For all the sophisticated algorithms involved in same-day delivery, many of the services ultimately come down to the delivery guy

November 23, 2013

In War for Same-Day Delivery, Racing Madly to Go Last Mile


There’s a hot new job in tech: delivery guy. As the holiday shopping season gets underway, same-day delivery has become a new battleground for e-commerce. For all the sophisticated algorithms and proprietary logistics software involved, many services come down to someone like Fermin Andujar, who finds himself racing to a store, scanning the aisles for the requested items, buying them and rushing them to the customer.According to eBay’s job description, he is a “valet,” dispatched on Manhattan streets as a personal shopper on a bicycle or in other cities in a car.

The app for eBay Now, the company’s local shopping service, promises that valets will complete a shop-and-drop-off not just in the same day but “in about an hour,” a timetable crucial to the company’s intensifying efforts to one-up Amazon in the delivery game.

It wasn’t so long ago that overnight delivery seemed amazing enough. Then Amazon started building huge warehouses — what it calls “fulfillment centers” — near major cities to be, in a spokeswoman’s words, “as close to customers as possible.” With 40 such centers in the United States encompassing more than 80 million square feet of storage space and employing 20,000 full-time workers, Amazon offers same-day delivery in 11 cities.

EBay, which last month announced plans to expand eBay Now to 25 cities, and other businesses, including Google’s nascent shopping service and start-ups like Deliv, have a different model: Use existing stores or “retail partners” as distribution centers and beat Amazon in the race against the clock.

Which brings us back to Mr. Andujar. A lean, imperturbable 19-year-old, he has dealt with a lot. Weather. Traffic. Bulky seasonal purchases like air-conditioners or humidifiers and space heaters that require subways, cabs or even the help of another valet. He has delivered to customers in strange places, like bars.

He has had to call customers middelivery, as he did from Target the other day to report that the boots she had ordered did not come in tan in size 7 1/2. (She agreed to black instead.)

That personal, labor-intensive approach doesn’t translate easily into profit. “You just can’t get any hourly worker at Popeyes to do this — you need someone with a work ethic and a sense of urgency and a willingness to go out of the standard operating procedure to delight the customer,” said Sucharita Mulpuru, a retail analyst at Forrester Research. “It is an H.R. issue, not a tech issue. Many of these companies are coming at it from a tech standpoint.”

On a recent afternoon, Mr. Andujar was waiting in eBay’s “valet lounge,” when his iPhone emitted a hornlike blast. A three-item order had come in for Babies “R” Us, listed on his screen in daunting specificity:

1 Philips Avent nine-ounce BPA-free natural polypropylene bottles, pink, three-pack.

1 Huggies Little Snugglers jumbo — Size 1 — 40 count.

1 Carter’s super soft dot changing pad cover — ecru.

The store was downtown. The customer was uptown.

Mr. Andujar strapped on a giant backpack and sped off on his single-speed bicycle through city traffic. Five minutes later, he locked his bike to a bus stop sign. (In most other cities, the valets drive cars.)

With an assurance atypical of a 19-year-old man in a baby supply store, he strode straight to the baby bottle aisle and located the requisite Avent three-pack. Next stop, the diaper aisle. A few minutes later, the Huggies and changing pad cover were in his hands.

Adjusting the teetering stack of merchandise in his arms, he headed to the next stage of his mission: standing in line.

Six customers were ahead of him. He waited calmly, paid quickly with a company credit card (total $64.53), placed the goods in his backpack, and started pedaling uptown.

With about 10 minutes to spare, Mr. Andujar arrived at his destination, where the customer, Karen Horowitz, was waiting in her ninth-floor apartment while her 5-week-old baby napped.

Ms. Horowitz said she had decided to try eBay Now, which costs $5 a delivery and requires a minimum order of $25, after friends recommended it. She loved a feature on the app that let her track the valet. “I was watching her on the monitor,” she said of her sleeping daughter, “and him en route. I was really surprised how fast he was.”

While it seemed unlikely that eBay could make money on orders like this one, Ms. Mulpuru said a longer-range goal would be “locking in” that customer, and indeed, Ms. Horowitz said she would order again.

“One thing Amazon has done very successfully,” Ms. Mulpuru said, “is they’ve owned the entire value chain. They’ve owned the last mile, the moment that matters. That moment is when the package arrives.”

She concluded: “Once you can own the moment that matters, you build a loyal customer base.”

Years ago, similar endeavors imploded. Webvan, UrbanFetch and Kozmo (which was backed by a $60 million investment from Amazon) were seen as follies of the early dot-com era, brought down by high labor costs and unrealistic pricing.

Today companies are scrambling to find the right new formula. Deliv uses a crowdsourcing approach, tapping students, real estate agents, aspiring actors and others with spare time and a vehicle. EBay recently announced plans to acquire for an undisclosed price Shutl, a London company that uses technology to pair couriers at hundreds of firms with local orders for delivery. Postmates, a start-up that operates in New York, San Francisco and Seattle, has been adding 100 to 200 couriers a week, but it recently instituted “surge pricing,” higher prices for customers, when demand for deliveries outstrips the supply of couriers.

Daphne Carmeli, Deliv’s founder and chief executive, said she thought the high concentration of big national retailers in shopping malls made them targets for growth.

“If you look at the top 100 retailers in country, they have 100,000 points of distribution,” she said. “They have a square footage that dwarfs Amazon.”

Deliv recently signed an agreement with General Growth Properties, a large mall operator, to execute same-hour and same-day scheduled deliveries from stores in four of its malls. More, Ms. Carmeli said, will follow.

To entice customers during the holiday crunch, eBay Now plans to waive the $5 delivery fee from Sunday through Dec. 24 and extend the service’s hours Dec. 16 through 23.

“Consumers expect to be able to shop anytime, anywhere,” said Deborah Sharkey, an eBay vice president, “and immediate delivery is a logical extension of that immediate gratification.”

Kozmo is even hinting of a return: “Remember us?” says the website “We’re relaunching soon with the vision to fulfill your online order incredibly fast, and on-demand.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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