It used to be that besides the mail carrier, garbage collector and occasional pizza delivery boy, most traffic came from the neighbors. Streets in bedroom communities that were once quiet now hum with the constant rolling of delivery trucks of all types. These vehicles drop orders from Amazon and bring subscription boxes from Birchbox. Dinner increasingly comes from GrubHub. You can order milk, booze, ice, travel clothes, gasoline, shoes and even grandkids for rent for delivery on-demand at the touch of a smartphone app. Enter a megatrend that Ipsos calls the New Delivery Economy.
Dual income households, time starvation, and nesting are driving this megatrend. All totaled, the on-demand economy is worth $34 billion in the U.S., according to an estimate by BIA/Kelsey which means big business.
Demand for convenience is strong
The delivery economy is here to stay, agrees R.J. Hottovy, senior retail and restaurant analyst for Morningstar. He says that once upon a time, people made purchases based on product and price. “People pay for convenience more today than they ever have,” he says.
Yet delivery-based business models are far from a slam dunk for brick-and-mortar retailers and service providers. Risks include higher operating costs, lower margins, and inconsistent or poor customer experience thereby creating damage to brands. Poorly designed, your delivery offer can eat into your in-store revenue, which could put you out of business. Whatever your approach, it’s worth understanding your customer base and testing options. Most importantly, ask yourself three questions as you delve into the New Delivery Economy.
Three questions for your business
How is delivery impacting my brand? Check to be sure delivery is positively impacting your brand perceptions of customers and prospects. You can do customer journey mapping and shop-alongs with customers. You should certainly monitor your social feedback relating to your delivery channel. Lastly, you can mystery shop your delivery operations possibly even capturing delivery recordings via doorbell video cameras which are becoming ever more prevalent.
Where is the profit going? Next, model the economics of delivery and combine those with your base retail financials. You are probably outsourcing delivery services and the provider could be taking your margins – beware! Since Amazon just bought 20,000 Mercedes Sprinter vans to offer third-party delivery services, you can bet that anyone using that Amazon delivery service will be paying a premium. At the same time, you might find delivery is cannibalizing your retail business turning you into a delivery-only operation.
How are you using technology to make delivery distinctive? Nowadays, pizza chains have apps that let you customize your pie down to the placement of your pepperoni and other fun things. From a seller’s standpoint you can make all sorts of cross-offers. Say you have a surplus of chicken wings; you can offer a spot promotion to move inventory. Use technology for distinctive marketing too. For example, Domino’s offers “carryout insurance” and is offering to fill potholes along your delivery route which is making the Domino’s delivery experience distinctive.
The New Delivery Economy is here to stay and business leaders need to ensure that they’re positioned to bring the right results for their businesses.