With near real-time delivery spiking retailers’ interest, particularly due to a surge in online sales due to Covid, Shipt is warning the industry that ultra-fast delivery (within 15 minutes) is actually the wrong approach. Shipt, owned by Target, is widely used in the US for same-day and next-day deliveries, with many retailers offering services within a two-hour window. The company is reinforcing its core ethos of personalized shopping and quality service.
Same day delivery stays with customers
Rina Hurst, Shipt’s Chief Business Officer, is clear on the approach retailers should take and spoke about it at Shoptalk, a recent industry event. Hurst explained that before the pandemic, same-day delivery was initially seen as a luxury feature and then became critical during the pandemic. She said: “We are now seeing same-day and next-day delivery sticking with consumers.”
However, Hurst went on to explain that while the speed variable has moved from weeks to days to same-day days in recent years, ultra-fast delivery is not growing at the same rate. “Only 50% of orders require delivery within the hour,” Hurst said. Even with some grocery partners, a majority of orders are requested within an hour. For example, 57% of Winn Dixie orders placed at Shipt are for the next hour.
Speed is not a priority in delivery
According to a recent consumer survey Fast delivery Sixth most important factor for food delivery. Low or no delivery charges were ranked first, followed by the price of the items and the availability of the products.
Shipt doesn’t focus its efforts on ultra-fast delivery models, but considers same-day and next-day delivery as a balance between speed, quality and cost. Hurst explained, “It’s like a three-legged stool and we’re trying to balance all three factors and it really depends on the customer that’s being served and what’s most important to them.”
Hurst explained that Shipt customers often use the service to stock up on large shopping carts, placing more than 20 orders a year, with an average cart size of about $100, which is three times that of ultra-fast delivery services. Hurst said, “We just don’t see a use case for ultra-fast delivery in our customer base.” While customer demand in urban markets, especially grocery delivery, certainly makes more sense given the market’s denserness, ultra-fast service is very costly.
Immediate delivery is very expensive
While many small startups have jumped on the immediate delivery bandwagon and secured funding to spur what appears to be a consumer trend, most are falling flat on their backs as operating costs make the business model a losing proposition. In the first seven months of 2021, investors pumped $10.1 billion into food companies, compared to $7 billion for all of 2020. Jokr, a food delivery startup founded in 2021, did it Lost $159 per order in New York City and other operating companies such as Fridge No More suffered similar losses. Many of the instant delivery startups are reducing their services or increasing delivery times to minimize high operational costs.
Bigger companies like DoorDash or Instacart might survive due to economies of scale in the hyper-fast delivery space, but Shipt still takes a different approach. Hurst said, “At Shipt we think a lot about quality and it’s at the center of the equation in every decision we make. Quality is our secret recipe.” After quality, the second most important consideration for consumers is that the service delivers on the promised delivery time.
Most customers opt for same day shipping instead of within the hour
For non-grocery items, delivery in less than 15 minutes is even less of a priority for consumers. For example, according to Shipt, 76% of Party City delivery orders are placed more than three days in advance because most consumers plan parties in advance. Hurst said, “The most important factor is delivery to customers within the time commitment promised, and we just don’t see growth in service requests for ultra-fast delivery.”
What Shipt sees and hears from its customers is that personalized service is a key factor in creating loyal users. A newly launched Featured Shopper program allows Shipt users to choose a personal shopper to use as a favorite. Hurst shared a personal story about her favorite shopper, who called her when milk was missing from the grocery list. “He really saved my day and it’s great to have that kind of service.” Shipt personal shoppers often find a suitable replacement 60% of the time when faced with an out-of-stock situation. This keeps the customers satisfied and saves the retailer the sale. Superior, personal, white-glove service is an important consideration for repeat customers.
Shipt focuses on personalization
With multiple delivery brands pushing for hyper-fast delivery speeds, Shipt instead places a heavy emphasis on personalization and quality service as the key drivers of success and customer retention in the personal shopping space. The enthusiasm in the industry is super fast and the “need for speed”, but Shipt does not rely on it to ensure long-term customer satisfaction. Shipt’s deep expertise in shipping and last mile delivery, as well as customer feedback, show that same day delivery and pre-ordering are what is needed to support today’s market.