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EcommerceBytes-NewsFlash, Number 3264 - February 18, 2014 - ISSN 1539-5065    1 of 4

eBay and USPS Cast Doubts on Same Day Delivery Model

By Ina Steiner
EcommerceBytes.com
February 18, 2014




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There are signs that same-day delivery may not be as winning a model as some had hoped. The USPS suspended one of two pilot programs called Metro Post due to a lack of participation from retailers, and eBay CEO John Donahoe recently downplayed the company's same-day delivery service eBay Now during a presentation to Wall Street analysts.

However, the USPS Office of Inspector General (OIG) is concerned about a movement it calls "crowdshipping" that retailers use to deliver same-day orders to their customers.

eBay's CEO was speaking at the Goldman Sachs Technology and Internet Conference on Wednesday when he said eBay Now had received more media attention than warranted, and he cautioned analysts about how to think about the demand for same-day delivery.

Donahoe explained the reason eBay launched eBay Now was because of a request by two eBay Enterprise clients. A couple of large retailers said they needed to provide same-day delivery capabilities but believed no one retailer could do it on their own. "Could you guys help us aggregate," they asked eBay.

"We proved you could make the logistics on same-day delivery, in fact, we were going to make one-hour delivery work pretty well," Donahoe said. But in order to scale the service, eBay needed to get the delivery costs down, and the best way eBay saw to do that was to use what Donahoe called "sharing economy" economics in order to use excess delivery capacity. eBay acquired UK startup Shutl that had the "best third-party marketplace software" for vetted delivery people, he said.

However, "This isn't a service that we want to provide our retail partners. It's not a major business line that we're going to try to - an independent business line we're going to try to grow." eBay is proving it can work so retailers can offer that to their consumers, Donahoe explained.

When asked how big same-day delivery could become for ecommerce in the U.S., Donahoe said he didn't know, and didn't think anyone really knew. "The way we look at it is, consumers - all of us - consumers will want a choice," and he described various ways consumers could order and obtain items online, via mobile and in-store.

"We're trying to build a set of capabilities to give consumers choice. I think same-day delivery will be a piece of the equation. One slight caution I would have is, it's easy for each of us to project our own experiences."

"In this room, by and large, we have money but no time," the CEO said. "So the notion of shopping quick - we may or may not like shopping - but that's really appealing. The bulk of consumers either have more time than money, so they're willing to search for value, and convenience is one of the criteria but value is a much bigger criteria, or two, they like shopping. Shopping is entertainment."

Convenience is one of the factors, but it's not the only factor, he said. "So I think it's important not to just project the attributes of everyone in this room as that being the market, because the biggest part of the market likes shopping and is looking for value. It's not either or," he said.

Meanwhile, the U.S. Postal Service is also piloting a same-day delivery service in two cities in a program called Metro Post. However, it is suspending the test in one city on March 1st.

An OIG report explained that the Postal Service had expected to enter into agreements with several large retailers, but only one large retailer agreed to participate in the San Francisco pilot and later withdrew prior to implementation due other operational priorities.

Nevertheless the OIG is concerned that same-day delivery services are cutting out the Postal Service in favor of a new class of logistics known as "crowdshipping" or "crowdsourced" delivery. In a report published last week, the OIG said the movement is still in its early stages. "As it matures, it may have profound implications for the Postal Service."

About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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