Shipt Is Doubling Down On Personalized Service For Same-Day Deliveries

As near-real-time delivery picks up interest among retailers, especially coming off a COVID purchasing increase in online sales, Shipt is cautioning the industry that ultra-fast delivery (inside of 15 minutes) is actually the wrong approach. Shipt, which is owned by Target, is widely used across the U.S. for same-day and next-day delivery with many retailers offering services within a two-hour window. The company is doubling down on its core ethos which is personalized shopping and quality service.

Same-day delivery is sticking with customers

Rina Hurst, chief business officer of Shipt, is clear on the approach that retailers should be taking and spoke about this at Shoptalk, a recent industry event. Hurst stated that same-day delivery was first seen as a luxury feature pre-pandemic and then became critical throughout the pandemic. She stated, “We are now seeing that same-day and next-day delivery is sticking with consumers.”

However, Hurst further discussed that while the variable of speed has evolved over the past few years from weeks to days to same-day, ultra-fast delivery is not growing at the same rate. “Only 50% of orders are requesting delivery within the next hour,” said Hurst. Even with some grocery partners, a majority of orders are not requested within the quarter-hour. For instance, 57% of Winn Dixie orders placed with Shipt are for the next hour.

Speed is not a high ranking consideration in delivery

According to a recent survey of consumers, fast delivery ranks sixth among the most important factors for grocery delivery. Low or no delivery fee was ranked first, followed by the price of items and availability of products.

Shipt is not focusing its efforts on ultra-fast delivery models but is thinking about same-day and next-day delivery in terms of a balance between speed, quality and cost. Hurst stated, “It is like a three-legged stool and we look at balancing all three factors and it really depends on the customer that is being serviced and what is most important to them.”

Hurst discussed that Shipt customers often use the service to stock up with big baskets, placing more than 20 orders per year, with an average basket size of around $100 which is three times that of ultra-fast delivery services. Hurst said, “We are just not seeing the use case for ultra-fast delivery within our customer base.” While certainly the customer demand in urban markets, especially for food delivery, makes more sense since the market is denser, ultra-fast service is very costly.

Instant delivery is very costly

While many small start-ups have jumped on the bandwagon of instant delivery and secured funding to spur what seems to be a consumer trend, most are falling flat on their backs with operating costs making the business model a losing proposition. In the first seven months of 2021 investors pumped $10.1 billion into grocery companies, compared with $7 billion in all of 2020. Jokr, a grocery delivery startup founded in 2021, was losing $159 per order in New York City and other operating companies like Fridge No More were experiencing similar losses. Many of the startups in instant delivery are scaling back services or increasing delivery times to minimize high operating costs.

Larger companies like DoorDash or Instacart may be able to survive in the space of hyper-fast delivery based on economies of scale, but even so, Shipt is taking a different approach. Hurst said, “At Shipt, we think a lot about the quality and this is the center of the equation on every decision we make. Quality is our secret sauce.” After quality, the next most important consideration for consumers is that the service meets the delivery time commitment.

Most customers choose same-day over within-the-hour

In terms of non-grocery items, delivery in under 15 minutes is even less of a priority to consumers. For example, according to Shipt, 76% of Party City delivery orders are placed more than three days in advance since most consumers plan parties ahead of time. Hurst said, “The most important factor is delivering to customers within the time commitment promised and we are just not seeing a growth in service requests for ultra-fast delivery.”

What Shipt is seeing and hearing from its customers is that personalized service is a key factor for loyal users. With a newly rolled out featured shopper program, Shipt users can select a personal shopper that they want to use as a favorite. Hurst recounted a personal story about her favorite shopper who called her when milk was missing from the grocery list. “He really saved the day for me and it is great to have that type of service.” Shipt personal shoppers will often find appropriate substitutions 60% of the time when faced with an out-of-stock situation. This keeps the customers happy and saves the sale for the retailer. The elevated white-glove personalized service is a key consideration for repeat customers.

Shipt is betting on personalization

With several delivery brands pushing for hyper-fast delivery speeds, Shipt is instead betting big on personalization and high-quality service as the prime drivers for success and customer loyalty in the personal shopping space. The buzz around the industry is super-fast and the “need for speed” but Shipt is not betting on this for long-term customer satisfaction. Shipt’s high expertise in shipping and last-mile delivery, along with its customer feedback, is showing that delivery on the same day and order ahead is what’s needed to support today’s market.