In some urban and suburban areas, grocery delivery vehicles are a regular sight. Indeed, many urban dwellers get regular offers for an annual $100-subscription to a same-day delivery service.
Same-day delivery sure seems popular given the buzz. But same-day delivery of merchandise and groceries to consumers represents only 2 percent of the total domestic parcel market (249 million packages in 2018). And nearly every delivery is a money-loser, our recent white paper indicates.
So why such a buzz? For one thing, same-day delivery is a rapidly growing market. While only now 2 percent of the overall parcels market, recent annual growth has exceeded 50 percent. And many startups are competing with heavyweights, such as Amazon and Target, which intrigues investors.
However, same-day delivery seems to interest primarily urban Millennials. Our survey of 2,500 customers across the nation indicated that about half are very price-discriminate. That is, they’re not willing to pay extra for same-day delivery, with the possible exception of urgent needs like medications or groceries.
Is there value for the U.S. Postal Service in this market? It’s not clear. The current business model for many providers doesn’t seem sustainable. Our paper indicates most providers lose money with each delivery.
However, the market could morph, and certain aspects could prove profitable. Given the uncertainty, the Postal Service must continue to monitor same-day market developments. In addition, the next-day market — where USPS is stronger — appears to be a more critical market segment.
Share your thoughts. Is same-day delivery today’s fad or tomorrow’s new normal? What do you think the standard delivery time for online deliveries will be five years from now? For your online orders, would you prefer free next-day shipping, or, say, an $8 shipping charge for instant delivery?