Same day delivery with ‘crowd logistics’

Over the recent years, (almost) all the large e-commerce retailers started to offer same day delivery to their customers. These services are generally carried out by third party logistics providers. With the emergence of same day delivery, new third parties that provide this service also emerge. An example of such a company is Deliv. The goal of the company is to close the last mile gap between retailers and customers. The main way in which Deliv differentiates itself from competitors is that it crowdsources same day delivery. This is done by using a network of on-demand drivers. This creates the advantage for the company that the investments are relatively low in comparison to large competitors. An example is Amazon, which has to invest in expanding the network of distribution centers to enable same day delivery. This while Deliv has no inventory and no fleet of vehicles. This is the reason why Deliv is able to provide the service for $5, which is a relatively low fee in comparison to competitors. Another way in which Delives differentiates itself is that it sells the service to stores and malls instead of directly to customers. Deliv partnered with malls because over 85% of the largest retailers are located in malls. By doing this, Deliv created its own distribution network (Halzack, 2012).

There are 4000 retailers that partnered up with Deliv. Examples are BestBuy, Foot Locker and Staples. The retailers provide the same day delivery option by Deliv in their checkouts. When an order is placed, the on-demand driver picks up the order at the physical store (or mall). An algorithm is used to adjust driver routes based on last minute changes and it takes the capacity of the model of a driver’s car into account. The customers can pick a time slot and the order can be delivered within an hour. Afterwards, the customers are asked to rate the drivers.

Deliv has to compete with parties such as Amazon, Google Express, UberRush and Lyft. Due to this competition, Deliv will face challenges when it wants to expand its services in the future. The first main challenge is that Amazon and Google Express are able to maintain a service that is not profitable. Amazon is able to raise the prices on products to compromise for the costs of same day delivery (which is not possible for Deliv). Google can make up for the costs of same day delivery with the profits from product searches and customer data. The second main challenge is that this crowdsourced service can lead to controversy as happened with Uber and Airbnb. This is due to the fact that individuals carry out services without having to (completely) comply with permits, socials regulations and insurance (Morphy, 2014).

Despite these potential challenges, UPS recently acquired Deliv for $28 million. UPS did this to learn more about the same day delivery market and customer requirements in order to make the right decisions in the future. UPS has not made a decision yet whether it will enter the same day delivery market for retailers. Currently, UPS does not consider same day delivery for retailers as economic viable yet (Reisinger, 2016).

Will Deliv be able to win the same day delivery ‘war’ from parties such as Amazon and Google by using the crowd?

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