Services vying to offer speediest delivery yet

CHICAGO -- Not long ago, two-day delivery was considered a premium service. And fast, too. Fast enough, it seemed.

Now new services -- from Amazon and startup competitors -- are trying to get shoppers' purchases to them even faster.

Analysts said that while there's a reason a takeout dinner needs to get to the customer in 60 minutes or less, it's less clear shoppers will be willing to pay for the same service when it comes to retail products, which rarely need to arrive so quickly.

When a recent evening with friends turned dull, Chaim Osina turned to Amazon.com. Two hours later, the game he'd ordered showed up at the door, and a lame time was averted.

"Did I need it? Probably not," said Osina, a 25-year-old Chicagoan. "But there's times it's really useful."

According to a survey by Forrester Research, 29 percent of U.S. online shoppers said they're interested in guaranteed same-day delivery, a relatively small share, said e-commerce analyst Brendan Witcher.

"And interested doesn't mean they're going to pay for it," he said, particularly when so many retailers offer a free-shipping option that in some cases isn't much slower.

There's a difference between delivery in a day or two and same-day or next-hour shipping, said Paula Rosenblum, managing partner at retail consulting firm RSR Research.

"I've always viewed that as a very niche market, particularly if you pull groceries out," she said. "When was the last time you had a T-shirt emergency?"

Companies handling the deliveries, and some customers, say it's not always about needs.

Mark Morris, 31, likes the convenience of Amazon Prime's same-day service, though he wouldn't be willing to pay extra. "There aren't a lot of things I can't find just down the street," he said.

A Macy's spokesman, Andrea Schwartz, said the retailer works with startup Deliv to offer same-day delivery "for convenience," even though Macy's also lets customers buy products online to pick up in-store in addition to standard shipping options.

"I don't know if we need it, but we've become trained that we can have it," said Deliv CEO Daphne Carmeli. "Did anyone think we needed two-day shipping when Amazon rolled out Prime? No, but we have it, and it's addicting."

Amazon has since picked up the pace, bringing free same-day delivery service on Amazon Prime orders over $35 to select cities. Another service, Prime Now, will deliver a range of items in an hour or two.

One-hour delivery service Postmates recently announced a membership program of its own. For $9.99 per month, Postmates Plus Unlimited members can get free delivery, with no service fees, on purchases of $30 or more from partner merchants.

About 3,000 merchants are part of Postmates Plus, the company's network, and those orders make up about 40 percent of all Postmates deliveries, the company said.

Other orders require a delivery fee calculated based on the distance traveled in addition to the service fee. Postmates makes enough on the "premium" non-Plus orders and commissions from merchants to help subsidize the membership, said communications director April Conyers.

It's not the only one vying to get stuff to customers in a day or less.

On-demand delivery service DoorDash is concentrating on meal delivery for now but hopes to branch out to other products, said spokesman Eitan Bencuya.

Instacart is best known for its grocery deliveries, but recently began working with Target to deliver small appliances and home improvement products, said Nilam Ganenthiran, Instacart's senior vice president of business development. It's a pilot program in a handful of markets. The company charges $5.99 for an order above $35 with at least two hours' notice, or $7.99 for one-hour delivery, and also gets money from stores and brands. Whether item prices differ from in-store prices depends on the merchant, Ganenthiran said.

Deliv pitches its services to companies, not customers, offering same-day delivery for retailers like Macy's, malls and even some e-commerce companies, said Carmeli.

Witcher and Rosenblum agreed same-day service is most likely to pay off in urban areas with enough affluent customers willing to pay for convenience to support a delivery network, particularly with inconvenient products, like bulky items difficult for shoppers without cars to transport.

Osina, the Amazon customer, said he uses same-day shipping and Prime Now a couple of times a week, often for business. He's a computer consultant and uses the service to order equipment his clients need, he said.

He's also used Postmates to order Coke Slurpees from 7-Eleven while watching movies with a friend -- even though there's a 7-Eleven store just down the street -- but said he'd be hesitant to use Postmates for bigger-ticket purchases. He's comfortable with Amazon but said he's less certain how newer players would handle problems or returns.

Jill Lindenberg, 52, visiting Chicago from Michigan, said she couldn't see herself using it. She plans ahead, and couldn't picture herself getting stuck with a need that immediate. "And I'm too cheap," she added.

Even Osina said he rarely chooses to pay for same-day delivery if his order isn't large enough to get the service free, since regular Amazon Prime shipping is only a little slower.

SundayMonday Business on 04/25/2016

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