Two-Hour Delivery Becoming ‘One of the Expectations’ for Consumers

eCommerce Delivery

As Amazon, Walmart and other huge online marketplaces take more of consumers’ spending and offer faster delivery options, some consumers are increasingly coming to expect that their order will arrive within a day, if not the same afternoon.

“The problem is that for every other eCommerce company, with everyone wanting to sell through their own website, it’s really impossible to compete with that level of convenience at scale,” Ben Jones, founder and CEO of eCommerce fulfillment platform Ohi, told PYMNTS. “We know consumers want it; brands really have no good way to offer it.”

The answer, from Ohi’s perspective, is to partner with mid-market and enterprise direct-to-consumer (D2C) brands to provide a nationwide “micro-warehousing network,” so that items can be delivered within two hours in certain metro areas across the U.S. The company currently operates in four cities: New York, Chicago, San Francisco and Los Angeles. Ohi aims to operate in 25 cities by the end of next year, focusing on where brands have high concentrations of demand.

Jones said the company generally works with categories of “any type of product you might find in a CVS,” including beverages, pet food, beauty, health and other consumer-packaged goods.

“I don’t think anyone needed two-day delivery of anything, but as soon as you could get everything in two days, you wanted everything in two days,” he said. “And I think it’s the same trend. As consumers realize that it’s actually possible to order anything they want online and to get it in less than an hour, that starts to become one of the expectations.”

There’s no shortage of companies offering speedy delivery of products to consumers, including DoorDash, Gorillas, Gopuff and Instacart. Startup company Jokr was also formed earlier this year by former Delivery Hero executive Ralf Wenzel using a similar business model to Ohi — a network of small local warehouses offering a range of retail products to consumers.

Read more: Former Delivery Hero Exec Founds Jokr for Hyperlocal Delivery

Nearly 20% of consumers are making purchases at stores using online delivery aggregators such as Instacart more often now than they were last year, with 52% of shoppers recently making a purchase this way, according to PYMNTS research conducted in collaboration with Carat from Fiserv. Twenty-three percent of consumers say they’re also shopping more at online marketplaces other than Amazon more often than last year, with a total of 70% shopping this way.

See also: ‘Buy Now, Get Now’ and ‘Buy Now, Get Later’ Add New Dimensions to Bring-It-to-Me Economy

What sets Ohi apart, though, is the lack of a separate app or website for consumers. Rather than send customers to Ohi as a partner, two-hour delivery is available during the checkout process as a shipping option. Jones said he sees the company as “B to B to C,” or business to business to consumer.

“Our platform enables them (brands) to offer this really amazing post-purchase experience, everything from checkout all the way through to bag opening,” he said.

Cutting Costs

From a consumer standpoint, Jones said instant delivery is “just this amazing convenience and ‘surprise and delight’ experience” when they reach the point of checkout, which creates an incentive for customers to keep coming back.

“That translates into the lifetime value of those customers and revenue for the brand,” he said. “Instant really changes the dynamic of logistics away from just being a cost center and shifts it toward being a revenue driver for the brand.”

Jones noted that shipping through Ohi is generally cheaper for most brands than three- to five-day delivery, because the inventory is hyperlocal to the consumer. The “last mile” can account for as much as half of all delivery costs for brands, but because of Ohi’s micro-warehousing network, “we actually massively reduce that cost in the last mile.”

Related: 50% of Delivery Costs Occur in Last Mile, Putting Pressure on Transport Providers

Last month, Nancy Korayim, founder and CEO of last-mile delivery company Metrospeedy, told PYMNTS that she’s seen demand jump 150% since the pandemic began — and although consumers say free delivery is an important feature, “there’s no such thing as free delivery.”

“Someone is paying for the cost, and it’s usually the businesses that are absorbing the expense,” she explained.

Getting Even Faster

With $19 million in Series A funding closed in April, Jones said the company has been growing quickly, hiring new employees in preparation for next year’s expansion into new cities. The company is also getting ready to expand its product offering to include an option for delivery in under 20 minutes.

“We’ve seen all of these 15-minute, 20-minute grocery companies springing up recently,” Jones said. “I think it’s important, if we’re providing this world-class service to brands, that we keep up with that ever-evolving consumer expectation.”

What’s still unclear, he added, is whether brands will actually see a difference in consumer preferences for having an order delivered within 20 minutes or an hour.

“Everything we do is based on the data, and we saw extremely clear ROI differences between same-day and two-hour — massive beneficial differences for brands,” he said. “We will see if, once we launch 20 minutes, there is a similar benefit for brands.”