The Gray Hair Speaketh

Advice that is largely Unsolicited..

Why I think same-day-delivery models of Ebay Now and Flipkart are unsustainable?

Ebay Now and few others in the US have launched same-day-delivery business models.

There have been fanciful launches of services in the past, and a launch is NOT the same as success.

So whether this works or not, the jury is still out.

Here’s a story on the ebay Now model in the US.

And I have seen the Peapods and the Webvans which struggled (not just with same day delivery but with the general business model that they took on) and failed. And I have a sense that these same-day-delivery models are also unlikely to win.

I hear that Flipkart is also gunning to start these in India, and I see challenges in the same.

Why do I say so?

Here are a few reasons:

  1. It cannot be economical. Earlier traditional models of delivery of such kinds, got challenged on economics, and gave up. Bundled, slightly longer delivery schedules to get some economies of scale (rather than deliver your one package, can deliver 4 in your area, once in 3 days?). So don’t know how this current trend can sustain.
  2. It is not scalable. You may end up needing warehouses at various locations, and then a network at each of these.
  3. You’re competing with the local kirana, local vegetable vendor, etc. who will deliver anyway.
  4. You’re spoiling the customer. Most times, he doesn’t need it same day anyway. To get your edge over your competitors, you’ll do this, after a while find it hard to sustain, then drop it. Customers will feel let down. Curse you for withdrawing.
  5. You’ll burn some money for the 6-12 months that you will attempt to do this. Customers are not going to pay a huge premium to get this. So all the local warehousing, and the set up of the network, and absorbing some of the cost to acquire a few fussy customers. Will all go waste. As withdraw it, you will, in time.

Meanwhile, it is an interesting story to get the buzz to happen..for ebay Now there, and soon for Flipkart, here..

July 30, 2013 Posted by | Business Model, Ecommerce, Retail | , , , , , , | 2 Comments