‘same day delivery’ a shift in retail distribution by Sutherland Global Services

‘Same Day Delivery’ a Shift in Retail Distribution March, 2014

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Definition

“Same Day Delivery” is a service provided by retailers to their shoppers on goods bought in their stores or on their website, whereby, the retailer delivers the purchased goods to the customer’s preferred location within that day and the shopper is charged a fee for this service Usually applicable to a certain category of merchandise only and only if the goods are bought up to a defined time of the day

Same Day Delivery

Major Online retailers are adopting the concept of ‘Same Day Delivery’ including, Amazon and eBay The ‘Same Day Delivery’ concept is also being adopted by omnichannel retailers like WalMart, Sears, Home Depot, Target and Macy’s Mall operators like Simon Property Group and General Growth Partners also provide ‘Same Day Delivery’ where a shopper can load merchandise at several mall stores and drop off bags at a logistic company’s booth (e.g. Deliv) or with mall employees for a later delivery to his / her destination

Source: Secondary Research, Sutherland Research and Analysis

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Key Drivers

Maturity of the Brick and Mortar Retailers and the economics of Delivery • US Brick and Mortar retailers are increasing their online presence and are using their stores as delivery and exchange center • Most retailers now have the capability to let customers buy-online-and-pick-up-in-store (BOPUS) • Retailers have realized that Same Day Delivery with companies like Zipments is more affordable option than 2-day delivery with the U.S. Postal Service or UPS

Meet the need for ‘Instant Gratification’ • US Online retail sales is growing at a good pace – up 13% from 2012’s USD 231 Bn to USD 262 Bn in 2013 (estimated) and is expected to grow USD 370 Bn • Online retailers are looking provide their shoppers with the near “instant gratification” experience – something that they believe the brick and mortar stores are able to do (with the immediate delivery of merchandise), and they weren’t

Source: Secondary Research, Sutherland Research and Analysis

www.sutherlandglobal.com March 6, 2014

Current Market Players who Promise Same Day Delivery (1/2)

Service Name

eBay Now

Google Shopping Express

Amazon Local Express Delivery

Time of Launch

Retailers Served*

July 2013

Target, Walgreen, The Home Depot, Guitar Center and Best Buy

September 2013

American Eagle, Staples, Walgreens, Target, Whole Foods Market and Costco

October 2009

Amazon.com

Offering Details Time – Less than 1 hour, orders placed by 9 pm (Monday – Saturday) or 6 pm (Sunday) for delivery within an hour Geo covered – San Francisco and San Jose, California and Manhattan, New York, Brooklyn, Queens in New York, the Bay Area peninsula, Chicago and Dallas Fee – USD 5 for an order value over USD 15

Time – Three to five hours Geo covered – San Francisco and Silicon Valley Fee – Six-month free trial membership (4.99 per store stop for non-members)

Time – Orders placed between 7 am – 12 pm (varies by city) for delivery by 8 pm Geo covered – Baltimore, Boston, Chicago, Indianapolis, Las Vegas, New York (and parts of New Jersey), Philadelphia, Phoenix, Seattle and Washington D.C. Fee – USD 8.99 per shipment + 99 cents per item; Prime members pay USD 3.99 per item (for order value over USD 5)

Source: Secondary Research, Sutherland Research and Analysis, * Indicative list

www.sutherlandglobal.com March 6, 2014

Current Market Players who Promise Same Day Delivery (2/2)

Service Name

Walmart to Go

Nordstrom Same-Day Delivery

Instacart

Time of Launch

October 2012

November 2011

2012

Retailers Served*

Walmart

Nordstrom

Safeway, Trader Joe's, Whole Foods and Costco

Offering Details Time – 4 hours, orders can be placed till 12 pm Geo covered – California, Virginia, Denver, and Philadelphia Fee – USD 5 to USD 10 (order value over USD 45 and depending on how tight is the delivery window chosen) Time – Orders placed by 1 pm for delivery by 7 pm Geo covered – Limited to West Coast cities Seattle, Bellevue, WA and La Jolla, CA Fee – USD 15 Time – 1 to 3 hour Geo covered – San Francisco, Oakland, Berkeley, Mountain View, Palo Alto, Menlo Park and Sunnyvale Fee – USD 14.99 for 1 hour delivery and USD 3.99 for three hour deliveries for grocery orders of at least USD 35 or USD 99 for a one-year subscription (known as Instacart Express)

Source: Secondary Research, Sutherland Research and Analysis, * Indicative list

www.sutherlandglobal.com March 6, 2014

What are the Industry Players and Experts Saying? (1/2)

“ ... Clearly there's been a race to get it faster and cheaper to the consumer, [who] is going to expect that they know when the package is going to arrive and ... to arrive fairly quickly ...” Ed Yruma, Retail Analyst, KeyBanc

“ ... We don't have a fleet of trucks. What we do is we use crowd source labor to go to existing local stores, pick up your groceries and make the deliveries ... You (our customers) don't have to find a babysitter, you don't have to grab a taxi, or you don't have to find parking ... ” Apoorva Mehta, CEO, Instacart

“ ... We see the service as another step Amazon is taking to shorten customers’ waiting time between order and delivery and to lower the frictions involved in eCommerce. When Amazon introduced Prime, it raised the order frequency for Prime shoppers—and we think the new delivery option could be one more lever for increasing order frequency ...” Imran Khan, Analyst at J.P. Morgan Chase

Source: Secondary Research, Sutherland Research and Analysis

www.sutherlandglobal.com March 6, 2014

What are the Industry Players and Experts Saying? (2/2)

“ ... This new service (express) brings the speed of the Web to the real world by helping you (customers) shop your favorite local stores online — in a single place — and get what you need delivered the same day ...” Tom Fallows, Product Management Director, Google Shopping Express “ ... We view Google Shopping Express as another step in the evolution of Google Shopping and potential move to a full-blown marketplace ...” Shawn Milne, Analyst, Janney Montgomery Scott “ ... If we can consolidate 20 retailers and get 200 or 300 deliveries a day in a single area, it lowers the cost ... at any given moment there's a driver two minutes away from everywhere, if we have a delivery person five minutes away from any retailer and five minutes from any consumer you can make it more economical ... ” John Donahoe, CEO, eBay

Source: Secondary Research, Sutherland Research and Analysis

www.sutherlandglobal.com March 6, 2014

Conclusion

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Online retailers have a cost friendly option of enhancing customer need by providing Same Day Delivery than opening up physical stores Brick and Mortar / Omnichannel retailers are embracing Same Day Delivery service to optimize their strategically located stores Mall operators are lending a helping hand to their tenants (stores) to maintain consistent sales volumes and thereby, maintaining mall occupancy Third parties like Google and Instacart are capitalizing on this retail trend to get a strong foot hold in the retail industry Local retailers can gain immensely from this service to increase sales by utilizing a developed delivery network Retailers in all forms will be able to create a strong service differentiation once their delivery network is developed

Source: Secondary Research, Sutherland Research and Analysis

www.sutherlandglobal.com March 6, 2014

End of Presentation