Ebay Bets On Same-Day Delivery To Compete With Amazon

eBay (NASDAQ:EBAY) has started experimenting with same day delivery following the lead of Amazon (NASDAQ:AMZN) and other online retailers. The new service called “eBay Now” had a limited release in San Francisco last week and is currently being rolled out to existing consumers in the local area and is also available through iOS app. The service will allow customers to sign up for same-day shipping from local merchants in San Francisco for only $5. If this move toward instant fulfillment is successful, it could have implications for other online companies including Wal-Mart (NASDAQ: WMT), Target (NASDAQ: TGT), Amazon and other retailers.

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The service is powered by  Milo, an eBay acquisition, which provides real-time inventory and pricing information from 50,000 offline retailers such as Home Depot, Lowe’s, Target, Best Buy, Barnes and Noble and other large retail chains. Small retailers can also upload inventory to Milo and eBay. The service will potentially have a direct impact on large retail chains drawing in more users. It will also help boost the use of eBay and PayPal. However, in rolling out the service, the company could possibly cannibalize its own Marketplace.

Given that competitors like Amazon and Wal-Mart have warehouses and stores already present across the country, a dedicated effort on their part would result in a wider range of products available to the customers for same day delivery with quicker delivery times. This could put a damper on the future prospects of this service should eBay plan to upscale. Also, there are significant infrastructure costs associated with operations of this nature. While Wal-Mart and Amazon already have infrastructure in place, eBay will need to make substantial investments to be competitive.

We currently have a $50 Trefis price estimate for eBay, which stands nearly 11% above the current market price.

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