How Same-Day Delivery Can Give Brick-And-Mortar Retailers an Edge

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storeWith more consumers shopping online, fast and reliable delivery is becoming a key differentiator for retailers with a brick-and-mortar footprint. Consequently, same-day delivery services have seen a resurgence recently, with renewed venture investment and interest from large e-commerce companies like eBay, which snapped up Shutl last month to supplement the commerce giant’s existing eBay Now initiative.

Deliv, a same-day delivery startup, has made a few moves of its own over the past four months, inking a partnership with real estate titan General Growth Properties in August and nabbing $6.85 million in funding earlier this fall. The California-based company offers retailers same-day delivery, provides alerts to the consumer on the status of their package, and allows merchants to track their package along its delivery route.

Street Fight recently caught up with Daphne Carmeli, Deliv’s CEO, to find out what’s driving the revival in same-day delivery, how startups can compete with the big firms, and why same-day delivery is a big opportunity for brick-and-mortar retailers.

Same-day delivery has made a comeback recently. What’s driving the resurgence?
Everyone is focused on this space now because retailers now have the motivation, technology, and labor to make it work. But it’s also about Amazon: these companies are trying to figure out ways compete with Amazon. The interesting thing is that when it comes to shipments, delivery, and getting packages to customers from the time they moment they press “buy,” the omnichannel retailers with brick-and-mortar presences actually have an advantage because inventory in their store lies within 5 miles of about 90 percent of their purchasing population. So they actually have the capability to get stuff to customers faster than what Amazon can do.

From a product perspective, what new tech is enabling same-day delivery to work in ways it couldn’t a few years ago?
Today, most retailers now have the capability to let customers buy-online-and-pick-up-in-store, or BOPUS. BOPUS means that retailers that have invested in the technology can match someone’s purchase online based on their ZIP code and identify that inventory near that ZIP code in that store. This allows retailers to have visibility of their inventory at a store level, which was not possible before.

Another big change in the environment is the widespread use of smartphones. This means you can leverage a crowd-sourced model for the drivers because you can mobilize them based on where they are, and if you know where they are, you can have a bunch of drivers focus on where are they, their availability, routes that they have, so that you can be optimized in terms of when and who you send to jobs. So those are a few big differences today of what makes this market and why it’s moving so fast.

Walk us through the way Deliv’s technology works.
Through a very simple API, we get some basic information: the originating store, the items, the SKUs, the dimensions and weight of the items, the destination of where the items are going, the name of the person it’s going to, and the delivery time. Then it hits our optimization platform which creates a real-time route, bundling up pickups and deliveries, following which we assign the driver to the route based on their ratings, their proximity, their availability of how long they’ll be working. We then match the driver to the real-time route.

The driver has a smartphone app where they are receiving tasks, and throughout the process they are using a GPS-enabled smart phone, so we’ve got GPS coordinating where the driver is, and we have technology at our control center where we can track every delivery and manage any exceptions that happen during the delivery. The customer receives communication along the way via push and pull communications. At the end of the process, the customer can rate the driver and that rating is critical in what work the driver gets next. The routing is a rating-based algorithm.

eBay has been very aggressive in the space, ramping up its own eBay Now initiative through internal investment and the acquisition of Shutl last month. How can smaller startups compete?
eBay’s acquisition of Shutl is a huge validation of what we’re building. And that’s great. But eBay is based on a very different model than ours, because they are a marketplace themselves. It’s just not a scalable model. The majority of retailers don’t want to be disintermediated and they want to leverage the technology they’ve invested in that gives them the visibility, and this completely avoids that.

On the supply side, Shutl built a software platform that talks to existing couriers in the market, and weaves together all of the couriers. So when they get a delivery they send it off to those couriers. We rejected that model because the courier and Shutl both have to make money, so the bottom of what you can have as a price point for same-day delivery will be higher than what we’re going to be able to have by kicking out the middle man.

Most of the innovation in local delivery has centered on larger brands. How can smaller retailers benefit from same-day delivery?
Once we have our infrastructure down, meaning we’ve got our driver pool, and our customer service supporting these geographies, that API that we have is going to be available to anybody. You can be a local merchant, not an omnichannel merchant, and you might have a customer that wants something to be delivered. You can go to a web-based form, submit your order, and we can come and pick it up. So all of the local merchants are going to be able to leverage the network that we put down and leverage the economies of that network because the big volume are already there.

You mentioned your partnership with large mall operator, General Growth Properties. How is the partnership helping you execute your delivery?
Our partnership with General Growth Partners made sense because what makes our business model work is getting as much volume of delivery that we can get within a bounded geographic area — the more stops you can give a driver in a route, the lower the cost per delivery. It doesn’t take a ton of volume, but you need volume in order to bring down cost of delivery in order to get to the $5 price point. That’s where the real disruption happened in what we’re doing, because everyone up until today has been accustomed to a very simple reality, which is: the faster you get something the more expensive it costs.

You now have an aggregation of retailers of 100,000 stores as compared to the 56 from Amazon. You have scaled together to have more footprint and capability to have more SKUs than Amazon will ever be able to do. Once we open up in a geography and we lay down our delivery network, every single retailer is now available to plug into that network and the more retailers plug in, the lower the price point.

Myriah Towner is an intern at Street Fight.