The Wall Street Journal reports that Home Depot plans to spend “at least $300 million on supply chain, technology and online improvements in the fiscal year that begins in February, including building new fulfillment centers and overhauling its warehouse technology systems” to enable same-day shipping and delivery of orders. Here are some other interesting details from the article:
Home Depot wants to allow shoppers to place orders by 5 p.m. to be shipped out no later than that same evening. Customers will be able to receive real-time delivery updates via their mobile phones and choose from 100,000 items, said Mark Holifield, Home Depot’s senior vice president of supply chain.
The big-box retailer also plans to begin fulfilling online orders from within its stores, rather than a warehouse or distribution center, to enable it to deliver 90% of orders to customers within two days. Currently, it takes between two and seven days for customers to get most orders, the chain said.
Despite all the buzz generated by Amazon (and others) about drones in recent days, what retailers are really focusing on today, both online and brick-and-mortar, is enabling same-day delivery. Over the past 18 months, we’ve seen Amazon, Google, and eBay all launch same-day delivery services, and even startups like Deliv have entered the market. And now Home Depot joins the quest too.
Home Depot’s announcements bring a few trends into focus for me:
1. Although e-commerce remains a relative small percentage of total retail sales, it’s by far the fastest-growing segment of the industry, which is why retailers are shifting their investment dollars toward technologies and infrastructure that enable them to streamline and scale their e-commerce and omni-channel fulfillment capabilities.
2. With this shift (and increase) in investment dollars, it’s not surprising that virtually all supply chain and logistics software vendors are looking to get a piece of the pie, including warehouse management and transportation management solution providers (see recent announcements by GrandJunction and Descartes). And it’s a promising business opportunity for 3PLs too.
3. Two-day delivery (preferably free) is now the default expectation of consumers when they order online. They might wait longer if they can’t find the product cheaper elsewhere, but everything else being equal, delivery time is driving purchasing decisions.
4. It’s taken a long time, but logistics is truly becoming a strategic weapon for companies — and the C-suite is finally recognizing it.
As I wrote about last year, enabling same-day delivery creates new challenges for retailers. Network design, inventory optimization, and transportation planning and execution (among other things) are very different when your service level is “same-day to the consumer” compared to achieving a target in-stock percentage at the store level, or even providing next-day delivery. And then there’s the biggest question of all: can retailers enable same-day delivery in a profitable manner? Time will tell.
In the meantime, consumers and everyone involved in helping retailers like Home Depot spend their millions on enabling same-day delivery are looking to reap the benefits in the coming year.