Same Day Delivery: The Amazing Race

Tags: Expedited Shipping, E-commerce, Last Mile Delivery

Illustration of expedited courier

The same-day delivery race puts crowdsourcing, bicycles, and delivery vans on the same team.

The promise of same-day delivery has many brick-and-mortar retailers champing at the bit to get in the race. In a world where speed and immediacy sells, stores know this hyper-level customer service can help them claw back market share from online-only competitors.

When consumers really need an item in a pinch, it's always just a car ride away. Soon, they may not even have to even get in the driver's seat.

Walmart, Amazon, and Google, among others, are piloting same-day delivery projects in select locations around the country that have enough density and demand to drive the value proposition. But obstacles persist, and success is contingent on critical mass. Expedited transportation is costly, and last-mile capacity is likely to become even more constrained as e-commerce grows. And moving small volumes over short distances at warp speed can make anyone with an environmental inkling wince.

In spite of these challenges, mainstream adoption of same-day delivery may be coming faster than you think. In fact, it might be right around the corner—with the bike messenger, the flower delivery guy, or even the neighbor you didn't know down the block.

This is the promise that stirs Garrick Pohl, co-founder and CEO of Zipments, a New York City-based technology company that has evolved into a virtual freight broker for local and regional courier services. The company serves four types of customers: retail, professional services, consumers, and restaurants.

Many companies are still in beta mode as they test the feasibility of regional, metro, and nationwide same-day delivery. Zipments is among a number of IT startups trying to support retailers through this discovery phase.

Pohl recently met with Inbound Logistics to talk about the pressures shaping same-day delivery dynamics, how bicycles play a role in creating capacity, and what the future of crowdsourcing last-mile logistics might look like.

IL: How did you come up with the idea for Zipments?

Pohl: The two other co-founders and I were part of another start-up, where we worked on mobile fleet management solutions—monitoring driver behavior relative to maintenance schedules and fuel consumption. That was our first foray. But we saw what mobile technology could do—provide an app that can tell if drivers are going too fast, ping their cell phone, keep fuel consumption in check, and curb their enthusiasm.

Intrigued by the new concept of crowdsourcing, we started Zipments in 2010. We weren't sure how same-day delivery would work in a business-to-business logistics model because it needs 100-percent reliability, and crowdsourcing doesn't lend itself to that.

So we started with a consumer, peer-to-peer focus and launched our first service in the Midwest. We might deliver a Craigslist item to the home, or pick up laundry that someone in the neighborhood could help out with.We offered no guarantees, and rates were negotiable between buyer and seller.

One year later, we began looking for a market with greater density and landed in New York City. We realized we had to build a completely different business offering 100-percent guarantees and a definitive pricing model. That led us to what we are today: a robust, primarily business-to-business service.

IL: Zipments aggregates courier capacity—whether it's a truck, van, or bicycle messenger—in effect, creating capacity that didn't exist before, especially in urban areas. How does this all work?

Pohl: When we moved from the Midwest to New York City, we discovered that mode is dependent on the region. In the suburbs, for example, a lifestyle courier is an attractive job opportunity—perfect for someone who does it part-time, or opts in to take jobs that are along common routes. On the other hand, in New York City and other major metro areas, we typically partner with existing courier companies or full-time independent contractors. They have a better understanding of the landscape where they work, whether it's navigating traffic or negotiating building security.

For the most part, many startups in the same-day delivery space are perceived as 'fetching' applications—that they exist solely to provide consumers with the fastest delivery possible. That's not the case for Zipments; we're tapping into latent capacity.

At the fleet management solutions startup, we worked on a project with a large auto parts retailer. It had about 5,500 pickup trucks that performed milk runs between retail stores and auto body shops, as well as 2,000 sedans that salespeople used. Of the 7,000-plus vehicles that were running around the country, many were idle most of the day.

So whether it's auto part milk runs, florist delivery vans, or bicycle messengers, there's a huge nationwide fleet of latent capacity. We're trying to work with these various fleet managers to help them better utilize their assets and serve other sectors.

One opportunity we have with the bicycle fleet is a new mode of transport—cargo bikes. We have a lot of these in New York City, and they carry up to 500 pounds of payload. We see cargo bikes as a viable portion of the overall fleet.

IL: What challenges have you run into?

Pohl: The challenges are typical of any unified operation system where bike messengers or any type of delivery people have to abide by new standards, whether it's proper technology training or communication skills. Messengers are no longer just delivering documents. They have to go into the store and interact with the retailer.

It's a different workflow than what they've handled before. Where they previously focused on delivering small documents in 15 minutes, now they have to transport large boxes in one or two hours. But the technology layer helps to create this unified delivery experience.

IL: Is there a sweet spot as far as distance?

Pohl: It's segmented both in terms of the markets we serve, and the modes of transportation. Metro delivery is anything less than 10 miles. Our bicycle deliveries can manage that. Ten miles is pushing it, but you'd be surprised the distance some of them can cover in one day.

Local deliveries extend out to 20 miles; while suburban deliveries reach 30 to 50 miles. Regional deliveries are akin to going from New York City to Philadelphia. We don't do many regional deliveries yet, but as the network grows, we expect that segment to expand. There is capacity for regional deliveries; people are passing through these corridors every day.

IL: Does this type of same-day delivery service drive more just-in-time-type replenishment?

Pohl: We do a lot of restaurant deliveries that are not high priced, so we don't see a huge economic advantage one way or the other. But retailer expectations are becoming more like restaurants. Customers want product in a few hours, and retailers have it ready to go. They have the ability to fulfill orders quickly in-store. The delivery scenario is the same as somebody showing up at the local pizza place, grabbing the pie that just came out of the oven, and getting it to the customer in 30 minutes or less. We're starting to see more of that happening with retailers.

We also move a lot of volume between stores, especially in metro areas where retailers are shrinking their footprints. A customer might walk in and say, 'I like this shirt, but can I get it in green?' and the salesperson answers, 'Sure, we have it in another store. We can get it to you later today.' We see more of that kind of transaction. The cost increase is moving product around; the cost savings is in reducing the square footage of your store.

IL: How does your model play with the growth of e-commerce and increasing demand for direct-to-home deliveries?

Pohl: The sexiest part of the business—what gets investor capital riled up—is the idea that we can support omni-channel initiatives. When it comes to retail, those initiatives generally fall into two categories. First are the small, local retailers that want to have a brick-and-mortar presence close to demand. But they also want to develop online tools and fulfillment that echo Amazon. For those retailers, it doesn't matter whether a driver in a flower shop van or on a bike shows up to make the delivery, as long as the service is acceptable.

The second omni-channel initiative comprises big-box retailers, who focus more on the overall presentation of the service. I'm a huge advocate of what Walmart is doing with regard to crowdsourcing deliveries, and it is far from the only retailer looking at this.

Crowdsourcing deliveries becomes a matter of bringing neighborhoods back together again—where one person walks out of a store, sees someone close by who has a delivery request, and can be compensated in some way for making that delivery. Knowing it's someone who lives up the road creates a better delivery experience. Retailers have a huge opportunity to capitalize on that social connection.

For example, consider the relationship between a customer and big box grocery store. You go to the big-box store once a week and spend $100. In the middle of the week, you have a hankering for ice cream. You don't want to drive all the way back to the big-box, so you stop at Walgreens on the way home from work.

The larger stores want to stop you from hitting the corner store; that's their goal. They want to continue their relationship with you, to the point where they can predict that on Wednesday night you'll probably want ice cream, so they go ahead and send it to you.

This may be years down the road, but that's the question all retailers are moving toward answering—how do we utilize delivery to maintain the ongoing relationship day after day?

IL: Did you draw any inspiration from fulfillment and delivery models elsewhere around the world?

Pohl: We looked at two examples outside the United States. One was the method of delivery. Cargo bikes, for example, are big in Europe.

We also looked at the on-time demand request coming out of Asia, where a kiosk on a train platform enables people to use their mobile phones to scan items from a grocer that they want delivered to their homes later in the day.

The same thing is happening with retail and local delivery that occurred with mobile technology—it started strong in Europe and Asia, then migrated to the United States. We put new cargo bikes on the road that came from Europe, and they are head-turners. People don't see those types of bikes going down U.S. city streets every day.