Technologizer

eBay Now: The Promise and Pitfalls of Same-Day Delivery

The e-commerce behemoth's experimental service aims to deliver an array of products in about an hour -- which is even harder than it sounds.

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Harry McCracken / TIME.com

Back in the Web 1.0 era, a hot startup named Kozmo.com aimed to revolutionize e-commerce by delivering an array of products in less than an hour. It turned out that Kozmo would be most famous for failing: After raising $250 million and launching in eleven cities, it folded in 2001. Several competitors, such as Urbanfetch, also failed to figure out how to make ultra-fast delivery work.

But on the web, no idea ever vanishes permanently. Now same-day delivery is back: Startups such as Postmates are giving it a try, and so are big companies such as Amazon and Walmart.

And then there’s eBay Now. The e-commerce behemoth began testing same-day shopping in San Francisco in August. It officially launched the service there in October, and brought it to New York City in November. It’s still officially in beta-test form in both cities.

That’s an appropriate label for it to carry. Just as in the Kozmo era, same-day delivery is a cool idea. But eBay Now has its share of rough spots. And even with eBay’s formidable resources, it’s not a given that the service is going to be around for the long haul.

Kozmo and its rivals died so quickly at least in part because their business model was unsustainable: They opened their own warehouses and stocked them with stuff like DVDs and ice cream. But they charged about the same price you’d pay anywhere else, and didn’t tack on a huge delivery fee. That left little money to pay for the warehouses, let alone to eke out a profit.

eBay Now

Without building any warehouses, eBay has access to a far broader range of products than Kozmo ever carried, stored in convenient repositories all over the locales it currently serves. When a customer orders a product, the company simply sends a courier — it calls them “valets,” to emphasize their helpfulness — to a nearby store, including big names such as Bed Bath & Beyond, Best Buy, Home Depot, JCPenney, Macy’s, RadioShack and Target. The valet finds the item (or items), waits in line with other shoppers to pay, and then makes the delivery. eBay doesn’t promise a specific delivery time, but says the process takes “about an hour.”

Everything’s done using a smartphone application — available only for the iPhone at the moment — which lets you browse for products, add them to a shopping cart and place an order. When you do, the service alerts a valet and gets the process going. (San Francisco valets generally drive cars; in New York, most of them use a bike or deliver on foot.)

The app lets you keep tabs on the delivery’s progress, and allows you to make a phone call to the courier. It also uses geolocation to figure out where you are; eBay points out that you could have an item delivered to you at the beach or on a park bench as well as at your home or office, and can switch delivery destinations even after you’ve placed an order.

eBay Now

Rather than building everything from scratch, eBay is leveraging some technologies it already owns. All of eBay Now’s data about in-stock products at retailers is provided by Milo, the local-shopping startup which eBay bought in 2010. And you pay for products you buy using PayPal Here, the Square mobile-payments competitor from eBay’s PayPal division. (You don’t need a PayPal account — any major credit card works fine — though you can use PayPal if you’ve got it.)

eBay really wants San Franciscans and New Yorkers to give eBay Now a try. It’s charging a flat $5 per delivery, and you can order multiple items as long as they all come from the same store. The fee is waived for your first three orders, and you get a $15 discount on the first one.

Wait a sec. How can eBay turn a profit when it’s buying products at full retail price, selling them without any markup and charging little or nothing for delivery?

Well…it can’t. The company says that it’s just trying to get the service rolling, and will figure out ways to make money later. For instance, it might establish deals which involve retailers paying a finder’s fee, or it might raise the delivery charge for at least some products. For now, the $5 fee even covers bulky stuff like 50″ HDTVs.

In other words, eBay Now doesn’t yet have a workable business model in place, which gives it something in common with Kozmo even though its startup costs are presumably vastly lower.

No matter how you do it, same-day delivery is complicated. eBay’s system has lots of moving parts, with lots of little things that can go wrong.

I encountered one such glitch with the first order I placed, for a couple of adapters for my new iPhone 5. Josh, my valet, managed to make the purchase at Best Buy and get to my office within an hour and fifteen minutes. But when he tried to swipe my credit card using PayPal Here on his iPhone, cellular coverage seemed to be too spotty in our nineteenth-floor office suite. We had to make an elevator trip down to street level to seal the deal.

A few days later, I ordered a Cuisinart ice cream maker. Valet Allyson also arrived in around an hour and fifteen minutes, after bringing the appliance from a Macy’s on the other side of town. She was particularly personable, but once again, PayPal was balky. This time, I proactively suggested heading downstairs; even then, it took another five minutes of fiddling to make the payment system work.

In between buying the iPhone adapters and the ice cream machine, I got a far more comprehensive look at how eBay Now works by tagging along on two deliveries, at eBay’s invitation. I rode shotgun with Chris, another valet, and shadowed every step of the process.

Chris and I (and an eBay representative) sat in his Volvo, parked in downtown San Francisco, for only a few minutes until his eBay Now app alerted him of an incoming order: a cold compress and some cold medicine, which he was to pick up at a Walgreens several miles away. (In the case of retailers with multiple locations, eBay Now chooses which outlet to visit based on its proximity to the customer and the desired products being in stock.)

eBay Now

Harry McCracken / TIME.com

Once we’d crept our way through rush-hour traffic and arrived at the store, Chris tracked down the products, making sure he’d found precisely the correct versions. When he did, he discovered that one was slightly more expensive than eBay Now’s listing had indicated…and one was slightly cheaper.

eBay Now

Harry McCracken / TIME.com

The pricing surprise required a quick call to the customer to O.K. the new grand total.

eBay Now

Harry McCracken / TIME.com

And then Chris paid Walgreens, using a special debit card which eBay had credited for precisely the amount required to make the purchase.

eBay Now

Harry McCracken / TIME.com

Next, he logged the successful product pickup and shot a photograph of the receipt with his iPhone. (Customers who want to return products don’t take them back to the store — instead, they call eBay, which sends a valet to handle the return and refund.)

eBay Now

Harry McCracken / TIME.com

When Chris arrived at the address provided by his eBay Now app, he circled the block a couple of times and, finding no parking spots, temporarily blocked a nearby garage door. Then he discovered that the address was an insurance office — and nobody there seemed to be expecting a delivery.

eBay Now

When a customer places an order, the app determines the address through geolocation; it’s an imprecise technique, and the user can override the results if they’re inaccurate. But in this case, the customer apparently didn’t notice the error. So Chris called again.

eBay Now

Harry McCracken / TIME.com

It turned out that she was just next door. As with my purchases, PayPal Here was balky; it took Chris several minutes of futzing to make it accept his login information.

eBay Now

Harry McCracken / TIME.com

The delivery complete, Chris checked it off in his app.

eBay Now

Harry McCracken / TIME.com

A few minutes later, another customer order came in — for printer paper and ink — and we were off again. We tooled over to Office Depot, then drove to the customer, who turned out to be playing tennis at a sports club. (He needed the supplies so his kid could print out a homework assignment.)

This delivery went smoothly until the customer tried to pay. Once again, Chris had trouble getting PayPal to work. So much so that he ended up giving the customer the order for free.

If you’ve been following along, you may have noticed that the majority of eBay Now hitches I witnessed involved the PayPal Here payment process. Actually, in all four encounters — two as a customer and two while shadowing Chris — I never saw it just work.

An eBay representative told me that PayPal Here’s 0-for-4 performance was atypical. When Chris struggled with payment processing, his iPhone was attempting, unsuccessfully, to connect to a wi-fi network; he shouldn’t have had wi-fi turned on. The company says that the PayPal Here app has trouble determining its location in dense areas such as San Francisco’s financial district, where I had two orders delivered to TIME’s office; it’s working on a fix.

That brings up a question: Wouldn’t it be simpler if customers used the eBay Now app to pay as part of the ordering process? Why, yes, it would — and eBay says it plan to make that possible. Besides eliminating any possibility of PayPal Here malfunction, pre-paying will permit valets to drop off products if the customer doesn’t happen to be available. And it might also let users look up past transactions, something you can’t currently do in the app, which is a tad rudimentary.

Other improvements eBay is contemplating include arranging for valets to pick up products at stores without waiting in line at checkout — which would cut delivery time — and allowing customers to place orders when stores aren’t open, for later delivery.

In its current form, eBay Now may feel like an idiosyncratic experiment rather than a business with an obviously bright future, but I hope that the company sticks with it. I’m ready to be a regular customer of a same-day delivery service which really works — and I’ll bet a lot of other busy, impatient people are, too.

6 comments
TechlandReader
TechlandReader

Let's see, facility costs, executive costs, management costs, dispatcher costs, valet costs (salary and benefits), wireless costs, technology costs, cost of returns, advertising, transportation, taxes, licenses. Did you say each delivery takes a little over an hour? Looks like a loss of about $25 or more per delivery to me.

That's not a profitable business model. That's not even a business model. That's a virtually free service. eBay is offering fairy dust in an attempt to charm the public, but all it does is train the public to expect everything for nothing. You can't give it away and then quadruple the price later to make it profitable. Research shows you lose about 90% of your "subscribers" if you take a free or very low-cost service and dramatically increase the price.

Unfortunately, a nonprofitable venture will have to be paid somehow, probably by fee-paying PayPal users or eBay sellers. The money has to come from somewhere.

x1
x1

Teleportation works best.

Craigtech
Craigtech

Back when I lived in San Francisco during the boom, I can remember using Kosmo.com to have everything form Playstation 2 games to donuts delivered at all hours of the night.  It was a great service but I wondered how they could stay in business since it had to be expensive to deliver this stuff in such a short time.  Obviously now, staying in business (and earning a profit) was a problem.  Still, I hope eBay is able to make it work.

SitaramanAnanthakrishnan
SitaramanAnanthakrishnan

are we not complicating this just too much.? profit for ebay, forget it. at the same time, cant people move out and make them physically active, rather than pay/order from the couch and spend 10x for medicinal problems.

Taxpayer
Taxpayer

Not ready for prime time.  Way too complicated  and no room for profit. 

coyotewm
coyotewm

"In other words, eBay Now doesn’t yet have a workable business model in place, which gives it something in common with Kozmo even though its startup costs are presumably vastly lower."

Using a military expression, this is "recon by fire".  "Let's just do it and worry later about how we did what we did."No respectable investor would touch a company, concept actually, that was mostly based on trying, excluding, of course, the trys that had already been done using someone else's money.  So why do corporate boards of large, otherwise successful companies go along with it?