Instant gratification: UPS

In 2012 e-commerce in the US totaled $225.5 billion, a 713% increase from the $27.8 billion in 2000. Online purchases were projected to nearly double by 2017 and reach $434 billion. Ultimately, e-commerce depended on a few key factors, the most important of which was same-day delivery. In-store buying still accounted for $4.134 trillion, or 94.8% of total retail sales in the US in 2012. The primary reasons for this preference were the ability to touch and feel the products, to try before buying, and to gain the instant gratification of walking out with the purchase. However, in-store shopping had disadvantages: it cost time and money to go to the store, there was the risk that the required item would not be in stock, there was possibility of only a limited selection, and the risk that the store did not offer the best price. The benefits and risks of online shopping were nearly the mirror image. It was not possible to touch or try products in advance and if an item didn’t fit or work, there was the hassle of returning it. Even if everything went well, customers had to forfeit the instant gratification of getting their purchases straight away and wait a day or more for delivery. Given the size of the potential market, e-commerce retailers increasingly sought to provide consumers with hassle-free returns and same-day delivery. Success in doing so had the potential to propel sales beyond the projected $434 billion in 2017 to $500 billion, $750 billion or even more. Retailing had greatly evolved in the US from the early pioneering days of individual shops to department stores to mass discounters and category killers. E-commerce was the latest iteration but its further success involved more than just low pricing. For it to expand to more than 10% of total retail spending, return convenience and same-day delivery were likely required and the logistics required for this were non-trivial. How should Amazon, Walmart, Google, UPS and FedEx approach same-day delivery?

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