Stores test same-day delivery to compete with Amazon

Los Angeles TimesDecember 14, 2012 

Stephen Kling is a devoted Amazon.com shopper, but lately he's been lured back to big-box retailers, buying items from Target and Office Depot. The reason? He can get same-day delivery.

Using a smartphone app from eBay, the San Francisco corporate trainer can order products from a variety of bricks-and-mortar retailers and get the items hand-delivered to him that same day, often within an hour. Last month, he ordered a $250 Nexus 7 tablet computer, and it was delivered to him within 30 minutes – at his barbershop.

The eBay Now pilot project was launched in August, partnering with the likes of Macy's, Target and Best Buy. Basically, a customer orders an item on a smartphone and an eBay “valet” personally delivers by the end of the day for a $5 fee. (The first three deliveries are free.) The service was expanded to New York last month.

“It was awesome,” said Kling, 30. “I'm normally addicted to online shopping, but it literally took just 30 minutes from when I ordered the Nexus to when the concierge delivered it. I was still sitting in my barber chair.”

It's all part of an effort by bricks-and-mortar chains to keep up with Internet rivals such as Amazon.com. Retailers weary of constantly competing mostly on price are testing same-day delivery to woo impatient shoppers this holiday season, a time of year when immediate delivery can be particularly important.

“It's going to work in an urban area where stores are very clustered together and items can be delivered very fast,” said Brian Sozzi, chief equities analyst at research firm NBG Productions. “If I order something from my house, and the local Wal-Mart is 10 miles away, that's going to be challenging.”

Next week, the U.S. Postal Service begins an experiment in San Francisco. It's partnering with about 10 retailers, which have yet to be announced, to offer same-story delivery around the city, said spokesman John Friess.

Some companies, including several startups, are rushing to be middlemen between retailers and their shoppers.

Postmates, a San Francisco company founded last year, guarantees delivery within the hour from over 4,000 merchants throughout the city using 150 couriers armed with smartphones. The company hopes to expand to other cities soon.

“It works like a remote control for your city,” said Chief Executive Bastian Lehmann. “You press a button and under an hour the item that you so desire is in your hands.”

Wal-Mart this fall rolled out same-day delivery for popular holiday items, such as toys and sporting equipment, in four markets. Shoppers are required to order online by a certain cutoff time and then pick a time slot for delivery later that day for a $10 fee.

Ravi Jariwala, a Wal-Mart spokesman, said same-day delivery was a natural progression for Wal-Mart, which found through surveys that most of its shoppers would consider using same-day delivery. Many would use on at least a monthly basis.

“If you want to shop Wal-Mart and are in a pinch and need something right away, this is a great option,” he said. The goal is to win at e-commerce by creating “a deeper relationship with the customer,” he added.

That's something Amazon.com, which has won over many shoppers with its popular Prime two-day delivery program, is well aware of. It's been offering same-day delivery in select markets since 2009. To reduce shipping times, the e-commerce giant has been rapidly building distribution centers.

But Chief Financial Officer Tom Szkutak recently denied rumors that Amazon planned to offer the service on a wider scale. “We don't really see a way to do same-day delivery on a broad scale economically,” he said during a conference call.

That means struggling big-box retailers may really be able to stake a claim on super-fast delivery by using their bricks-and-mortar stores as warehouses conveniently located near shoppers, said Sozzi, the analyst.

“These stores have to have some shot of competing with the likes of Amazon, because they really can't compete on price,” he said. “So if they can find some way to get a TV to you literally on the same day you order it from your mobile phone while picking up your kids from school, that tosses the ball back to Amazon to pick up its game.”

Toys R Us so far has not tried its hand at same-day delivery. But Chief Executive Jerry Storch said the company is “absolutely” exploring how to offer the service and pointed to the chain's 850 locations as crucial to getting goods to shoppers fast.

“Our stores are everywhere, and that is what makes same-day delivery possible,” he said. “Same-day delivery will happen and it will happen to all major retailers, and it will happen primarily from stores.”

In San Francisco, eBay uses a stable of 50 “valets” on bikes and in cars to deliver items to a location of the customer's choosing from a variety of national retailers.

“They can bring the new sweater to you when you're in a park and you are suddenly cold, which has happened,” said eBay spokeswoman Lina Shustarovich. “There was a dad who realized he was supposed to pick up a costume for his kid after work, and instead he went to get a drink. So the costume came to the bar.”

She said that each market poses its own unique transportation problems. “San Francisco is hilly and big, so most valets drive cars. In New York, most are on bike and foot because the subway system is so comprehensive,” she said. “The method of delivery is completely different depending on the city.”

Chris Souza, a San Francisco marketing specialist, has used the service to get paper towels and laundry detergent without leaving his home. While “it was a really cool experience,” he said he'd have to think carefully before getting charged the $5 delivery fee.

“It's one of those nice-to-haves,” said Souza, 25. “I don't imagine using it every week. But if you're hosting a bunch of people and can't get out of the house to get something, it's worth it.”

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