When Daphne Carmeli launched Deliv in 2012, her pitch for a same-day delivery service didn’t often get the warmest reception. “The stupidest idea ever,” she was told.
“Remember Webvan?” they’d say. “Remember Kozmo?”
In Silicon Valley, the spectacular flameouts of those dot-com-boom delivery services are deeply entrenched lore. And as a veteran of the Bay Area start-up community, Carmeli remembers them well. But they don’t scare her.
And that’s because Carmeli believes this time — this moment, this era — is different.
For one, the technology available for executing the complex logistical gymnastics of same-day service is vastly better. But Carmeli also thinks her predecessors — and some of her rivals — did not or will not conquer this business because they’ve been trying to solve the wrong problem.
“The market opportunity for same-day delivery has very little to do with meeting the needs of people who want things fast,” Carmeli said.
In other words, customization is king here. Deliv’s model is geared toward a generation of shoppers who want service that is both predictable and flexible. It’s designed to accommodate a shopper who wants his purchase to arrive in the two-hour window between his haircut appointment and his kid’s soccer game. It’s for the shopper who schedules a 6 p.m. delivery, but needs to push it back to 6:30 at the last minute when a conference call at the office runs late.
Deliv is vying with Goliath-size competitors for same-day delivery supremacy. Amazon.com is racing to build out a vast network of distribution centers to support its same-day efforts in more than a dozen markets. (Jeffrey P. Bezos, the chief executive of Amazon, owns The Washington Post.) Google has been buying up delivery vehicles and hiring workers for its Google Express offering, which executives are reportedly prepared to spend $500 million to expand.
But Deliv is not making such massive investments. Its model doesn’t require them.
Deliv relies on a crowdsourced network of on-demand drivers, a set-up that carries few expenses: no inventory, no fleet of vehicles, no fuel costs and a small permanent workforce. And while larger rivals are trying to entice consumers directly, Deliv is selling to retailers and mall operators. The stores and malls then decide for themselves how much to charge shoppers for the service.
Like so many Silicon Valley start-ups, Deliv is built on an algorithm, one that can adjust delivery routes on the fly and understand exactly how many boxes of what size will fit into each driver’s model of car. Its partnerships with old-school malls effectively create a system of warehouses and distribution centers.
Deliv has quickly amassed a roster of more than 250 retail partners, including Macy’s, Brooks Brothers, Foot Locker and Neiman Marcus. It has expanded to eight metropolitan areas nationwide.
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As Deliv has designed it, same-day delivery relies on a complex, carefully planned series of relay-race-like baton handoffs. Employees of the individual retailers pack up the orders and then mall employees known as runners make the rounds, scooping up bags and boxes store by store. On a recent Thursday at Tysons Corner Center, the runner job fell to Nico Thomas, who zipped from Williams-Sonoma, where he retrieved a gift-wrapped box containing a slow cooker, to Macy’s, where he collected a Michael Kors tote bag.
Thomas deposited the orders in a storage room near a mall exit, where Deliv driver Nakir Carter knew to make the pickup at an appointed time.
Once his car was loaded, Carter turned to the Deliv app for a precise route for his deliveries, a path designed by the algorithm to waste minimal time. If customers change their desired time slot or a new order rolls in, the route is instantly recalibrated.
Carter’s second stop is at a large office building just off Leesburg Pike in Vienna. Carter makes his way to a second-floor suite, toting the Williams-Sonoma box and its plume of red ribbon. With help from the receptionist, he finds its recipient, Hassan Dhouti.
Dhouti turned to the same-day option when he realized his schedule was conspiring against him in his quest to make osso buco for a dinner party that Saturday. He didn’t own a slow cooker, but with a Christmas party on the calendar Thursday night and a big client presentation on Friday, he didn’t have much time to make it to the store. Expedited shipping on an online purchase would likely have run up a hefty charge. This option cost $5.
Dhouti said he was impressed by the convenience.
“I’m a management consultant,” he said. “I wish I thought of it.”
Early in the process of conceptualizing Deliv, Carmeli mapped out all the U.S. locations of the nation’s top 200 retailers. The visualization made clear that the vast majority of these stores — she estimates 85 to 90 percent — were in malls.
It would be crucial to build her service in cooperation with the mall operators. Deliv would have to offer them something compelling, and that’s why it is not just delivering orders placed online: It also delivers goods that people buy in brick-and-mortar stores.
When she pitched the idea to Art Coppola, chief executive of mall owner and operator Macerich, Carmeli remembers framing it to him this way: “I can walk around Disneyland, buy stuff, and have it show up at my hotel. Why can’t I do that at the mall?”
So that’s what Deliv is now offering at 30 shopping centers nationwide. If your load of bags is uncomfortably heavy, or if you’re sticking around for a movie and don’t want to schlep your purchases into the theater, Deliv will bring them to your home.
At Tysons Corner Center, it’s as simple as sending a text message to the mall concierge. Tell the concierge where you are, and someone will come collect your bags. If you live in the designated delivery zone, they’ll bring your items to your home later for a flat fee of $5.
“We are not making money on this,” said Kurt Ivey, vice president of marketing for Macerich. “We are not trying to generate revenue, we are trying to enhance the [shopping] experience.”
Ivey said he hopes the service compels customers to stay in the mall longer.
“We were desperate to keep them from going to their car and dropping off their bags,” Ivey said, because typically once they do that, they don’t come back in.
Four major mall operators — Simon, Westfield, Macerich and GGP — are investors in Deliv.
It’s rare for these competitors to team up, but the economics of the thing fall apart if the malls don’t agree on a single delivery provider. If each mall operator were to partner with different delivery services or build their own, it’s likely that none of them would get enough business to make the service affordable.
It’s clear from the number of retailers that offer free shipping that consumers are reticent to pay for delivery. So to make them shell out for same-day service, Carmeli believes it’s essential for the service to be cheap.
Carmeli likes to say she’s trying to make same-day delivery a “no-brainer,” even for situations when instant gratification isn’t a particular concern. To do that, she believes the cost has to match or beat what a consumer would pay for ground shipping from UPS or FedEx. She doesn’t set the price that consumers pay for her service — the retailers and the mall operators do that. But she’s hopeful that by keeping Deliv’s costs low, she can make it feasible for its partners to offer a low price.
Same-day delivery is going to be tricky for any business to do profitably: Last-mile delivery of all kinds is expensive and time-intensive. And it’s likely that same-day is only feasible in population-dense areas.
Analysts say one attractive thing about Deliv’s model is that it allows customers to continue to make purchases directly from the retailer.
With Google Express, for example, Google facilitates the payment process. Unless that customer has used a store loyalty card, the retailer is not able to keep tabs on a shopper’s behavior.
“The most valuable things to retailers are their customers and their data, so that direct interaction and that relationship drives brand equity for them,” said Mary Sullivan, lead analyst for digital trends at consultancy RetailNet Group. “This is why I’m candidly surprised that so many retailers are partnering with Google Express.”
But Deliv will face key challenges, too, as it aims to expand its service. Unlike same-day models in which the deliverer is also the seller, Deliv can’t bump up the price of the merchandise to help make up for delivery costs. And its rivals have deep pockets and might be willing to stick with same-day delivery even if it isn’t profitable.
“Google is perfectly willing to take a loss on the actual transaction because they can make up that money on product search,” said Steve Mader, senior analyst at Kantar Retail.
The competitive landscape could also change: Retailers could try to build out their own same-day offerings. (Wal-Mart, for example, has tested same-day delivery.) And while crowdsourced ride services such as Uber and Lyft currently exist harmoniously with Deliv, they could leverage their networks one day for same-day delivery.
Retailers are already broadening their uses for Deliv. High-end men’s stores such as Hugo Boss and Ermenegildo Zegna are using it for alterations, so that buying a suit and having it tailored doesn’t require two trips to the store.
Carmeli sees another area for growth: She’s thinking about how her network might be used to handle merchandise returns, a question that is only likely to become more relevant as more shopping is done online.
With each new experiment, Deliv will focus on offering shoppers flexibility and predictability, not raw speed.
Carmeli says, “That’s not the value proposition for the consumer — unless you’re ordering lunch.”
Correction: An earlier version of this story incorrectly described Google Express’s payment system. Google facilitates payment, but the retailer is the merchant of record. This version has been corrected.