EBay scraps same-day delivery
Count eBay out of the same-day delivery game. The online marketplace announced yesterday it is "retiring" its eBay Now service in markets where it has been available in the U.S.
In its announcement, eBay said, "While we saw encouraging results with the eBay Now service, we always intended it as a pilot, and we are now exploring delivery and pick-up/drop-off programs that are relevant to many more of our 25 million sellers, and that cover a wider variety of inventory that consumers tell us they want. We will continue to pilot scheduled delivery in the UK."
In the end, eBay’s same-day delivery service was not worth the cost involved in operating the system.
"We’ve found that the types of things that people buy on eBay aren’t necessarily those that are in high demand for same-day delivery, and that same-day options for the most part exclude core eBay sellers who don’t have offline locations," an eBay spokesperson told TechCrunch.
EBay’s move comes as others, most notably Amazon.com, see opportunities to grow their businesses through more immediate delivery systems.
Source: ebay.com/now
In May, Amazon began offering free same-day shipping on select items to Prime members in 14 major metro markets around the U.S.: Atlanta, Baltimore, Boston, Dallas/Fort Worth, Indianapolis, Los Angeles, New York, Philadelphia, Phoenix, San Diego, San Francisco, Seattle/Tacoma, Tampa and Washington, D.C.
Discussion Questions
Do you see eBay’s decision to no longer offer same-day delivery as an indication that such services are not viable for the industry, or is this just a situation particular to eBay?
Poll
BrainTrust
Chris Petersen, PhD.
President, Integrated Marketing Solutions
Paula Rosenblum
Co-founder, RSR Research
Same-day delivery is not cheap. Unless enough customers opt for it, the costs are not worth the benefit. To its benefit, eBay realized that same-day delivery is not important to enough of its customers to warrant continuation of the service. Other companies, notably Amazon, feel differently. Since this service is still in its infancy, it will be interesting to see whether the business model is sustainable.
I think eBay is getting back to basics, spinning off PayPal and selling its Enterprise division. Same-day delivery felt like a “me too” project rather than something eBay customers really wanted. It’s certainly still a viable service, but I don’t think it was core to eBay’s value proposition.
I don’t believe eBay’s exit from same-day delivery services is an indicator of the market not being viable or sustainable. eBay is at a crossroads. As they are spinning off PayPal into a separate company, they are being forced to evaluate a number of their initiatives in order to cut down and focus on a core strategy going forward. Exactly what that focus will be remains to be seen.
Same-day delivery falls into that category of “good stuff is not cheap.”
Same-day delivery is whole different ball game than even next-day delivery. The major hurdle and cost is not the delivery itself, it is maintaining enough physical inventory of enough SKUs in a single metro area. That requires physical inventory, space and predictive analytics (“Big Data”) to get it right and get the costs in line.
EBay has historically focused on collective marketplaces of sellers. They simply don’t have the platform or distribution logistics to be cost effective if the mix of products sold is not profitable.
If there is someone who has the right stuff, distribution centers and logistics, it would be the e-commerce specialists starting with the letter “A.”
Those of us in the United States often forget that in the major metro areas of cities like Shanghai and Delhi, the standard for delivery is a four hour window! So yes, one day delivery within hours is definitely feasible.
I think the answer is a little bit of both, and found eBay’s explanation credible and logical. This sound exactly right:
“We’ve found that the types of things that people buy on eBay aren’t necessarily those that are in high demand for same-day delivery, and that same-day options for the most part exclude core eBay sellers who don’t have offline locations … “
Same-day delivery is always going to be a niche market. I’ve used Prime Now twice — once when I had my computer’s UPS system go bad at 10 p.m. (they got me a new one here by 10 a.m. the following morning), and once when I burned my hand really badly and needed ointment right away.
Both cases were unusual. Under ordinary circumstances, I could have waited two days for a new UPS, and I could have gone to the drug store for antibiotic cream.
I’ve written elsewhere that I think Prime Now will be a money maker for Amazon. I think it just didn’t work for eBay.
In a world where Jet.com can scrape together enough VC money to open with the express goal of holding on long enough to be profitable and where Walmart announces they are cutting 24-hour stores, same-day delivery being scrapped by eBay seems to point to the foundational idea at some point — all businesses need to make a profit if they are to survive.
There’s no such thing as free … someone is paying for it.
The eBay business model is different than that of other digital businesses who may be able to deliver on the same-day promise. I have no clue how they thought this was going to work, but you’ve got to give them credit for experimenting and for shutting it down.
I never thought it made sense for eBay to offer this. I don’t think it is something most consumers expected from eBay, and I’m sure most sellers didn’t want the added cost.
EBay simply did not build their model for this type of service and they are smart enough to recognize that it is not necessarily important to their customers. Not everyone has to offer same-day.
I am still of the opinion that if you need something so badly that it must be same-day, it’s worth paying extra for.
If Amazon can do it and still make a profit (ahem) then when you need something today, buy it from them then go back to other brands for what they offer.
That’s just my two cents.
Same-day delivery service is a tool for consumers to consider as a matter of their own perception of need. If it is imperative for the consumer to have possession of product or services costs can be, and many times are, set to a secondary consideration. Companies that are expert at selling price will most often talk themselves out of adding service(s) with a simple business formulation like “It’s not something our customers will pay for.” The obvious question is how many companies have struggled to get this service off the ground or profitable.
Legal and medical corporations spend hundreds of millions of dollars yearly to “get it now” whatever it is. In order to nurture and proliferate the same-day offering into other markets it may be a good idea for retailers to turn the service over to delivery companies looking for business. In short if it is not practical to give the customer a bundled service then offering them access to the services they need as an introduction to availability may be a valuable option. As time goes by and the infrastructure for same-day deliveries is matured to the level of a profitable in-house offering, retailers can then elect to make themselves the provider. Building new businesses is a time consuming effort that with proper skill sets and savvy financial investments will provide future business growth into new markets and/or client types such as a new generations attuned to that level of expectation as a normal transaction inclusion or expanding needs.
This situation is particular to eBay. With this decision, eBay is demonstrating an understanding of its core customer and her needs — whereas its initial decision to embark on the same-day delivery service did not reflect this understanding.
In most cases retailers SHOULD experiment with expanded service offerings to delight their customers. However, retailers should tread lightly when expanding high cost, high impact services like same-day shipping. If the customer grows accustomed to the new level of service, the retailer needs to think twice about potential customer backlash and business impacts prior to termination of service.
Same-day service is not a huge requirement of the typical eBay customer. EBay and Amazon are not the same brand. It was never intended to be. It is not profitable to compete in an arena where your service is not a necessity. EBay has made a wise decision. Let the others beat themselves up going after the same-day customers.
The drive for same-day delivery seems to come mostly from the tech companies. And, as a former tech company denizen, most tech company efforts are driven by the idea “we can do this” rather than “this makes a big difference to consumers.”
From a consumer point of view there are some times when same day delivery is value—very valuable. But those are the exceptions. By and large, next day or even next week delivery is just fine.
So it’s no surprise eBay is making this change. So for anyone else interested in establishing same-day delivery the key question is: does it matter with your product and your consumer? If there is significant value or strategic reason to do it, then I’m entirely supportive. But that should be the exception, not the rule.
It absolutely depends on the category and the consumer’s willingness to pay a premium for same-day delivery. In my mind there are very few categories that the desire for instant gratification merits the fee that would be necessary to cover the delivery costs. And with eBay it’s not something you can push to click and collect. I think it makes a lot of sense for eBay. I think in a lot of the instances of same-day (like Macy’s), it’s just good publicity. I wonder how often the service actually gets used.
I think eBay is taking an Amazon approach in some ways: fail fast and focus on what works. There’s no reason to continue a program that isn’t profitable or in line with business goals just to keep up with competitors.
Only companies that are willing and able to sustain short term (and maybe even long term) losses will be able to make the most of same-day delivery. The interesting question will be how they are able to make money from it. Shoppers want free and fast delivery, but not all retailers are able to provide the instant gratification they’re looking for without cutting into costs.