What Online Retailers Really Think About One-Hour Shipping

The topic of one-hour shipping isn’t exactly a new one, with three-hour and same-day shipping already being offered in many of Australia’s metropolitan areas. However, when The ICONIC operated a mini one-hour delivery trial at Mercedes-Benz fashion week, it re-ignited the conversation – how big is the demand for one-hour shipping, and how achievable is it on a large-scale?

According to Patrick Schmidt, The ICONIC’s CEO, consumers are looking for fast and convenient delivery services, which is why the company decided to go ahead with the trial.

“Faster delivery is something we know our customers want and we’re determined to enable it,” Schmidt said.

“At The Iconic, we work hard to continuously build the shopping experience of the future; pushing the boundaries with a one-hour delivery service that could soon become a reality is just one of the ways we’re testing how to make our customers lives easier.”

This sentiment has been echoed by a number of Australia’s shipping and fulfilment experts, with executive staff from StarShipIT, Passel, Smart Send Pty Ltd and Fluent Commerce, as well as Shippit, all claiming one-hour shipping will likely be part of the retail mix in the future.

Power Retail talks to Tinyme, Showpo and The Party People, three very different online retailers, to hear their thoughts on the issue.

Ben Hare, Chief Operating Officer at Tinyme

Ben Hare from Tinyme
Ben Hare, Chief Operating Officer at Tinyme

Tinyme, an online store offering personalised children’s products, already offers its customers substantial choice when it comes to delivery.

Despite offering standard, rush, pick-up and rush pick-up delivery options, Hare believes there is always going to be a demand to expand the businesses shipping and fulfilment capabilities.

“There’s certainly demand for super fast shipping. It’s never going to become the standard option due to the cost of delivery, but there will be a niche demand for a really fast service that people are willing to pay for; particularly for certain products or circumstances,” he says.

Although, according to Hare, introducing services like one-hour shipping inevitably come with extra obstacles that need to be overcome.

“One-hour shipping has substantial challenges to overcome. It requires having distributed stock locations that are close enough to the customer to make the timeframes possible – clearly such shipping options are going to be restricted to metro areas. It also requires expedited picking processes to enable dispatch within a very short timeframe. These all come with a cost, as does a more point-to-point courier service to make the delivery.

“The key is offering customers multiple shipping options that suit their circumstances. One-hour shipping is only ever going to be one part of a suite of options. Whilst there will be situations where customers are willing to pay a substantial premium for one-hour shipping, much of the time they will prefer a cheaper, more efficient option.”

Jane Lu, Founder and CEO at Showpo

Jane Lu from Showpo
Jane Lu, Founder and CEO at Showpo

Founded in 2010, Showpo is a Sydney-based online retailer offering clothing and accessories predominantly to a young, female market. The women’s clothing e-tailer already offers a number of shipping services to cater to its customers’ varying needs, including same-day and Saturday delivery in Sydney’s CBD, express post, and standard shipping services.

But, when it comes to one-hour shipping, Lu isn’t sure there is a big enough market or demand for it among her young, generally tech-savvy audience, or that it’s entirely viable logistically speaking.

“One-hour shipping seems quite difficult with the current infrastructure available to Aussie retailers, given it takes almost an hour to ship from most warehouses into the CBD,” she says.

Although, Lu believes one-hour shipping could potentially be offered by “local bricks-and-mortar stores that have [stock available in-store].” Although, she still questions the necessity of this service, because of how easily consumers can get the same service through initiatives like Airtasker, minus the extra strain one-hour shipping would put on retailers themselves.

“You can achieve [this] yourself anyway by sending out an Airtasker. I’ve sent one out to get me Hollywood tape and KFC before.”

Dean Salakas, Co-CEO at The Party People and Advisory Board Member at Online Retailer

Dean Salakas on Shark Tank
Dean Salakas, Co-CEO at The Party People

Salakas easily has the most optimistic view on one-hour shipping out of the retailers Power Retail spoke to, as according to The Party People’s Co-CEO, “it already exists – at least to some extent.”

“Something like delivering balloons… it already has a life on it,” he says. While he acknowledges that successfully implementing a wide-scale fast delivery network is not without its challenges, he also thinks the most important thing is that customers are given choice.

“I’m all for customer choice, rather than worrying too much about complexity – give them as much choice as possible.

“We already offer quite a few delivery services, with regular, same-day and express all in the mix”, he says, “but other shipping services add value… there’s a huge market for a one-hour delivery window”.

Presently, Salakas says that warehouse staff usually pick an order on the same-day, if an order is placed before 11 am, and that order will be shipped by 4 pm. To pick a typical order of party supplies, which he says could be arund 20-30 items, staff often take 30-minutes.

“I think it’s just over 50 percent of our order volume is already express, so providing a one-hour shipping service, wouldn’t put that much of an extra strain on our existing staff. I don’t think we would have to hire extra workers unless the service was to really take off.”

Salakas also says that the business wouldn’t necessarily have to carry the extra cost of providing extremely fast delivery, as it could be passed on “customers will pay for the privilege of ordering and getting it straight away”.

For peace of mind, allowing the status of their delivery is clearly communicated, Salakas is confident that throwing the extra delivery option in the mix will ultimately help retailers thrive in a competitive market.

“Customers are always asking for options, it’s just the question of whether it’s commercial to provide the options they want. But, when it comes down to it, if you’re not offering the best customer experience, you’ll end up missing out on sales and that will hurt you in a competitive market.”

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