Online firms are plunging into same-day delivery again
WHEN veterans of the last dotcom boom name companies that epitomise the excesses of the late 1990s, they invariably include Webvan and Kozmo.com in their lists. Both promised to make it easy and cheap for people to order goods online and have them delivered swiftly. And both failed spectacularly after they discovered just how hard it is to make money trying to deliver on tight deadlines.
Now, three online giants that survived the dotcom bust are trying to succeed where those two firms failed. Amazon is leading the charge. It has launched AmazonFresh, a same-day delivery service, in San Francisco, Los Angeles and Seattle. “Place your order by 10am and have it by dinner,” it boasts. The service, which offers a selection of over 500,000 items including perishables such as milk and eggs, delivers its wares in garish green vans.
Google and eBay are in the vanguard too. Google Shopping Express offers same-day delivery in the San Francisco Bay Area, as does eBay Now, which is also available in Chicago, Dallas and New York. The two firms are in partnership with big retail chains and smaller local shops, which hold stock that they can tap into.
Delivery startups such as Instacart and Postmates are also working closely with retailers to avoid the fate of Webvan, which squandered a fortune building its own warehouses. Instacart, which focuses on groceries, relies on freelance “personal shoppers” who use their own vehicles to collect and deliver goods. An Instacart smartphone app tells them which shops to visit, what to pick up and where to take it. Working out delivery schedules and routes is “a really challenging data-science problem”, explains Apoorva Mehta, the firm’s boss and a former Amazon employee.
Sofa-bound shoppers now have a plethora of options. In San Francisco and Los Angeles, Amazon offers a 30-day free trial of AmazonFresh, after which customers pay $299 for a year’s membership. Members get free shipping on orders of more than $35. In Seattle, there is no annual fee, but orders worth less than $100 incur charges. Google Shopping Express, which has a much smaller selection of wares, is offering a six-month free trial while it decides what to charge; and Instacart gives customers various options, including a $3.99 fee for delivery in less than two hours and an Amazon-like $99 annual membership that eliminates fees on orders worth more than $35.
Your correspondent placed orders with all three of the big online firms, and everything turned up on time and in good condition. There were only minor hitches. His Google order came in two separate deliveries. And it was difficult to find details on AmazonFresh’s webpage of how a dissatisfied customer could avoid incurring the $299 fee at the end of a trial period. (Amazon’s customer-service department replied promptly when e-mailed asking for an explanation.)
Most competitors in the same-day business are focusing on cities with lots of rich consumers prepared to pay for time-saving services. But turning a profit will still not be easy. Andrew Schmahl of Strategy&, a consulting firm, says a survey of 1,000 American online shoppers it conducted last year showed most were reluctant to pay anywhere near enough to cover the cost of speedy deliveries. That may explain why other retailers have been hesitant to enter the business.
Firms such as Google and Amazon may be willing to lose money on deliveries if the data they glean about people’s shopping habits let them aim their online ads more effectively. Amazon could also use its vans to deliver packages that it currently sends through courier firms such as UPS. The e-commerce giant is certainly doing whatever it can to make swift online shopping easier. It recently unveiled the Dash, a wand-like device that lets customers build their online orders by scanning barcodes on empty packets or jars, or by speaking into the wand’s built-in microphone. The trick will be to turn such tech wizardry into magical profits.