Bloomberg opinion – By Kirsten Salyer
In the online-shopping world of endless options, seamless search and easy e-payments, the delivery of the item to your door remains the one tangible part of a virtual experience. It’s an important step, that last mile, when a few clicks materialize into that latest iPhone or new dresser or box of kale and quinoa. As a timid online shopper, when I buy online, the “when” and “how” are just as important as the “what.
“Historically, the United Parcel Service, FedEx and the U.S. Postal Service have carried most of the weight of the delivery process. Now, the tech giants want in. Google announced Monday it is expanding its same-day deliveries, following Amazon’s increased development of a similar service. Conquering home delivery has been compared to achieving the “Holy Grail of e-commerce.” Disrupting the delivery process offers these tech companies a way to attain total domination of the shopping experience, and it will almost certainly be a good thing for consumers, too.
Google’s service, which been operating in San Francisco for just over a year and is now expanding to parts of New York and Los Angeles, offers expedited shipping from major stores including Target and Walgreens. In a similar fashion, trucks managed by Amazon-supervised contractors are now delivering packages to consumers in parts of San Francisco, Los Angles and New York. (Sorry, everyone else, you’re out of luck for now.)
At face-value, the move to physical delivery seems counter-tech: Internet-based technology company sends real-life people dressed in khaki to go door-to-door. Yet the home-delivery space is in bad need of tech shakeup to provide faster, flexible, more reliable service. Increased competition among delivery providers also benefits consumers looking for deals. For example, Google is offering six months of unlimited free deliveries as part of its expansion.
Owning the delivery process is an important step for these tech giants to fully manage the customer experience. Google has conquered how information travels on the Internet; now it could be a real player in shaking up how physical items move around the country. As an online retailer, though, Amazon arguably has more riding on this experiment.
Owning and operating its own trucks offers less dependence on other distributors, which would help Amazon prevent being stuck helpless during public-relations nightmares such as the delays last Christmas. There’s also the cost: Amazon pays about $2 to $8 to ship each package, and its delivery costs keep going up, 66 percent in the last two years. Higher shipping costs was one of the main justifications Amazon gave for increasing its Prime membership, a service that offers free unlimited two-day shipping for most items, to $99 from $79 in March. Amazon also recently added the delivery of perishable grocery goods with Prime Pantry, available to its Prime members for a flat rate of $5.99 a box. A focus on fresh makes the delivery process even more critical.
Of course, there are drawbacks to testing a new system. Amazon’s U.K.-based delivery service received negative reviews from customers complaining about late, missing or inaccurate deliveries. There also isn’t a tracking system in place that gives consumers the type of step-by-step updates we’ve come to expect from UPS or FedEx.
The Postal Service, UPS and FedEx should take note. Right now, package delivery is a positive note for the cash-short USPS, so much so that it struck a deal with Amazon last fall to deliver packages on Sunday. Tech companies jumping in the delivery game probably won’t affect the main distribution players for now. It is unlikely Amazon or Google could afford to manage truck distribution in less populated areas, and increased success of e-commerce could even result in increased business for UPS and FedEx as other retailers try to ramp up their own online-delivery operations. But as Amazon and Google iron out the kinks and bring on the drones, we’re in for an exciting — and let’s hope more reliable — delivery future.