eBay Now / Same-day Shuts Down, Who’s Next? Why eBay Bowing Out Does Not Spell the End of the Hype Around Same-Day Delivery
eBay recently announced they’re shuttering their same-day delivery offering, eBay Now (http://finance.yahoo.com/news/ebay-stops-the-clock-on-1-hour-delivery-142950607.html ). Re/code also pointed out that Google is losing some executives in their same-day offering Google Express (http://recode.net/2015/05/19/googles-e-commerce-plans-are-in-question-as-executive-departures-mount/ ). Does this indicate the beginning of the end of the same-day delivery hype? Is Google Express next to bow out? I’m saying no to both questions, and here’s why.
eBay Now ran a flawed and expensive delivery model from day one. eBay Now paid their drivers to enter retail stores, purchase an item, and then deliver it, all in less than one hour. That was a very high-cost model, since eBay picked up the entire cost of fulfillment and delivery. The one-hour service level also limited eBay’s ability to reduce costs by building routes and comingling packages. Add in the retrenching efforts at eBay, and it looks like they had the wrong model and no appetite for fixing that model.
Google Express does share some unsustainable characteristics (they cover the cost of picking inventory out of local stores), but they also have operational and volume advantages that eBay Now never did. Google Express offers a scheduled same-day delivery which is about 40 percent less expensive than eBay Now’s on-demand offering because they can establish efficient routes. They also are using their significant heft to work on retail partnerships to eliminate their fulfillment costs and are considering alternative delivery models to lower costs, such as comingling orders with existing local carriers. Google Express is also an important part of Google’s overall e-commerce strategy, as it brings retailers who don’t offer that service into the fold. Expect Google Express to stay in the game with some further changes to improve sustainability.
As far as the same-day delivery hype, with Amazon relentlessly pushing toward same-day as their standard, rising customer expectations, and continued investment in this space, the hype isn’t going away anytime soon.