The massive consumer rush to buy stuff online has created some real-world logistical problems -- problems that some start-ups hope to solve.
Making E-commerce Easier
The massive consumer rush to buy stuff online has created some real-world logistical problems -- problems these start-ups hope to solve
Shopping on the Web is pretty simple. You just point and click -- and wait.
Sure, the Web gives you endless variety, terrific deals, and 24-7 convenience. But when it comes to actually delivering the goods, E-commerce isn't quite as fast and painless as the hype would have us believe. For some consumers, ordering on the Web just isn't worth the hassle. 30% of Internet shoppers have cut back on their online purchasing because they don't like having to wait for orders to be delivered, reports the Yankee Group.
With such a big chunk of the E-commerce market at stake, there's plenty of incentive to make Internet delivery radically simpler and quicker, and a new crop of Web-based start-ups is aiming to do just that.
I want it, and I want it now
In the brick-and-mortar world, instant gratification is something we take for granted. You walk into a store, and you walk out with the merchandise you want. So it's no surprise that consumers want the same immediacy with E-commerce. Call it the Kozmo.com phenomenon, after the well-known Internet service that delivers snack food, videos, books, and CDs within an hour to time-starved -- or maybe just lazy -- urbanites.
Kozmo.com isn't the only start-up focused on shrinking delivery times. Sameday.com, based in Los Angeles, strives to give any Internet retailer a way to deliver products to customers on -- you guessed it -- the same day those products were ordered. In 1998 founder, president, and CEO Alex Nesbitt, with backing from Bill Gross's Idealab, launched what was then called Shipper.com to offer next-day delivery to E-commerce companies. He changed the company's name and focus after realizing that the demand for same-day delivery was even bigger.
To deliver that quick turnaround, Nesbitt has bet on a system of large, centralized warehouses in which the company's customers maintain inventories of their most popular products. The company launched in Los Angeles last year and now, with 36 warehouses around the country, offers ultrafast delivery in New York, Chicago, San Francisco, Memphis, and the Dallas-Fort Worth area.
When retailers link their E-commerce sites to the Sameday.com site, Sameday.com becomes one of several shipping options that buyers can choose from. Sameday.com also has its own Internet mall, where Web shoppers in Los Angeles, for instance, can order baked goods, books, music, toys, gifts, and electronics from the company or its partners. Picking, packing, and shipping charges are in the $6-to-$8 range, a slight premium above traditional second-day shipping. The start-up also charges retailers additional fees for receiving and storing inventory.
As Nesbitt sees it, aggregating deliveries from one central warehouse is the key to keeping delivery prices low. But rolling out the service hasn't been cheap. So far he's raised $25 million in three rounds of venture capital; he aims to break even sometime in 2002. To do that, he says, Sameday.com will have to gross $200 million from 20 million deliveries a year.
On a recent Thursday in Los Angeles, the company made just 200 deliveries. But Nesbitt is confident that demand for his service will grow. "The question for E-commerce companies is, how do they make that instant gratification available at a cost point that consumers find attractive?" he says. "We bring the cost of speed down dramatically."
The online strip mall
Whereas Sameday.com is about time, WhyRunOut.com is about convenience. Grocery shopping, dry-cleaning retrieval, film drop-offs, video pickups and returns -- WhyRunOut.com aims to unburden people of the mundane tasks that so often eat up a perfectly good Saturday morning. Unlike most Internet grocers such as Webvan or Peapod, however, WhyRunOut.com offers same-day delivery: order by noon at the WhyRunOut.com Web site, and you get your groceries and other goodies in the afternoon or evening.
And unlike Sameday.com, WhyRunOut.com manages speedy response without a central warehouse. Instead, the company teams up with local merchants. WhyRunOut.com's professional "shoppers" fill orders at a number of stores, then deliver goods and services straight to the customers.
WhyRunOut.com collects fees from retailers and charges consumers for each delivery. "Our target segment, busy suburban families, would rather trade money for time," says founder Dan Frahm. What about the cost of paying people to roam the aisles and wait in checkout lines? Frahm admits that his model misses some of the efficiencies of a central warehouse. But, he points out, grocery stores are already fully stocked with merchandise and located close to consumers' homes. "Yes, there's some labor there, but it's half what you have if you set up your own warehouse system," he says.
Frahm started WhyRunOut.com in 1998 with $50,000 in savings, at first doing the shopping and schlepping himself to hone the concept. Lately, the company has been operating in beta-test mode, with 30 employees and fewer than 1,000 customers in its home territory of Orange County, Calif. Currently, Frahm is seeking venture funding to underwrite a marketing campaign.
One thing that's helped, he says, is being able to ride the coattails of some better-known Internet grocers. "Customers know that home delivery is out there, and other Web grocers helped make it an acceptable way of life, which we could never have done on our own."
Look, Ma, No PC
These days you don't even have to have a computer to shop the Internet. At least that's the aim of Vistify. Founded in Phoenix in April 1999 and now located in San Francisco, the company focuses on the household-replenishment market -- or, in plain English, goods such as groceries, personal-care products, and housewares.
Instead of ordering on a PC, users can choose products by touching pictures on the screen of an Internet appliance that might sit on their kitchen countertop. (Vistify has developed its own streamlined, Jetsons-esque prototype. The company also plans to offer its service on TV screens, among other media.) Vistify itself won't sell products or deliver them, says chief marketing officer and cofounder Menekse Gencer; instead, it will offer goods through partnerships with other providers, such as Internet grocers and delivery services. At press time, the company was planning a trial rollout for the end of the year, in Colorado.
For those who can't wait for their Internet appliance, there's Quixi, launched in New York City in October 1999 by Evan Marwell and Robert Pines. Quixi lets users shop the Web through their cell phone and a live, human intermediary who searches for information and makes purchases online using the subscriber's stored (and privacy-protected) credit-card number and delivery information. Users pay $19.95 a month, plus some additional transaction charges. Quixi receives 5% to 10% of revenues from each online sale that it processes.
