Pre-COVID, retailers were already seeing a surge in same-day and next-day service offerings in the market with behemoths like Amazon announcing moves towards 1-day Prime. The onset of the pandemic, and the resulting reliance on eCommerce, has not only accelerated this trend but changed how it might look in the future.
We sat down with Daniel Sokolovsky, CEO of AxleHire, an emerging leader in the same-day and next-day space to learn how these trends are affecting retailers, what’s going well, and where we can collectively improve. Listen in or check out these select excerpts from the conversation below.
What trends are you witnessing in the same-day/next-day delivery market?
Over the past five and a half years I’ve seen a lot of shipping permutations. One of the more interesting ones to us is this overall shift to having inventory be a lot closer to the customers. You go back 20 years or more, and you have companies who only have, or had one fulfillment center.
Later on, as eCommerce grew, we saw companies go from one fulfillment center to three. Then came the meal kit era – when companies really needed to start shipping faster. Then they expanded from three to maybe four or five facilities. And then you look at behemoths like Amazon who go out and just have multiple facilities scattered in their largest Metro areas.
This shift of inventory closer to the customers has really enabled delivery to be a lot faster, but what’s more important is that as this is happening models like UPS and FedEx are breaking. A lot of that is because their hub and spoke model was designed for shipping across the country. Whereas now, that inventory is sitting anywhere from 25 to 250 miles away from the customer.
Have you seen any shifts since the pandemic started?
“Store-to-door” or “ship from store,” has obviously exploded. You have a lot of customers who still wanted to purchase from the exact same brands, the exact same retailers that they’ve been. Whose trust they’ve gained for many years and who still prefer to order on those websites. We’ve really seen that the retailers who have been more successful at implementing store-to-door capabilities since the pandemic started are the ones that have really been able to hunker down and not lose too many customers during COVID, and who have really picked things back up as we started to see things relax a little bit and as we are going into stage two or stage three.
What should retailers be thinking about when considering layering a same-day/next-day into their overall transportation strategy?
It starts with product discovery. A lot of people have seen success just with this “prime one-day” signifier by showing consumers that you don’t need to go to the store to get this product, that you can actually get it delivered relatively quickly. That’s a big enabler for our customers. Overall, stores have been becoming less of a positive experience over the past few years, at least for me. And so because of that, if I know that the item is available and I can get it relatively soon, I won’t take the drive to get it. If they’re able to put that same-day/next-day tag on there, that’s when consumers start behaving differently. We do that for some of our retail partners today, and it’s showing a lot of success.
What do you feel retailers are doing well right now in the same-day/next-day space and similarly, where are they falling down?
Those that have been more successful are the ones able to have a cost-effective model for doing both buy-online-pickup-in-store and same-day/next-day delivery. You look at brands like Walmart, who has been doing really well with online groceries for a while, is doing much better now. Then you look at companies like Albertsons and smaller grocers that aren’t necessarily doing this, that have taken a big hit, both on revenue, but also customer base overall.
A lot of people really just need to have a serious conversation internally and figure out how exactly they want to address same-day/next-day delivery and omnichannel as a whole. It’s a big wake up period for a lot of retailers and they should take advantage of it.
How have you seen retailers price for same-day/next-day? Are they absorbing the cost, are they up-charging?
Typically when they start out and volume is low, they want to see what the consumer’s reaction will be so they absorb the cost. But then what happens is the volume starts skyrocketing. And they’re willing to keep absorbing it to start growing, but then because they’re using point-to-point models, what happens is that their cost per delivery doesn’t decrease. And so, although they’re getting so much more marketing, now every additional order that they get in, they’re subsidizing a solid chunk of money.
That’s where a lot of them decide they’re not interested or only keep it at a couple of stores or certain kinds of customers. They enter the market, put one foot in and have a great experience – customers are really happy but then the retailer is stuck footing the bill and paying a lot for delivery. That’s where lower-cost same-day and next-day models like AxleHire really are able to come in to help realign these deliveries in a way that works for retailers and works for their customers.
Are there any best practices or standards that you could share?
I would say two things, one for same-day and one for next-day. On the same-day side, it’s mainly about batching and consolidating orders. So having fewer, larger delivery windows for themselves. Provide more time to make sure that you can batch those orders, but also fix issues before they go wrong. Making sure your cutoff times are appropriate, make sure your delivery windows align, both with the delivery partner, but also with the store.
For the next-day side of it. It’s really about going out and making sure that your fulfillment technology, tracking, and overall communication with the customer, is prepared to handle any of the “what-if” scenarios. We see a lot of people who go out and they see the exact same UPS or FedEx tracking link for days on end with no updates. That is a much worse experience than saying, “Hey, there’s a delay or there’s an issue, let’s go out and fix it.”
How do your customers think about creating a consistent last mile experience?
By sweating the small details. What are their orders like? How are they thinking of their customers? What’s the distance they want to cover? Is there a limited sku count that they want to put online or do they want to offer all these things for their customers? How is the store doing fulfillment? Is the store going out and using technology to do it? Or are they haphazardly getting those orders together, throwing them in a bag and saying that they’re ready to go? It’s when these small details get ironed out, that retailers perform well and are successful at increasing customer retention and building a lot of brand loyalty. Everything is happening so quickly that if you don’t have the small details ironed out, then you have a lot of room for error.
What do you think retailers should be doing now, to prepare for the upcoming holiday season?
Know the limits. There may be a lot of activity in the stores, there may be a lot of activity in the fulfillment center. I’m predicting that in both cases, retailers are not ready for the volume that can happen and may lose market share because of this.
Most importantly make sure to set the right consumer expectations. Know the limits in terms of where you can perform. Use analytics to staff appropriately. Make sure you can fulfill packages on-time and can set the right expectations for their customer. It’s a big multi-departmental undertaking, but it needs to be done.
Do you have any additional advice to share?
2020 and COVID has been a big wake up call for a lot of different people. There’s a lot of ways to move forward and to do so successfully. It’s the small details that matter. There’s a lot of multi-departmental efforts that need to take place, but the time is now. Otherwise, you may not stick around for much longer.
AxleHire, founded in 2015, is a superior last-mile delivery solution that combines innovative technology and superior logistics to deliver cost-effective, scalable delivery solutions to customers. The team at AxleHire provides reliable same-day delivery, next day delivery, distribution, and freight services to industry leaders such as HelloFresh, Ikea, Warby Parker, and Pet Food Express. AxleHire currently services customers on the West Coast, New York, and is expanding nationwide to other key metropolitan markets. For more information about AxleHire please visit: axlehire.com
This ‘Ask Me Anything’ piece is the fifth blog in our partner series on supply chain resilience during and after the COVID-19 outbreak. Check out our first interview with Happy Returns, or check out the following pieces to learn more about supply chain disruption during this time:
- Our Parcel Network Pulse Dashboard pulls together our data of over 3 billion shipping events to help retailers identify where eCommerce fulfillment disruptions are happening.
- Watch our webinar, ‘The New Normal: Preparing Your Team For Peak Surges And Disruptions‘ to learn more about how you can diversify your network going into peak season.