Amazon's new "Local Express Delivery Option" allows order placed in the morning to be delivered that afternoon. In Seattle, orders as late as 1 pm can be delivered same day. The service is not cheap costing Amazon Prime members $3.99 for delivery and $6.99 for everyone else. As the service grows, stock analysts expect that Amazon's same-day delivery charges to drop as the delivery service gains density.
This same day delivery follows Amazon's entry into local delivery with its "Amazon Fresh" service in Seattle that offers delivery of everything from ice cream to digital cameras with same-day or next day delivery. This service is delivered in trucks painted with an Amazon logo. The late delivery offered in Seattle for Amazon's local express delivery option most likely reflects the capability of the already established delivery operation for Amazon Fresh.
Amazon is not alone in offering same day delivery. Barnes and Noble has offered same day in Manhattan for a number of years. That service is free for orders over $25.
The same-day service that Amazon and Barnes and Noble offer does not use the usual parcel delivery suspects, FedEx, UPS, and the Postal Service. Instead, They use national companies that offer local delivery and dedicated fleet services in numerous cities. For the launch of the Local Express Delivery Option, Amazon is using Dynamex and A-1 Express Delivery Service.
These two local delivery carriers are just two of the largest of set of local and regional parcel carriers that are shrinking the time between when an on-line order is made and the parcel is delivered. Amazon's service succeeds only because Amazon can cut the time from order to placement on a delivery truck to less than 4 hours and it has multiple warehouses close to major population centers.
Other on-line retailers offer service that is nearly as speedy. Staples offers next day delivery on most on-line orders and it recently purchased an office supply firm that specialized in next-day delivery to offices using a private fleet of delivery trucks. (In fact the firm that Staples bought had a private delivery fleet because it bought its primary supplier of delivery services.)
On-line retailers are looking for ways to cut the time from order to delivery and find that the FedEx, UPS, and the Postal Service all are too inflexible to allow for later pick-ups and early-morning deliveries that on-line customers want. They are turning to not only same day couriers but to regional parcel carriers that operate out of one or more distribution hubs to cover most of the United States. The rise of these regional carriers was note at the recent Document Forum, where their presence as exhibitors was given a special place in the exhibit hall. The largest of the regional carriers are:
- Capital Express - covers the Midwest with a focus on delivery of medical and other time sensitive and high-security delivery customers
- Dunham Express - covers all of Wisconsin and parts of surrounding states
- Eastern Connection - covers Maine to Virginia with next day service
- Edge Logistics - provides regional parcel delivery with nationwide coverage
- Lone Star Overnight - covering Texas, Oklahoma and Louisiana
- OnTrac - covers the West Coast plus Nevada and Arizona with next day and 2- day service and same day service throughout the plains and mountain west
- Skyline Messenger Service - covers Georgia and the Carolinas
- Spee-Dee Delivery Service - covers 7 states in the Midwest from Illinois through the Dakotas
- Transtek - covers Colorado, western Nebraska and parts of Wyoming
- US Cargo - covers 11 states from terminals in Ohio and Pennsylvania
Can the big three compete? Probably, but they have to add new services and become more flexible in how they operate. For example, the Postal Service could offer a new competitive next-day service if they offered a combined pick-up to delivery service under the "Postal Service brand" with the pick-up operations operated by contractors. The key is focusing on local delivery and a well run pick-up operation could handle a late pick-up with a-drop-off to a delivery office in the early morning of the day of delivery. Worksharing does not allow for as seamless a process as one provided under a single corporate identity.
Will they compete? Making the changes necessary to handle the new distribution needs requires flexibility from both management and labor at the three largest carriers. Standard operating procedures, sometimes contained in operating manuals, and sometimes in union agreements reflect the old paradigms of parcel distribution. Top management learned the delivery business in a world with different distribution patterns than what Amazon is now looking for. Justifying changes in what appears to have worked for many years is not easy. All three have shown that they will make the effort and the delivery products available today are far superior to what was available two-decades ago.
How soon will they compete? This is the great unanswered question. My hunch is that the regional and local carriers will grow their business and nibble away market share for many years before a serious move is made in this market by FedEx, the Postal Service or UPS. What may force the pace of entry into the quick-delivery market is the challenge of the recession that has made selling delivery services more difficult and finding volumes to fill existing distribution networks more challenging. Maybe by next year's parcel forum we will see what the big three plan to do pick-up the business that they have lost to carriers that can offer the quick-delivery services that they cannot.