Arriving Now: Retailers’ Solutions for Same Day Delivery

Goldman Sachs Research: The New Digital Age of Retail – Last-Mile Delivery Overview

• Pre-Pandemic Landscape: Last-mile delivery (same-day or within-hours service) was limited primarily to restaurants and grocery sectors; general retail relied on in-store pickup for immediate gratification.
• Pandemic Catalysts: Two converging factors drove adoption: consumer reluctance to leave homes and the closure of non-essential physical retailers.
• Emergence of Curbside Pickup:
  • Defined as contactless collection where customers order online and remain in their vehicles.
  • Early adopters included Best Buy, Dick's Sporting Goods, and Ulta.
• Rise of Third-Party Delivery:
  • Platforms like Shipt, Instacart, and Rhody enable same-day delivery but require customer payment.
  • Rhody operates as a fulfillment partner for Tractor Supply and Home Depot.
  • Service models vary by specialization:
    • Full-service: "Personal shopper" picking and delivery.
    • Delivery-only: Specialized for specific categories (e.g., groceries vs. bulky furniture) or distances.
• Key Challenges for Retailers:
  • Quality Control Risks: Most major big-box retailers (excluding Target) outsource fulfillment, creating risks regarding product integrity and adherence to company standards.
  • Data Leakage: Third-party platforms with their own marketplaces capture consumer data that retailers could otherwise utilize for their own insights.
• Strategic Shift to Integrated Models:
  • Profitability Advantage: Third-party fulfillment is more profitable for retailers than traditional free two-day shipping (e.g., Amazon Prime), which incurs picking, boxing, and carrier costs.
  • Operational Efficiency: Outsourced picking frees store employees from packing/shipping tasks.
  • Competitive Moat: Brick-and-mortar retailers possess a unique advantage over online-only retailers by leveraging physical inventory for two-hour delivery windows.
• Omnichannel Dynamics:
  • Buy Online, Pick Up In-Store (BOPIS) and third-party last-mile delivery are viewed as complementary strategies.
  • BOPIS offers cost-free speed (customer travels to store), while third-party delivery offers home convenience (customer pays premium for speed).
  • Increased optionality across these channels correlates with higher consumer engagement.