Why a Renaissance in Local Delivery Points to a Resurgent Main Street

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When Kozmo.com shuttered in the spring of 2001, it was posterboy of the dot-com era’s excess. The same-day delivery service, which had launched three years earlier, was bloated: it managed a 1,000-plus-person workforce in nine markets and was hemorrhaging capital. In addition to the notable absence of a revenue model, the company was essentially trying to build in 2001 what Amazon has yet to build today: a hyperlocally scaled e-commerce operation.

Amazon still wavers on the model. In early summer, reports surfaced that the e-commerce giant was planning to pursue same-day delivery as a tentpole of its strategy moving forward. But the rumors were quickly quieted by Tom Szukutak, the company’s CFO, who told investors on the Q2 earnings call that the company did not ”really see a way to do same-day delivery on a broad scale economically.”

Fast forward to October, and we’re seeing an explosion of activity in the logistics space with a handful of key startups expanding; Walmart piloting a same-day delivery option; and eBay opening its own service, eBay Now. What’s driving the resurgence however, is not the e-commerce framework that sunk Kozmo and continues to hinder Amazon’s efforts. It’s a new push to improve connectivity, and transparency, within existing local marketplaces — not build new ones.

“What we’re doing is basically redistributing an infrastructure that’s in a city; we’re a simple marketplace,” Bastian Lehmann, CEO of Postmates told me in an interview. The company, which expanded into groceries earlier this month with an update to its Get It Now service, draws on a pool of crowd-sourced couriers — similar to Taskrabbit — to pick up, pay for, and deliver food and merchandise to anyone located in San Francisco. “The goal is to try to understand the inventory in city in the same way that Amazon understands what they have in their warehouse,” Lehmann explained.

But it’s the information problem behind inventory, not necessarily the logistics of bringing the inventory to consumers, that’s the major hurdle for services like Postmates today. The company currently manages the majority of the inventory information for the businesses on its platform manually (via a data entry team), but plans to launch a merchant-facing product which will allow businesses to keep their own inventory up-to-date. But for a company that positions its ability to deliver from business without pre-existing agreements as a major catalyst for scale, the inventory channel — whether via data entry or merchant relationship — will likely prove a major impediment to growth.

Part of the problem is that the current models for collecting and sharing local information — namely, crowd-sourcing (Foursquare and Yelp), aggregation (Factual) and distribution/publishing networks (SinglePlatform and Yext) — are largely inapplicable for the complex and time-sensitive nature of inventory information. While availability may not be a major issue in the restaurant vertical, retail inventory fluctuates and the value proposition for same-day delivery relies on absolute transparency of product (you need to know what’s available at the time of the order, and need to make sure it remains available until the courier makes the pickup). Inevitably, inventory data is too fragmented and fluid to rely on human management; it needs to be passed along programmatically through integrations with the point of sale and inventory management tools used by local businesses.

Tom Allason, CEO of Shutl, a UK-based startup that provides a branded delivery solution for retailers similar to the way paypal services payments, says that adoption of these connected inventory systems is improving. “There were pretty much no retailers in the UK who had [accessible inventory] five years ago; maybe a handful three years ago; and maybe thirty who got it last year,” Allason told me Monday. “But there’s not a single retailer that you talk to that doesn’t have a plan on getting [accessible inventory], whether it’s tomorrow or a few years down the road.”

Peter Christensen, the director of marketing at Retailigence, which aggregates and distributes inventory data to mobile applications, says the early success of online-to-in-store pickup programs run at Walmart and Target will likely push others larger retailers to begin to upgrade existing inventory systems.

In many ways, same-day delivery is a leading indicator for an emerging, and potentially dominant, sector in the hyperlocal industry built on top of a connected local inventory. Whether its fulfillment (same-day delivery or in-store pickup) or search and discovery, the inventory layer is a critical next step in creating parity between the local and remote (e-commerce) marketplaces. That process began with business information – place data, hours of operation, reviews etc – and, with the advent of GPS-enabled smartphones, has expanded to consumer location. But it’s real-time inventory, and the services built on top of it, which still makes Amazon a better marketplace than main street.

Fixing that is a matter of when, not if, says Allason. “You’ve got eBay and Google asking, ‘what can we do to beat amazon?’ They’ve both come to the same conclusion: use local retailers to sell local stock, and serve that stock up to local consumers.”

Steven Jacobs is deputy editor at Street Fight.

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