the biggest challenges in the industry. .

In addition to the increase in online transactions and the growing share of digital commerce in overall sales, a tight job market with higher wages are combining to push the current delivery system as we know it to the brink. chasm.

“Home delivery is unsustainable and is reaching a tipping point,” said Jason Tavaria, CEO of InPost UK. says the FT Tuesday (February 1) regarding the unprecedented stress, tension and rising costs that delivery teams in the “bring it to me” economy are facing around the world.

Amazon, for example, is said to have doubled the number of locker locations it uses there in the past year and now has more than 5,000 sites in use where UK consumers pick up their parcels rather than wait. they get home.

It’s an issue that’s forcing businesses that sell goods, as well as those that only deal in their delivery, to rethink the true cost of the last mile and the economics of delivering packages and food directly. at the customer’s doorstep.

More often than not, free shipping is a luxury service that’s increasingly hard to justify.

“Lockers help take pressure off delivery staff and that’s the way to go,” Tavaria said.

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As much as consumers know that “free shipping” isn’t actually free or even convenient, attempts to push the alternatives – which are on the rise – are met with stiff resistance and a vastly increased chance of losing sales to profit. from a rival who will ship “free”, in many cases, both ways.

As a result, innovation is on the rise and often involves companies outsourcing their delivery to consumers. For example, Domino’s Pizza announced on Monday (January 31) that it will “tip customers $3” if they pick up their orders rather than have them delivered.

Other solutions are also gaining ground, such as starting Via.Delivery, which uses cheap commercial freight rates and centralized claims centers, rather than door-to-door drop-off, to cut costs and ease some of the financial burden caused by merchant free shipping promises.

“The fact that commercial delivery – which we are trying to develop in the US – is typically 20-30% less expensive than traditional residential allows D2C brands to absorb these shipping costs in order to always offer a delivery option. free,” Via co-founder and CEO Mitchell Nikitin told PYMNTS last month.

Other time- and labor-saving solutions involve the use of drones and robots, as well as the increasing use of terms and conditions that limit the amount of items that can be returned for free. Minimum order sizes, whether for groceries, food, or merchandise, are also becoming more common with higher dollar limits.

And shippers themselves, including FedEx and UPS, are also changing the way they do business, with the former announcing a cloud technology partnership with Microsoft last month to use data to improve efficiency, and the latter signaling a Stronger-than-expected sales and profit growth on Tuesday (February 1) despite labor and supply chain headwinds.

“Productivity improvements have partially offset expense increases,” UPS Chief Financial Officer Brian Newman told investors and analysts during the company’s fourth-quarter earnings call, adding that the company’s army of more than 550,000 maroon-suited workers has enabled it to “leverage our weekend operations, package flow technology, and automated facilities to meet higher demand than expected at the start of the quarter.

In total, UPS profits rose 91% year over year, earning the Atlanta-based giant more than $3.9 billion for the last three months of last year, including a large part went to consumers in the form of “free shipping”.

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