eBay Takes the Lead in the Race for Same-Day Delivery

by Investing Daily
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In our July 31 article, “Amazon.com Focuses on Growth,” we looked at how that company is pouring cash into its expansion by opening a number of warehouses, many of which are located near major U.S. cities.

Amazon.com (NasdaqGS: AMZN) made this move in part to cut the time it takes to get its products into customers’ hands. That helps it compete with other online sellers, like eBay (NasdaqGS: eBay), but it’s mainly taking aim at one of the few remaining advantages brick-and-mortar retailers have: the convenience of being able to walk into a department store and come out with your purchase.

Still, the fastest you can receive a purchase from Amazon is by overnight delivery. But the improvements the company is making to its distribution network led many to believe it would try to go one step further: delivering goods to customers the same day they order them. Amazon CFO Tom Szkutak denied that in the conference call following the company’s second-quarter earnings release, claiming that it hadn’t come up with a way to do it profitably.

eBay May Have Beaten Amazon.com to the Punch

However, if a new service being tested by eBay (NasdaqGS: EBAY) is successful, the company may have found that way.

eBay just released a test version of its eBay Now service in San Francisco. eBay Now operates through an app that runs on the Apple (NasdaqGS: AAPL) iPhone’s iOS 6 operating system. Using this app, buyers can purchase items from nearby retail outlets.

Once you place an order, an eBay “shopping assistant” contacts you and arranges for the product to be delivered that day. Retailers the company has partnered with so far include Macy’s (NYSE: M), Target (NYSE: TGT) and Best Buy (NYSE: BBY).

Working With Retailers Makes Sense for eBay

This new service is part of eBay’s broader aim: to build strong alliances with major retailers. It’s a move that makes sense for the company, because unlike Amazon, eBay simply acts as a liaison between buyer and seller, and carries no products itself. Instead, it profits by taking a cut of the sale. So encouraging more retailers to use its websites allows it to quickly broaden its product lineup and boost its revenue.

According to Reuters, more than 50,000 U.S. stores have posted inventory on eBay, including big chains like Home Depot (NYSE: HD) and J.C. Penney (NYSE: JCP). Why? The company’s huge customer base (it has over 100 million users in its marketplace) has made it an increasingly important sales channel.

“It’s simple: location, location, location,” said Macquarie analyst Ben Schachter. “Sellers have to go to where the buyers are.”

New App Could Give eBay a Big Edge in Mobile

Over at Minyanville.com, writer Carol Kopp recalled the last time online retailers went the same-day delivery route—the dot-com era of the late 1990s and early 2000s. Back then, the high costs of the service, combined with the trickle of revenue these companies were bringing in, drove many out of business. That’s not the case with eBay’s new initiative, she writes:

“From the start, eBay is avoiding the worst excesses of the dot-com boom. For the beta test, the minimum order is $25. There’s a $5 delivery charge after the sign-up bonus of three free deliveries. By comparison, Amazon charges $79 per year for Prime membership, which includes free two-day delivery on eligible items and $3.99 extra for overnight delivery.”

A just-released report from Nielsen Research gives a clearer idea of just how much the eBay Now app could mean to the company if the test is successful.

The agency found that 45 million Americans, or 47% of all smartphone owners in the country, used a shopping app in the month of June. What’s more, the average user accessed these apps 17 times during the month. The eBay app was top of the heap, with 13.2 million unique users. Amazon followed close behind, with 12.3 million. Engagement also varies widely, with users spending just over an hour with eBay’s mobile app versus slightly under 19 minutes for Amazon’s. (See Monetizing Mobile: Facebook’s Sponsored Stories are Not the Answer for more on mobile user growth.)

“As more Americans use their smartphones while shopping and making purchases directly through apps, retailers should consider personalizing their targeted offerings around the needs of individual consumers,” said Don Kellogg, Nielsen’s director of telecom insights.

The need for same-day delivery would likely be near the top of most consumers’ lists.

Article originally posted here.

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