The e-commerce world in which Deliv CEO Daphne Carmeli lives is one where the fastest delivery method is also the least expensive. How can that be?
Faster typically equates to more expensive, but Carmeli and the company she founded three years ago are part of what’s known as the on demand economy. Deliv leverages mobile technology to access people and resources that previously were unavailable at scale to provide retailers with same day delivery capabilities. It is a crowdsourced model somewhat similar to Uber that is gaining momentum as retailers look for ways to satisfy shoppers desire for same day delivery.
In a wide-ranging conversation with Retailing Today precipitated by comments FedEx CEO Fred Smith made regarding the ride-sharing service, Carmeli weighed in on the omnichannel movement, store fulfillment, shoppers’ heightened expectations and the role of crowd sourced labor. However, it was Smith’s comments about shoppers’ willingness to embrace same day delivery that got Carmeli riled up.
“I fundamentally find it ironic that the company that was the number one disruptor in the 1970s with the introduction of overnight delivery is now saying, ‘who needs same day delivery,’” Carmeli said.
Smith didn’t quite say who needs same day, but during a recent conference call he said the greater need is to process online orders that are shipped longer distances the following day. And that may be true at this point in time. “I think there’s just an urban mythology out there that the app somehow changes the basic cost input of the logistics business or changes the patterns or the underlying business situation and that is just incorrect,” Smith said.
Smith didn’t comment on Deliv specifically, but since it relies on crowd-sourced labor the same as Uber, Carmeli took exception to Smith’s comments on many levels. One of the key reasons why is the omnichannel shift underway in which retailers are keen to more effectively integrate physical stores with digital capabilities.
“You can’t listen to a leading retailer’s earnings call or pick up a retail magazine or analyst report that doesn’t put omnichannel retailing strategy as the future of retail,” Carmeli said. “Front and center of that is leveraging stores to become the distribution points of the future. It is no longer about sending packages long distances the following day, but fulfilling same day out of local retail stores.”
Carmeli doesn’t dispute that products do still need to get to the store by various supply chain methods, many of which involve traveling great distances, but Deliv’s business model is focused on the last mile opportunity and shoppers’ “I want it now” expectation. That’s the point she contends Smith is missing at FedEx. Today, there is about $40 billion spent annually on transportation and 75% of that amount is for ground shipping, according to Carmeli.
Going forward, ship from store will account for a larger proportion of e-commerce fulfillment and a new shopper expectation for control and immediacy will be set. Some shoppers may want products delivered within an hour, but the value proposition of a service like Deliv is that the shopper controls when the merchandise arrives.
“You want it when you want it,” Carmeli said. And because shoppers choose their delivery window the incidence of a person not being present when a signature required delivery is attempted is low, according to Carmeli. That feeds into improved customers satisfaction, lower return rates and even higher average transaction size, she said.
Major carriers such as FedEx, UPS and DHL will continue to dominate the overnight, long haul world which is an asset intensive proposition. And merchandise still has to be shipped to stores before it can be delivered from stores. But once it is there, Carmeli’s view is an asset free crowdsourced model comprised of independent contractors promises to be a major disruptive force. To support that contention she makes a comparison to Alibaba, Uber, Facebook and Airbnb. Alibaba is a major retailer that has no inventory, Uber is the largest taxi company with no cabs, Facebook is the largest media company but creates no content while Airbnb is the largest hospitality company with no hotels. What each has in common with Deliv is they are accessible via an app. The big difference is the world of delivery – same day delivery to be precise – has yet to be disrupted to the same extent as some of the other examples she provides.