Same-day delivery may not be the Holy Grail retailers had hoped for. eBay (NASDAQ:EBAY) pulled its stand-alone delivery service app from its App Store last week and rolled it into its main mobile app and website.
Turns out immediate delivery of packages to customers is more difficult and expensive than originally thought. The eBay Now retooling should be a warning to others who are relying upon delivery to grow their business. Uber, Deliv, PostMates, and InstaCart all target same-day delivery. So do Amazon.com (NASDAQ:AMZN) and Google (NASDAQ:GOOG).
Non-traditional businesses are also testing the waters. Burger King Worldwide is experimenting with food delivery. Home Depot is adapting it to building supplies for homeowners.
But eBay's experience means more high-profile failures are coming.
Same-day delivery a logistical minefield
eBay's same-day delivery service was birthed following the purchase of local shopping service Milo in 2010. It officially launched eBay Now in San Francisco in 2012. It then expanded into a number of other metropolitan regions. Last year eBay said it planned to operate in as many as 25 U.S. cities by the end of 2014 with international expansion possible as well.
Those were ambitious plans for a service eBay only charged $5 extra for. Among its early retail partners were Best Buy, Home Depot, Macy's, and Target.
And the first hint of trouble surfaced this past spring. eBay quietly transferred its dedicated valets to third-party providers. It quickly learned hiring employees as couriers was expensive. Having them hang around the parking lots of major retailers waiting for an order to come in was not a productive use of time or money.
eBay ended up purchasing another delivery service in October 2013 that served as a pool for independent couriers. Shutl would figure out who was closest to an order and had space available to make the delivery. It was more cost-effective in reducing delivery expenses. The founder of rival Deliv was quoted by Wired as likening it to a difference between "a private taxi and an airport shuttle."
Rumors quickly circulated eBay Now was in trouble. There just wasn't enough order volume to make same-day delivery service viable. And now the service has essentially all but ended even before it was able to gain any traction.
Where's the demand?
Smaller delivery services may run into similar logistical snags. Even Google could. But it at least has the financial wherewithal to keep throwing money at its Shopping Express service.
Same-day delivery is just not a priority for consumers. Boston Consulting Group says free delivery or low prices are much more attractive. Last year it found nearly three-quarters of respondents to its survey cited free delivery as key to improving their online shopping experience -- half said lower prices. Only 9% of the 1,500 U.S. consumers surveyed identified same-day delivery as something they saw as essential.
A prime example of success
You would expect Amazon to face problems similar to eBay.
Its Prime two-day delivery service covers millions of products. It also throws in streaming video and music downloads. You can get same-day delivery for an additional $5.99 per order. And most recently Amazon expanded Prime to cover groceries. It even partnered with the U.S. Postal Service to offer Sunday delivery.
It also seems woefully underpriced even after raising the cost to $99.
But Amazon is known for its willingness to suffer losses on products and services to grab market share. Its Kindle tablet and the Fire phone are just two examples.
Why some will succeed regardless
Not all delivery is created equal, however. eBay says the real action in delivery is in site-to-store delivery. Consumers only want same-day service for groceries.
That may explain Wal-Mart's (NYSE:WMT) success. It was an early developer of the shop online, deliver to store for free model. So prominent was its effort other retailers were forced to join for their survival.
Now it is expanding the click-and-collect model to groceries. It's Asda grocery store chain in the U.K. has offered drive-thru services for years. It will be applying those lessons learned to the states. Now the post office wants to deliver your groceries too.
Others also want to expand delivery. Sears Holdings (NASDAQ:SHLD) is using its Shop Your Way member loyalty program to innovate in-store pickup. Customers don't even have to get out of their car. Employees will bring out the items and load them for you.
Omnichannel marketing is essential for retailers. Consumers want to shop when they want, how they want, where they want. Those companies that best provide a seamless approach to shopping in-store, online, or through a catalog have the best chance to succeed.
They just don't need the items rightthisminute. eBay Now's effective demise will shake out the industry. Expect only the biggest to be left standing.
Follow Rich Duprey's coverage of all the retailing industry's most important news and developments. He has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, eBay, Google (C shares), and Home Depot. The Motley Fool owns shares of Amazon.com, eBay, and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.