Saturday, August 3, 2013

Same-Day Delivery

Remember Kozmo? A dot-com bust over a decade ago, Kozmo delivered low cost items like books, magazines, and DVDs to consumers in under an hour, without delivery fees. It failed because it had a terrible underlying cost structure (low margins and high logistics costs), but it served our desire for instant gratification through same-day delivery. For better or worse, that desire didn’t go away when the dot-com bubble burst.

What, you ask, does that have to do with motor vehicle service parts?

Same-day delivery is back on the radar. This time it’s being pursued by companies with patience and track records of success. eBay Now and Google Shopping Express essentially provide a delivery service that links established retailers with consumers. Amazon Local Express Delivery simply extends Amazon’s business to same-day delivery. None of these services are widespread, so it’s too early to judge their success. Still, their existence will affect you. Here’s why.

First, these services raise your customers’ expectations. We know customers value same-day repair, but it becomes a table-stakes offering in a world where everything is always available. “What do you mean I have to wait ‘til tomorrow for the parts to show up?”

Second, we have yet another rival. Sure, established, highly capable competitors like Worldpac offer quick, same-day deliveries to dealers and independent repairers, but now additional distribution networks can serve DIY customers and, potentially, independent repairers. eBay Now, for example, already includes parts from Autozone.

For the DIY segment, I am concerned with the evolution of Amazon’s automotive offerings. Amazon already lets customers maintain a “garage” on their website, and their user interface and parts finder (which determines which parts can fit on which vehicles) seem to improve every time I visit the site.

Amazon does not currently sell huge volumes of service parts and accessories, as evidenced by their top 100 automotive products (mostly car care and lower-end accessories); but, Amazon is patient. They could be a formidable competitor in the B2C, and possibly B2B, service parts space if they combine their improving interface and parts catalog with same-day delivery.

For now, Worldpac is a much bigger worry. If these same-day retail services succeed long-term, they will set the bar for customer expectations and could potentially serve as direct competitors.

Bottom Line: In the short and long term, we need to improve same-day delivery capabilities. Dealers may be fairly good at same-day availability, and are very good at next-day delivery, thanks to FedEx and dedicated delivery carriers, but there is one key question. How are you addressing your customers’ increasing expectation of local, same-day availability for tens of thousands of service parts?

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