Free two-day delivery was so 2018. This holiday season, it's shaping up to be about next-day delivery.
Richfield-based Best Buy is among the retailers who have been able to shave a day off delivery through modernizing their supply chains. The electronics giant plans to announce Tuesday that about 99% of its customers are now able to get free next-day delivery on thousands of items through Bestbuy.com. But bigger and heavier items such as big-screen TVs and refrigerators are not eligible.
"Our customers want and deserve convenient, fast options to receive our great products," Rob Bass, Best Buy's head of supply chain, told analysts last month at an investor's meeting in New York. "And they want it on their terms."
At that meeting, he said Best Buy was able to get items next day to about 80% of its customers with plans to significantly increase that percentage before the holidays.
In the last several years, many retailers have been investing millions of dollars to overhaul their supply chains in order to better compete with Amazon's industry-setting speed. Amazon set the previous standard of free two-day shipping for members of its $119-a-year Prime program. In the last couple of years, big-box retailers such as Walmart and Target have been able to generally match that speed.
Then in April, Amazon raised the ante, saying it would spend $800 million in the second quarter to launch one-day delivery for its Prime members. The following month, Walmart fired back with its own announcement that it was rolling out free next-day delivery on more than 200,000 of the most frequently purchased items. Orders must be $35 in size to qualify. The company said it would expand the offering to about 75% of the U.S. population by the end of this year.
While Minneapolis-based Target hasn't made any big announcements about free next-day delivery, CEO Brian Cornell told analysts earlier this year that "upwards of 50%" of its online orders are already being delivered next day now that the retailer has been using its large store network to ship items to customers instead of relying on fewer and farther away distribution centers.
"So we think we're very well-positioned today," he said. "We're leveraging the fact that we're so, so close to the guest with our 1,851 locations."
Carlos Castelan, a retail consultant with Minneapolis-based Navio Group, said one-day delivery will likely make a bigger difference in major metro areas where it may be harder for customers to get to stores to take advantage of buy-online, pickup-in-store services.
"I think it's going to be an incremental improvement, but not the game-changer that two-day delivery was," he said. "The question from the retailers' standpoint is if the extra costs are going to be worth it in providing that extra day of service."
Best Buy has improved the speed of its deliveries by both shipping online orders from stores as well as from its distribution centers, seven of which now have automated storage and retrieval systems that cut down on the amount of walking warehouse employees have to do. The other advantages to the new systems are speed, better accuracy and less damage to items, Bass told analysts.
It's also built three metro e-commerce centers in Los Angeles, Chicago and New York, which are located close to major urban areas and are designed for fast, efficient fulfillment. It has placed automated packaging systems in three of its centers, with plans for more, which adds to speed and cuts down on the amount of excess packaging used to ship items.
And it continues to diversify its portfolio of carriers who make the last-mile deliveries instead of just relying on UPS as it once did.
On Tuesday, Best Buy was to launch its holiday offer of free standard shipping on any size order, a promotion it has run the last several holidays, waiving the $35 minimum it usually requires for free shipping.
In addition to one-day delivery, many retailers also offer in-store pickup of online orders that are typically ready within an hour or two. Target and Walmart as well as a number of grocery-store chains offer curbside pickup, an option that Best Buy has recently launched in a handful of select markets.
Some retailers also offer same-day home-delivery options, but those services often include an extra fee or require a membership.
Kavita Kumar • 612-673-4113
