Should Zingerman's fear same day delivery?

Another day, another article about how someone is launching a same day delivery service. This time it's Google. They're going to compete with Amazon. Who's now also competing with eBay. And so on.

Should we be worried about any of this at Zingerman's Mail Order?

In general, it pays to be worried about Amazon. They understand retail, they have good service (as long as you don't want to talk to anyone) and they have the cash—and willingness to spend it—for experiments like no other company on earth. And I don't mean experiments like drone delivery. That was an emperors-new-clothes idea that won't happen, a PR stunt that, for some reason, the press fell for. Amazon may experiment in other difficult-to-copy ways, though, like creating local (human) delivery forces that directly compete with UPS and FedEx.

On the other hand, I have zero concerns about Google competing with us. Whatever is in their company DNA, giving good service to customers ain't it. Their adventures in retail have been mostly disasters, I don't expect this to be any different.

But thinking more generally, should a small online shopping company like ours be afraid of these experiments in same-day shipping? Should we be worried about all these super-fast delivery services since everything we ship takes a day or two to get anywhere? 

In the short term, no. Why? The answer lies is in how these companies make same-day delivery work.

To do same-day delivery you need very short lead times on the stuff you sell. The way you get very short lead times—I'm talking hours, not days—is by having all your final inventory on hand within a short drive of your customers, or making it to order, like a pizza shop makes pizzas to order. Make to order is out of the question for Amazon so they need inventory.

Same-day inventory must be reliable. When customers ask for it you need to have it on hand at that moment, you can't wait for it to be delivered to your warehouse tomorrow. To ensure reliable inventory without stocking gazillions of units of every item you need to be able to forecast demand very accurately. To do that you need demand to be steady. What kind of items are demanded steadily? Things people use all the time, like milk and toilet paper. And the greater number of people that use them, the more steady the demand becomes since it's averaged over a larger population. So the way to get really steady, forecastable demand, is to sell staple items to lots of people. In practice, that means Amazon is going to park a huge warehouses of paper towels next to huge cities like Chicago.

That tells you what sort of business they're out to compete against. They're going after grocery stores and smallware retailers. This is about saving people the hassle of driving, parking, finding, paying for and hauling their own essentials. If you're a small company that sells mostly commodity off-the-shelf items in a big city, you should be worried. But for those of us whose primary business is shipping hard-to-find gifts to suburbs it's not very relevant.

What about the long term, should we worry about that? Well, as they say in economics, in the long term we're all dead, so there's that. But generally speaking, anything that reduces barriers to buying online helps online sales. One of the biggest barriers to online sales is time. You can go get something at a nearby store faster than you can get it from an online store. To the extent that barrier is reduced—or removed—the more people will shop online. If some companies can offer it and we can't then we're in a worse position. That's a lot of ifs, and that's a lot of time—a lot can happen before they're answered. I'm happy to watch companies with deeper pockets than ours fight it out and figure it out first.

It's interesting to watch this version of retail history repeat itself. Delivering staple items is essentially a very old business model brought back to life. We used to have all kinds of everyday needs delivered like ice, milk, eggs and coal. Some companies, perhaps unaware that the 20th Century was happening, never stopped.

This kind of delivery used to exist primarily because people lacked personal transportation (which is why they're still around in some cities where many people don't have cars, like New York). Today, deliveries are returning mostly because the biggest, best retailers like Amazon don't have physical stores and, frankly, don't want to build them. We used to think of these internet retailers as national, then global. They still are. But with same-day delivery, Google and Amazon are now going deep local.

Recent Reading

Hormone free. Antibiotic free. How about mafia-free? A new way to label food.

Let me explain. No, there is not time, let me sum up: the mind boggling problems of the standard meat industry in 1,000 words. (Spoiler alert: you can avoid all this by eating no meat or paying more for it.)

Super fun: maps of America that answer questions like "What is your state worst at?"

Recent Reading

 Pigs in space! Bacon went up with the first astronauts. Hat tip to Joe Cap.

From the annals of "Things that Only Exists in New York City." Rich people pay this guy to sit in line and buy them donuts. Sorry, excuse me, Cro-nuts.

My upper peninsula, too.

A lesson in lean visual management from Michelangelo

The artist's visual grocery shopping list, circa 16th Century. Hat tip to Spike.

Food waste, guest opinion

I recently posted an article about Doug Rauch who's creating a restaurant based on "expired food." Robert Lambert, our source for marmalades, fruitcake and fruit syrups wrote a note I thought was worth sharing. Plus I love Robert and a good rant now and then, especially when it's true.

The piece about using expired food hit a lot of buttons for me, and forced me to comment. I’ve read that as much as 1/3 of our food is wasted because of those damn expiration dates. I was at my local market last week when the woman who’d been checked out before me came back into the store and said her bag of potato chips was expired. What the fuck could possibly happen to a potato chip?

At home I actually prefer expired cream, as it thickens and gets more like clotted cream. I rarely use eggs and can keep a carton for weeks, with no ill effect. I grew up in a time before dated foods—as the man says, you simply smelled it. People now seem to think "Best if used before ____. Use after ____ and it will kill you." An English friend says she only refrigerates her ketchup and mustard in America, because her friends here would be horrified if they saw it in her pantry, but she’d never do that in England. What on earth do they think is going to happen to ketchup and mustard?

The one question I’m asked by customers more than any other is, “How long will it last?” I never know what to say—it’s like, well, it’s preserved, that’s the whole point, it will last indefinitely, that’s the function of the process. It will be good for a very long time, probably years, until it isn’t any more, and at that point anyone with any brains should be able to tell. Nothing is going to suddenly turn into poison and kill you without warning. And as the man said, all cases of food poisoning are from unexpired foods.

It really is a case of overly zealous bureaucratic safeguards making people stupider. Nature builds in all the warnings you need, and it is our responsibility to be able to recognize them. I used to make a Coconut Dark Chocolate Sauce, stopped about 4 years ago, but kept a couple of jars in the closet. I opened one the other night, and while I know you might dispute that it was ever any good to begin with, it was unchanged, and delicious, and we had it for dessert. Had it been covered in mold and smelled bad, we probably wouldn’t have.

Pricing madness in health care, the worst run industry in America

 

I've written about how health care providers have two sets of books. There's one book with the prices for insured patients. And there's a second book with prices for uninsured patients.

I was wrong about that. Heath care providers don't have two sets of books. They have dozens. They set different prices for all kinds of different customers: insurance company A, insurance company B, Medicare, Medicaid, uninsured patients and so on. On top of that they have so many different prices for so many different procedures that no one can keep track of them all unless they're a billing specialist.

This has led to a couple bizarre outcomes. One is that there is a particular job for an expert billing specialist. It's called a coder. The entire job of a coder is to translate the procedure a doctor did into a code used to bill the insurance company. It is a full time job for thousands of people. People with this job get paid enough to own a house and raise a child. (I know this because my niece has this job.) Can you imagine another industry where this kind of cost waste would be allowed to exist? Can you imagine Apple hiring thousands of people who, after you ordered and received an iPhone, sat at home and checked the code on your order—only the code, not whether you ordered the correct phone, not whether it worked well, not whether you liked it, not anything at all other than making sure the correct code was billed? It's like a scene from Brazil, except it's real and it's how we run what's arguably one of the most important industries in our country.

Another outcome from this pricing madness is that there is no way for you and I to find out how much a medical procedure costs until we get the bill. You can't find out beforehand. Try it, ask someone. The nurse won't know, the doctor won't know, the administrator who charges your co-pay won't know, your insurance company won't know. Even my niece won't know; coders only know codes, not costs, and they're not on any Contact Us list anyway. None of these people will even know who to call to find out—I've tried, I've asked. So who knows? Actually, I have no idea, I've never figured it out. There's no other business I can think of where you can't find out what something costs before you buy it.

More reading on the terrifying inscrutability of American healthcare pricing:

My dog's healthcare is better than mine.

That gall bladder surgery could cost you $41,000. Or maybe $90,000. Hard to say.

The U.S. leads the world in health care expenditures (but not results).

The Worst Run Industry In America is my look at the American health care industry, its service, prices and promises, from my view as a merchant.

Did you mean that?

This bus stop ad for the Whitney museum's every-two-years art show appeared in New York this week. Clearly it wants to be make a point about being a discoverer versus being a follower. But the phrasing makes me feel like it's promoting overpaying and inconvenience today versus ubiquitous easy access tomorrow. Tomorrow sounds better, I think I'll wait thanks.