Blog article submission for e-business

'eBay' on a 'Shutl'

It's an obvious paradox that while the online buying is convenient and fast, not so is the acquisition of the goods by the buyer.  Online retail giants may be at war with each other, but they do agree on one thing: They could never get ahead of the brick-and-mortar stores unless they provide "instant service". Appreciation of the fact by these players has made the race to lead the future of the same-day-delivery getting more intense day by day. The front runner has undoubtedly been Amazon with eBay close at its heels, trying to get ahead. There are other giants of e-commerce also that are in the race. In September 2013, Google started its same-day delivery service in the Bay Area. The third week of October saw Walmart expanding its same-day service Denver. On a smaller scale, with limited resources but innovative models, startups like PostMates, Deliv etc. are launching their on-demand delivery services in select cities.

The acquisition of London based same-day-delivery startup Shutl by eBay (for a yet undisclosed amount and terms of deal) is an attempt by eBay to get on to top gear and expand its same-day-delivery service from the current four regions (namely Chicago, Manhattan and Brooklyn, NYC Queens and Peninsula) to 25 cities, including London, by 2014. The announcement came on 22-oct-2013 by none other than eBay president Devin Wenig, showing the importance of the same-day-delivery model to its business in future. eBay is hoping, through the service, to bring in new/more buyers and expand its ability to let a user buy whatever he wants. 

So, what is it that makes this acquisition special? Would the multi-million dollar acquisition payoff? Would this acquisition be able to complement eBay's overall strategy? Answers to numerous such questions are behind the veil of the future for the time being which would make themselves obvious in time, but one thing is clear from this move– eBay's intention. 

Currently, eBay offer the same-day-delivery service through "eBay Now" (http://www.ebay.com/now/ along with apps for iPhone, iPad, iPod Touch and Android device) charging the customer $5 per store with a minimum order of $25 – and not accepting cash. A customer can choose items from hundreds of retail stores, Guitar Center, Babies R Us, Free People, Best Buy, GNC, Target, Home Depot, Office Depot, Radio Shack, and Toys R Us to name just a few – "The eBay advantage" of a plethora of sellers and easy returns.

So what does Shutl bring to the table? Well, expertise for one. Consider this. Shutl connects e-shoppers, retailers/sellers and package couriers towards delivering the orders to the shoppers not just within the same day, but within the same hour. Shutl's record of 15 minute delivery, a few months before the acquisition, is clearly analogous to Sir Don Bradman's with no one else in fray.

Within 3 years from its first completed transaction in March 2010, Shutl raised close to $9million. Shutl's initial growth rate of about 50% month-on- month is a testimonial to its success. By mid-2012, Shutl was operating in 50 cities and towns of United Kingdom, serving 70% of UK shoppers.

With all these positives where do the challenges lie? A part of the answer lies in the fact that the delivery model of Shutl is completely different from that of eBay Now. Shutl doesn't own and operate any fleet of trucks/vans or drivers. Rather, it works through an algorithm acting as a middleman focusing on the matching and coordination of delivery of orders with local couriers. Shutl does so as per the following parameters based real-time - price, performance history, quality ratings and customer feedback. Bringing in the concept of lean operations, it tries to keep the operations cost low. eBay Now employs couriers who get dispatched to stores to buy the goods ordered by the buyers and delivers them to the buyers. While eBay is not showing its cards (if there are any) as to how it is going to integrate, with synergy, Shutl to its model, such a transition would definitely not be easy.

Embracing Shutl's model means forgoing the existing model of eBay Now in the existing places with all the incurred spending becoming sunk costs. Continuing with eBay Now's existing in some places means not taking the full advantage of Shutl's technology, talent and expertise through its successful model. But, at the same time, a model which was working successfully in UK cannot be the guaranteed to work in a completely different market -The US.  

Studies of consumer behaviors in US have shown that the shoppers, buying the types of things that eBay offers, are more concerned about getting accurate deliveries, rather than speedy ones. After all it's not a pizza delivery – best served when hot. But eBay, along with other major e-sellers, thinks otherwise about the direction in which the market would move in the future. Is the same-day-delivery, which the eBay is trying to convert to same-hour-delivery, just a fad among online sellers or a trend stretching years ahead remains to be seen.

Thanks and Regards,

Rajesh Singh

12FN-101, Section - A

PGDM- IMT Ghaziabad