How Fast (Delivery) Became Slow
If you live in NYC and discover just one egg in your fridge, there is always Buyk or Gopuff. As two of the newest firms in fast delivery, they can be at your door in less than 30 minutes. Because they sprinkle the city with micro-hubs that stock 1500 to 5,000 items, their travel time is tiny.
Micro-hub employees at Buyk wear a scanner ring with which they scan every item they pack:
21st Century Fast Delivery
Just 17 years ago, Amazon was mostly a book and CD seller. To get their free Super Saver Shipping, we had a $25 minimum order and an 8 to 10-day delivery wait. For an extra $9.48, we could get two-day delivery. One day was $16.48.
But then, during February 2005, they offered us Amazon Prime two day delivery for $79.00 (yes, a prime number). You can see the downward plunge in delivery time:
But still, in 2015, 63% of us agreed that fast shipping took three to four days:
Techcrunch tells us that “free” just got faster. After announcing limited same-day Prime in 2016, Amazon now offers it in 12 metro areas. By same day, they mean as little as five hours. So I suspect all of the surveys about what is fast have rapidly become outdated.
Compared to other countries, in the U.S. we really care about fast:
Still, given the choice, according to this 2021 McKinsey survey, many of us take free over faster:
19th Century Fast Delivery
In 1861, 10 days became the 19th century idea of coast-to-coast fast delivery. However, only a select few could afford it. To send a half-ounce letter, the Pony Express $1 rate was the equivalent of $31.90 today:
For packages, the alternative was Wells Fargo. No not yet an investment bank, Wells, Fargo & Co. was created by Henry Wells and William Fargo in 1852. Once the first transcontinental railroad was completed in 1869, they could move mail and packages across the country in as little as one week.
Our Bottom Line: Reference Points
Looking at what we call fast delivery, behavioral economists would say that our reference points have shifted.
To see what they mean, I always like a gas price example. When the price per gallon is dropping from $3.00 to $2.75, we think gas is cheap. However, when the price rises from $2.50 to $2.75, the same amount can feel expensive. The reason? The context or frame for our decision has changed. It has a different reference point.
For delivery, we can look back to Amazon Prime. Before February 2005, our delivery reference point was far longer than two days. But then, it all changed. And now, we can add 30 minutes to our expectations.
My sources and more: For the speediest deliveries, the NY Times and Techcrunch had the stories. Next, do look at Atlas Obscura McKinsey, and Deloitte’s annual holiday consumer shopping survey. After that, if you want to read more about reference points, anchoring, and behavioral economics, I recommend Nobel Laureate Daniel Kahneman’s excellent Thinking Fast and Slow. And finally, Arriving Today is the captivating (really) read if you want to know all about package delivery.
Please note that several sentences from today were in a past econlife post and our featured image is from Ross Franklin/AP via Techcrunch. Also, whenever we say free delivery, as economists, we know there is no such thing (TANSTAAFL).
Originally published at https://econlife.com on January 10, 2022.