Delivery Becomes Strategic for SMB Retailers

May 25, 2016 Peter Krasilovsky

How important is it for small business retailers to offer delivery? How timely does it need to be to move the needle on sales and loyalty? And can it be done economically?

These are key questions for many small businesses, especially for retailers and  restaurants  that find themselves  competing against online services and larger national chains, who will often absorb  delivery fees.

Many SMBs, of course,  have featured delivery for a long time. In the past few years, a number of third party delivery options have sprung up that formalize delivery as a mobile-based strategic tool.

Most of these third party delivery options are geared towards stores with multiple locations, although some also include SMBs in their networks.    Each vies to provide timely service—in some markets,  within an hour of an order.  A key imperative is to keep stores competitive against free Amazon Prime deliveries.    

Google Express,  InstaCart, Postmates and Deliv are among these delivery services.  They see themselves as providing virtual malls of many shops that helps SMBs get new customers, drive loyalty, cross-market  and compete against other retailers.

Google  Express General Manager Brian Elliott, speaking at the ShopTalk retail conference that took place May 16-18 in Las Vegas,  said Google “helps people connect with the retailers they love. “ As a mobile app that has access to lots of local stores , it also increases sales by letting consumers shop across many local businesses;  help consumers find goods;  and drive foot traffic.

 “It is not just about delivery,” says Elliott.  Consumers will use the service to “shop more often.  Delivery also drives new customers," he adds, further amortizing the incremental cost of deliveries.

Others observe that delivery helps businesses reactivate lapsed customers. One service provider at ShopTalk said he saw an 18 percent “reactivation” rate by offering free delivery.

Postmates, which is now in 40 markets,  is aiming specifically at SMB enlistment.  It currently collects inventory information for 50,000 merchants, but also delivers for a much wider group.  

Speaking at ShopTalk, CEO Bastian Lehmann said that Postmates provides a level of service that consumers now expect because of Amazon.  He adds that his network of nearby drivers makes it faster, easier and cheaper for an SMB to do a delivery than doing it themselves. Using traditional  delivery options,  the average cost of delivery for retailers is $9.

Utimately, SMBs  need to consider their delivery options as part of their overall marketing strategy.   It is part of the broader mix of services and features that consumers now routinely expect.

But it is also important that they don't over do it.  Every SMB restaurant and retailer needs to think about what their actual needs are.   As CEO Andy Dunn of Bonobos noted at ShopTalk,  one hour delivery of his men's pants wouldn't even impact 5% of his sales.  

About the Author

Peter Krasilovsky runs Local Onliner, a consulting firm that focuses on how digital channels target local consumers. “Local” has been a focus for him since 1995-96, and the firm's practice now includes search, marketplaces, geotargeting, vertical media and loyalty and promotion services. Peter was Chief Analyst and Vice President for BIA/Kelsey from 2006-2015. He holds an MA from The Annenberg School of Communications at The University of Southern California and a BA from Sarah Lawrence College in Bronxville, NY. He currently resides with his wife Sharon in Ashland, Oregon.

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