Don't get too used to the instant online shopping gratification that abounds this holiday season, as super-quick deliveries might prove too expensive for companies like Walmart, eBay, and Amazon to keep going for much longer. It's simple, really: Getting product to customers that quickly costs a lot, and the low prices associated with the service don't make up for that, as The Wall Street Journal's Greg Bensinger reports. eBay, for example, pays a courier $12.50 per hour plus $.55 per mile — including money for parking — to drive around San Francisco. The company only charges $5 on orders of $25 or more to get packages within 1 hour. Walmart charges somewhere between $5 and $10, a price that ShopRunner's chief strategy officer at Fiona Dias estimates will cover less than half the costs, she told The Contra Costa Times's Heather Somerville.
These companies have learned from the failure of Kozmo.com, the infamous same-day delivery service that epitomized a lot of went wrong during the dot-com boom. But it might not matter. Instead of scaling up nation-wide and offering everything for free, this instant delivery option only exists in limited markets. Plus, all of the services try to limit the free delivery on both too-large or too-small items. Amazon, for example, charges another $.99 per item. eBay has an order minimum. But those safeguards might also end up hurting the viability of the same-day dream, in the end. The extra charges deter people from the service altogether. And, without high-demand, it doesn't work. "It only makes sense if the truck is full. It doesn't make sense if there's only one package," said Dias. And at this point, it's not clear there is enough interest to fill those trucks, due to the high-cost of the services. One Walmart shopper Somerville spoke with said the $10 service was "not for me."
On top of that, these companies have to build in safeguards for the inherent risks of this delivery promise. When Walmart doesn't get something to a customer within the promised 24-hour period, it comes the next day for free. Same with Amazon, unless something beyond Amazon's control interferes. (eBay doesn't offer any concessions.) "Retailers are clearly subsidizing this service to improve the customer experience," Kerry Rice, a Needham & Co. analyst told Bensinger. It's not clear how much longer how much longer that will continue. Take advantage, people.
This article is from the archive of our partner The Wire.