Like a pack of snarling street racers, tech’s finest firms are lining up in a race to win home delivery. To the fastest go the spoils.
That’s the philosophy driving technology companies like Amazon and eBay, which are rapidly expanding service for same-day shipping. While Amazon spends hundreds of millions of dollars on new fulfillment centers to close the geographic gap between customer and inventory, eBay has decided to rely on a preexisting network to get the job done for its year-old eBay Now service.
Here’s how it works. Customers place orders through eBay Now’s mobile application or website for items from more than 30 retail partners, including Target, Toys “R” Us, and Urban Outfitters. Couriers visit the retailers’ physical stores, assemble the orders, and drop them off in an hour or less. Then eBay charges the customer’s credit card or PayPal account upon delivery of the order, plus a $5 convenience fee.
“Seventy-five percent of what people buy is bought within 15 miles from home,” says Deborah Sharkey, eBay’s vice president of local. The pitch: In an age of instant gratification, why not use scale to keep customers loyal?
Although eBay won’t disclose the program’s first-year sales, Sharkey says demand is encouraging enough to aggressively plow ahead. The company says it wants to grow from four markets to 25 by the end of 2014, including its first international city, London.
To get there, eBay will rely on a British company it acquired in October called Shutl, which pairs couriers’ dispatch software with retailers’ inventory. The company operates in more than 50 cities and towns, helping to move goods in as little as 14 minutes. Partnering with Shutl for eBay Now’s launch in Chicago, where the smaller company had operations, spared eBay the expense of setting up its own local operations center.
Forrester analyst Sucharita Mulpuru says eBay Now is a solid bet because of this infrastructure. The outlook for same-day shipping in general, however, is less clear. Despite the fees, customers still do not shoulder the full cost of delivery. So who ultimately subsidizes customers’ need for speed: retailers, or the companies in between?
More challengers
Postmates
Availability: New York, San Francisco, Seattle
Fees: Start at $5; determined by an algorithm
Retailers: Plenty, from Banana Republic to Buffalo Wild Wings
Instacart
Availability: Chicago, San Francisco
Fees: Based on delivery size and speed; orders over $35 are $3.99
Retailers: Whole Foods, Costco, Safeway
Google Shopping Express
Availability: San Francisco to San Jose
Fees: $4.99 per order
Retailers: Whole Foods, Costco, Staples, others
This story is from the December 23, 2013 issue of Fortune.
