eBay is drastically scaling back its plans for same-day delivery, but says rumors that the service is shutting down are completely false.
“It’s just not true,” said Christopher Payne, an SVP and head of eBay North America, in an interview with GeekWire. “We have no plans to shutdown our same-day delivery offering.”
Payne says it will continue to focus on Chicago, Dallas, New York, and the Bay Area, where the eBay Now delivery program currently operates.
That’s a big shift from an announcement eBay made eight months ago, when it promised it would be serving 25 markets in North America by the end of the year, and select international markets, including London, by early 2014. Those plans had positioned eBay as one of the more aggressive entrants in the increasingly competitive same-day delivery market, going up against a variety of tech companies and startups, from Amazon to Postmates.
“This is an area where we are testing and learning,” Payne said. “We aren’t going into 25 markets this year. We are focused on our four cities, and will expand when we are ready.”
Payne was responding to rumors reported by VentureBeat, which claimed that eBay was facing significant problems within its local division and was in the process of shutting down its same-day delivery efforts.
The report also listed a bevy of other problems plaguing the team, including executive departures; a change in delivery methods; and a troubled partnership with Best Buy, one of the program’s early participants.
Payne downplayed most of the claims, and many of the recent changes can be traced back to eBay’s October acquisition of Shutl, a third-party marketplace for delivery services.
Shutl’s Founder and CEO Tom Allason was recently promoted to head-up local and local delivery, and the former startup is now handling delivery, rather than eBay owning and operating its own fleet of drivers. He said Best Buy continues to be a participant.
The reason why the program’s demise would be so juicy is obvious: If eBay bails now, it will be very reminiscent of the late 90’s when startups, including Webvan, HomeGrocer and Kozmo built up large fleets of couriers to delivery groceries and other items to your front door.
EBay is not the only company participating in the Webvan 2.0 era, but based on its prior announcements, it was being one of the most aggressive in the same-day delivery race. Other tech companies also experimenting with fast parcel delivery include Google, Walmart and Amazon, along with a host of startups, such as Instacart, Postmates and WunWun.
For many, this time around was supposed to be different, having learned from prior mistakes. But nothing is for certain, and all of the services by the major players should be considered tests or experiments. Take AmazonFresh, for example. The Seattle retailer has been experimenting with groceries since the service in Seattle more than five years ago, and has only started to roll it out to new cities more recently.
As eBay Now currently stands, customers place orders online or from their phone for items available in a nearby store, such as Macy’s and Target. eBay charges $5 for a courier to deliver the package within an hour or two to the person’s location — an office, apartment, or even a street corner.
The customer only pays $5 for the service, and the products themselves are not marked up. It is unknown whether the retailers are paying, as well.
eBay’s CEO John Donahoe has explained to Wall Street in the past how the economics can pencil out. He’s not only focused on finding cheap delivery methods, but also on how to save on warehousing costs, by partnering with physical retailers.
On the delivery front, the company considers Shutl is the crucial link. Just like Uber, Shutl is tapping into the excess capacity in the delivery industry, by allowing vetted drivers to bid on deliveries. By signing up retailers — like Best Buy, Target and Macy’s — eBay also gets a local cache of goods without having to pay for a warehouse near the city’s limits.
“I think there’s no doubt that the arc over the past 15 years has been towards convenience for customers,” Payne said. “Will everything be same-day or delivered immediately? Absolutely not, but it’s a piece of the portfolio. … Companies not experimenting with that are crazy. Customer expectations are rising every year.”