FinTech / Mobile

Same Day Delivery (completes its) Revolution

There is an app for that. And for that. There is even an app for both of them, at the same time, right now, at your door, at the retail price. Same-day delivery services are back at your fingertips and in many companies’ growth plans. And if you are experiencing a sudden feeling of familiarity and skepticism by reading these lines, you may be right to feel so.

The new players are tiny startups (Zesty, Spoonrocket), branches of huge corporations (Google Express, Amazon Fresh), risen from the dead companies (incoming Kozmo), expanding brands (Uber Corner, only in D.C.); they deliver groceries (Instacart, Wunwun), clean and fresh laundry (Washio), roses for your beloved ones (Bloomthat), new screens for your iPhone (iCracked), and more types of food than you could ever think of (Caviar, Doordash, Seamless…). The products have been diversified, but the purpose is still the same somehow: delivering <your needs> <where you are>, <now>. The names have changed, but the game seems to have remained the same.

One might wonder the reason for returning to a business where so many companies have colossally failed to provide a sustainable model. Things have changed since the Kozmo Ads for the ’97 Super Bowl. Online purchases have become second-nature, and smart phones are spreading faster than any technology before, creating a “network effect” according to the NYT. Giant online shopping corporations, like Amazon, have developed a strong business made of multiple alternative revenue streams, efficient warehouses, delivery cost-control and “good” customer service (though this last one is sometimes far from being achieved) – all key factors that the millennium delivery companies missed.

But if you paid attention to the new players, almost 95% of them do not possess what Amazon has mastered. And the reason is that the game is not the same anymore: as Claire Cain Miller wrote for The NYT, same-day delivery companies have become middlemen. Instead of improving their supply chain and their HR policy, these companies simply remove them from the business equation. They operate free-lance couriers and partner stores on a large scale. Webvan, one of the largest dot-com flops, had built $35 million in distribution centers before going bankrupt in 2001; Caviar, the fancy-food delivery company, recently acquired by Square, teams up give or take 25 employees in San Francisco. None of them has ever touched the food their company delivers.

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No supply chain, low operating overhead, favorable and wide-spread technology: running a same-day delivery service seems to have never been so easy. You might even want to invite a bunch of friends over to talk about the name of your future delivery company, right now! While you’re at it, get a $10 bottle of wine delivered for a small fee on Rewinery, the instant wine delivery service. Wait– Rewinery does not exist anymore. It disappeared in late 2013, failing to cope with the ultimate dilemma “how much are people willing to pay for something that is sold a few blocks away?”

Beyond the question of cost, is there enough demand out there to be profitable? How can a company be sure that all the errands it provides are not run at a loss? Making a $10 purchase profitable is impossible without adding 60-70% fees to pay the delivery man. Therefore, the business is quickly presented with the choice of whether to remain attractive and to run at a loss, or not running at all.

Are they all doomed? No. Until someone finds a way to crack the convenience equation, the need to win over new customers makes same-day delivery startups attractive to huge corporations – the only type of company strong enough to stand the costs, the only ones global enough to go beyond simple same-day delivery.

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