Same-day delivery may not have lived up to its full potential.1 Back in 2016, it looked as if fast delivery was ready to take off: same-day and instant delivery options were projected to reach a combined share of 20 to 25 percent of the market by 2025, and automated guided vehicles or drones would likely play a large role in parcel delivery.2 By the end of 2023, the world had taken a different path after the capacity constraints experienced during COVID-19 and the slowing down of funding for new same-day delivery business models.
Does this mean speed is no longer important? Not at all. It’s likely to grow sales and ensure repeat orders. But there are other factors at play, most notably customers’ growing preference for reliability over speed. In fact, the variety of delivery options, and the perceived quality of the delivery service, are major decision-making criteria for online customers.
Same-day delivery, where a customer places an e-commerce order and takes delivery of it within the same calendar day, is a small segment of the market. Our analysis suggests that in most countries, same-day accounts for less than 5 percent of the courier, express, and parcel (CEP) market. For instance, in France and Germany, approximately 1 percent of the CEP market offers same-day delivery. In Japan, the United Kingdom, and the United States, the proportion is somewhat higher at around 2 to 3 percent. In China, we estimate that the share is no higher than 4 percent overall, with 10 to 15 percent in intracity deliveries within major cities.
This article examines six variables that drive the potential for same-day delivery services. Combined, these conditions define the pace at which same-day delivery adoption may be approaching. However, retail, e-commerce, and parcel companies needn’t wait for variables to align before exploring faster delivery options. While companies keep an eye on market conditions, they might consider “24-hour delivery” as an alternative value proposition that resonates with customers’ desire for a variety of options that offer speed, reliability, and reasonable cost.3
1. Urban density: Same-day delivery is an urban pursuit
Almost all same-day delivery volumes are concentrated within cities—it’s an urban pursuit where population size and density are the most important variables to balance. Currently, only large metropoles can generate the demand and supply volumes to enable same-day services.1 In fact, many retailers, e-tailers, and parcel providers define their same-day offering at urban levels (rather than on a national scale) preferring regions with large pools of potential customers clustered in two or three densely populated urban areas. Serving more cities in each cluster would require hefty infrastructure investment.
2. Willingness to invest: Few retailers are large enough to build same-day networks
Theoretically, many e-tailers—from giants like Amazon to SMEs active in e-commerce—could offer same-day delivery services. But they may need to commit and invest if they are going to do so, especially if customers are reluctant to pay a premium for the offering. Removing grocery providers from the equation, our analysis shows that only the e-tailers with the highest market share in France, Germany, and the United Kingdom offer sizable same-day delivery services. As the top e-tailers or multichannel retailers in each market hold between 1.5 and 2.5 times the market share of their closest counterparts, we could assume that generally, very few retailers are likely to operate at a scale that enables them to build their own logistics networks—let alone for same-day delivery.
Same-day could become more affordable for high-volume retailers if they have local fulfillment capabilities that bring down the cost. They could also run loyalty programs, where same-day can be a differentiator and nurture customer loyalty. CEP companies can keep an eye on shifts in consumer behavior and changes in the retail landscape that indicate potential for same-day services.
3. Logistics enablers: Different models for different needs
Same-day delivery capability is reliant on the proximity of inventory to urban consumers. Retailers may bring products closer to their customers via a decentralized fulfillment center (FC) network comprised of smaller hubs that hug urban areas. Alternatively, they can consider tapping into new forms of urban logistics assets, such as e-commerce fulfillment in retail stores or in-city dark stores.
How retailers choose to narrow the last mile before delivery will vary depending on their scale of operations and logistics networks. Amazon, for example, has a decentralized FC footprint in the United States, while a multichannel retailer may typically use a ship-from-store model.1 e-Grocery delivery start-ups (also known as “quick commerce” companies) might establish dark stores to expand to same-day parcel delivery. And smaller local e-tailers may favor pooled fulfillment by partnering with an infrastructure or logistics provider.
Parcel carriers can keep tabs on large urban FC and microhub investments, a proliferation of ship-from-store offerings, multichannel retailers announcing pooled fulfillment offerings, and an uptick in delivery start-up partnerships.
4. Willingness to pay: Consumers prefer reliability over speed
Consumers show some excitement about the idea of same-day delivery, but seem to be more enthusiastic about precise delivery tracking; overall, to the consumer, reliability could be more important than delivery speed. In Germany, for instance, consumers are more interested in knowing exactly when their shipment will arrive than having it arrive on the same day. They are happy to pay a higher premium for a service that allows them to track their shipment and gives precise information on when it will arrive, narrowed down to a two-hour window.1
5. Order time: Most consumers miss the same-day cutoff, but delivery within 24 hours is achievable
Typically, only orders placed before one or two o’clock in the afternoon are considered eligible for same-day delivery. Orders tend to peak at around 10 a.m., and remain fairly consistent throughout the afternoon, which means that fewer than half of orders qualify for same-day.1 Extending the time limit is an option for boosting same-day orders, but it may require ramping up capacity by, for example, introducing increased automation.
Retailers could consider delivery within 24 hours of placing an order as a viable alternative to same-day delivery. An increasing number of parcel companies are offering such services to their highest volume shippers, usually in cases where retail shippers can pre-sort parcels and execute warehouse fulfillment very quickly. In this scenario, parcel companies can accept shipments before a late night or early morning cut-off time to achieve delivery of the order within 24 hours.
6. Urban regulations might play a role in same-day potential
Important community protections may influence the same-day delivery market. These include regulations on the use of autonomous delivery vehicles which could be used by same-day service providers. Air-quality regulations that impact the use of internal combustion engine (ICE) vehicles in cities, congestion control measures, and relatively new dark-store closures or limitations may also play a role in shaping the same-day delivery ecosystem.
Urban regulations are often set at a local level, so CEP companies might need to pay attention to regional regulations across their logistics chain. For instance, where CO2 emission controls are in place in a particular city, companies may commit to decarbonizing their fleets by 2030.
Same-day delivery in the future: Keep an eye on market shifts
Retailers, tech start-ups, e-commerce, and CEP companies looking to enter the same-day market could consider the following steps:
- Shift focus from same-day to within-24-hour delivery services. If customers demonstrate genuine excitement for 24-hour delivery times over same-day delivery, retailers can explore faster delivery offerings. Parcel delivery companies can use this as a basis to offer differentiated pricing, and present a convincing value proposition.
- Be selective and carve your own path. Carefully select the cities, product niches, shippers, and SKUs for which you offer same-day, bearing enabling factors in mind. Also, be mindful of following in the footsteps of leading e-tailers that have already established loyal customers.
- Extend your logistics networks through partnerships. One way forward could be to leverage partnerships with start-ups or established logistics providers to offer same-day for selected segments and customers.
- Keep an eye on indicators. Set up systematic monitoring of KPIs such as urban density and consumer willingness to pay, and look out for changes such as logistics companies moving their infrastructure closer to the consumer. Tracking these indicators could allow you to define the optimal moment to enter the same-day market, or—if you do not intend to offer same-day services—the right time to defend the value of your traditional delivery speed.