The Challenge of Same-Day Delivery
Recently eBay made headlines over rumors it was preparing to kill its same-day delivery service, eBay Now. The company denied that it intends to make that move, but it has shelved its plans to expand the service to 25 cities by the end of the year.
"It's very hard and expensive," Daphne Carmeli, chief executive of Deliv, a same-day delivery startup based in Silicon Valley, tells Inc. in an interview. Not only has eBay been paying too much for couriers, Carmeli says, its process isn't efficient and not enough people have been using it.
Small retailers face a similar dliemma. They need to lure customers to their online or physical store, and they have to get orders out fast. Trouble is, many don't have the resources or capital necessary to develop such a service.
"If you're selling something for $20 or $30 and you're paying minimum wage [to your courier], I would assume the margins are pretty thin," says Kerry Rice, an analyst with investment bank Needham & Company. "You really start to eat into what's profitable."
Here are a few of the challenges that stand in the way of same-day delivery becoming viable for small businesses.
No Planning Process
Perhaps the biggest issue is that there's no process for anticipating orders from customers, says Bruce Welty, chief executive of Quiet Logistics, a Wilmington, Massachusetts-based fulfillment provider for high-end fashion brands such as Zara. "You have to get things out quickly and this can be quite daunting, especially if you're in the clothing or shoe business, because they have multiple sizes."
It's one thing to send out an order in days, but trying to fill it yourself in under an hour is overwhelming. And hiring a team of couriers is just too expensive. That "would require a lot of customers, and then [the companies] need scale." Rice says. To that end, boutiques may have to rely on fulfillment houses, which may be out of their budget. Alternately, small businesses might partner with startups that specialize in delivery service to cover their needs locally.
Speaking of local, it's often better for businesses to start small because they can turn to regional delivery companies that are able to carry out orders. However, if they're hoping to roll out service on a global or national scale, it can be quite expensive to do anything by air "unless you have really high-priced products," Welty warns. Also, "when you get into widely dispersed delivery, it gets really difficult to figure out."
Finding Great Drivers
For Zifty co-founder Todd Miller, the biggest challenge of launching the Atlanta-based online delivery service was finding great drivers. "The only face of our business is the driver that shows up at the door," he says. "We hire one person out of every 50 or 60 applications." His couriers also work full-time and receive benefits such as a 401(k) with a match, as well as health benefits with a low monthly co-pay. "That status affords us people who are actually dedicated," Miller says.
Being on Time
In the same-day delivery space, timing is everything and customers want to know when their orders are coming. "The longer the delivery time, the less likely customers are to follow through" with a purchase, Miller says. Customers also love tools that let them track orders in real-time. Zifty, for example, offers a widget known as the Zifty Tracker, which "informs customers of all the things it takes to get these items to them," including the distance traveled and fuel consumption, says Jennifer Pate, the company's other co-founder.
Stores within malls are experimenting with ways to make inventory available for same-day delivery, Welty says. These locations pose their own set of challenges, however, because "their inventory is not always accurate" in the system, making it hard for workers to find items. This also might cause issues when customers are shopping, as they'll want to know precisely what's in stock, while store owners will need to keep track of what's coming and going.
A Seamless Experience
Customers want the least amount of hassle when they're shopping online, Carmeli says. That means not having a middleman to pick up and deliver orders, as eBay Now does, and providing a seamless online purchasing experience. For example, on the sites Deliv partners with, its service appears as an option at checkout, much in the way FedEx and UPS ground shipping do. This is something retailers want, too. "They do not want someone getting in between them and their customer," Carmeli adds. After all, so much of what consumers buy is being tracked, and that's valuable data they can't afford to give up.
JILL KRASNY | Staff Writer
Jill Krasny is a staff writer for Inc. magazine, where she covers the intersection of entertainment and startups. Prior to Inc., she was a writer for MTV and Esquire and an editor at TheStreet. She is a graduate of the University of Southern California with a degree in communication. She lives in New York City.