The same-day shipping revolution has come to DTC brands

In the last four months, Skims, Todd Snyder, Untuckit and Abercrombie & Fitch have launched same-day delivery services, mostly in partnership with third parties like Shippit and Uber. And that number will likely continue to grow. According to a survey from retail fulfillment company Bringg of 500 retailers from the U.S., the U.K., Canada, Germany, France and Italy, 99% of respondents said they will have same-day delivery by 2025.

Barely more than a third of companies surveyed by Bringg, however, said they have the technology to do same-day delivery themselves, with the rest citing the lack of technological or financial resources necessary. Companies like Amazon and Walmart have the resources needed to set up expensive same-day delivery infrastructure internally, and with more DTC brands trying to tap into the market, third-party fulfillment services will be even more important.

Skims, for example, is working with Uber and a company called RandemRetail for its two-hour delivery service. For now, the service is limited to only a 10-mile radius in the Los Angeles area and a 500-SKU subsection of the brand’s product catalog. Skims co-founder Jens Grede said that micro-warehousing, using small storage units of inventory around the city and having Uber drivers pick the packages up from there, was the only way to get something like this off the ground.

“Two-hour delivery will allow us to bridge the convenience of e-commerce with the instant gratification of in-person retail,” Grede said.

Other brands have similarly started same-day services in a limited capacity. Todd Snyder, which began offering same-day shipping in January, keeps it limited to New York City.

Nick Blanchett, CTO and co-founder of Ohi, which provides same-day delivery to DTC brands like Untuckit, said that same-day delivery capabilities have radically evolved in the last few years.

“It’s quickly becoming a necessity,” Blanchett said. “Even smaller brands are expected to have a premium post-purchase experience, whether that’s same-day delivery or elevated packaging.”

According to Blanchett, the ecosystem of services for DTC brands through places like Shopify has evolved in recent years. Brands that use Shopify, which has grown to include tens of thousands of partners like Ohi and RandemRetail, have easy access to the technology and services that make same-day delivery possible. Additionally, the rise of gig economy jobs including driving for Uber and delivering for DoorDash has helped solve last-minute problems for same-day delivery. Ten years ago, a same-day delivery would have cost $40-$50 in shipping. Now, thanks to the infrastructure of companies like Uber, costs have come down to around $10, much more manageable for smaller brands.

“The retail industry is reinventing itself and adjusting its fulfillment operations to the current market eruptions which are paving the way for cost-effective fast fulfillment,” said Guy Bloch, CEO of Bringg, which works with companies such as Walmart and Uber on fulfilling same-day orders.

Blanchett said there is still a minimum size DTC brands need to be to make same-day work. If you’re selling a few hundred products a month, it probably doesn’t make sense to invest in the amount of inventory required for same-day shipping. Blanchett said a minimum of around 3,000 orders a month — but ideally, 5,000 – -is needed for same-day to become viable. Brands should have at least 1,000 pieces of inventory for each micro-fulfillment center wherever they’re offering same-day, he said, which precludes the smallest brands until they grow their audience and inventory.

If brands can meet those minimum requirements, Blanchett said same-day shipping can cost less than typical shipping through UPS or FedEx. But it also leads to the biggest challenge with same-day shipping right now: meeting those inventory minimums in the first place.

A DTC brand like Skims, which made $275 million last year, can easily meet those minimums. But with ongoing supply chain disruptions around the world, smaller brands can find their inventory stretched thin between allocating enough to same-day shipping, supplying any brick-and-mortar stores they own with products and filling wholesale orders, if they have any.

“Things like port congestion in L.A. mostly affects brands’ ability to get inventory and has less impact on the last mile, which is where most of the same-day shipping infrastructure is focused,” Blanchett said. “But the rise in gas prices is having an impact on same-day because it’s reliant on drivers.”