During a recent executive Q&A session, Jim Tompkins was asked a lot of questions regarding delivery strategies. Many were interested in the reality of one-day delivery. Amazon is disrupting themselves with one-day delivery. One-day delivery is important in some cases but not all. Amazon already has one-day delivery in most major markets. Tompkins does not believe 3rd tier markets will receive one-day delivery for some time, nor will they expect it. Rather, the next stop on time of delivery will be same-day delivery where density will allow, such as major markets.
Others such as Walmart, The Home Depot, and Target have a different model than Amazon. They will leverage their store infrastructure for buy online pick up in store (BOPIS). These retail giants are well positioned for the change to one-day delivery, and Tompkins believes they will activate their plans to do so. Walmart was the first to follow suit, announcing it will offer free one-day delivery for 75 percent of the U.S. by the end of the year.
Amazon’s performance is very good for two-day delivery. The recent shifts in Amazon’s model are interesting, including their elimination of price fixing, where they have stopped demanding that vendors give them the lowest price; their change from 1P to 3P for many brands, which has created major disruptions; and also not allowing any new Seller Fulfilled Prime accounts.
Tompkins strongly believes food is the next big thing, the ‘New Oil’. While most people still want to go to the store for fresh and frozen food, the outer ring of the grocery store, Tompkins believes the bigger story pertaining to food will be delivery flexibility, determining when and where customers want something to be delivered. Some of his thoughts included delivery to lockers, neighborhood hubs, local stores, and train stations, which is currently taking place in Germany. These new delivery opinions will be used for ambient and possibly frozen, refrigerated, and warm food items.
When asked how brands and retailers can respond to Amazon’s one-day delivery, Tompkins stated, “They need to determine what products and markets want and/or need one-day delivery. Next, they need to determine a 10-plus facility distributed logistics network, helping to place inventory closer to the customer. Lastly, they need an inventory planning tool that flows product into these 10-plus facilities to minimize the added inventory requirement.” These are the vital steps brands and retailers need to take in order to meet the one-day delivery challenge.