Remember Veruca Salt from Willie Wonka and the Chocolate Factory? Her infamous singing tirade in Wonka’s golden egg room seems to be a decent analogy of how our shopping habits have changed over the last couple of decades. We used to be completely happy waiting a week or so for home delivery or standing in line a few extra minutes to ensure we got the “hot” new products. Now that the world is seemingly so much smaller, with digital and mobile environments bringing us closer, delivering vast amounts of information and enabling an atmosphere of instant gratification, we’ve all suddenly seem to have adopted the Veruca Salt mindset (minus the snarky, “Daddy-buy-me-everything” attitude).
Recently I read with interest an article that described the “day in the life” of a valet who works for eBay Now in New York City. If you’re not familiar, eBay started same-day delivery service last year, partnering with major retailers (Target, Best Buy, Bloomingdales, Kmart, Finish Line and more) to enable customers to purchase items and have them delivered within a few hours. eBay Now is only available in San Francisco and surrounding areas, Dallas, Chicago, and New York City, but has plans to expand to more cities in 2014. It’s an initiative similar to AmazonFresh and Walmart’s same day delivery pilots that aim to increase revenues and accommodate customers’ “want it now” mentality. The article outlined how the valets use various methods of transportation depending on the store location(s), delivery destination(s) and products purchased. Delivery was only $5 with a $25 minimum purchase, but the customer could also include a tip for the valet.
I was surprised by a couple of pretty big issues with this business model: o Lack of retailer involvement or visibility o No inventory management systems integration o Poorly designed execution
Outside of the relationship that eBay and the retailers had to enable the ordering of the merchandise and limited insights to assortments, that’s virtually where it seems to stop. The retailer doesn’t seem to have any involvement in the process – including visibility into the original order or who the customer is. So much for knowing your customer. Goodbye, transactional history. Also, the lack of involvement by the partnering retailers’ store staff is very surprising. The store associates are the people who know the layout of the store and should be able to quickly fulfill orders. But there is no communication to the retailer from eBay Now about the orders being generated, so their hands are tied. Many retailers are beginning to fulfill eCommerce orders from their physical stores, so this same basic process is already occurring. For the eBay Now model to work, shouldn’t the in-store fulfillment process be extended to make this process much more efficient? Also, even if inventory visibility is an issue on the ordering side, the store staff could much more quickly identify out of stocks, potentially suggest alternatives and even be empowered to offer a discount or price match on the suggested alternate product.
There is apparently no tie between eBay Now’s ordering platform and the retailers’ inventory management systems. This means shoppers can’t see if the item they want in their size or color option is actually available. From a customer satisfaction perspective, this would be very frustrating for the customer if they don’t receive what they want. Clearly, they are willing to pay an extra $5 (plus maybe even tip the valet) for immediate delivery, so there is a sense that the requested items are time-sensitive (think of wanting to buy nail polish or a necklace for a date night or running socks for a race). But also, from a process efficiency perspective, the valet – who must basically do the shopping like any other customer – has to intimately understand a multitude of store layouts and assortments to quickly fulfill the orders. In one of the examples I read, the valet had to maneuver through 2 or 3 different departments and involve 4 members of the store staff to ultimately determine that the retailer was out of stock on one of the items ordered. The “over $25” order had to be reduced to under $7.
I don’t know if eBay Now is sharing any type of customer information with the retailers. For example, every time I use my Target RedCard, the retailer knows a little bit more about me – but I can’t use that card when transacting with eBay Now, so that bit of information is lost to the retailer. Sharing customer information is possible, but for now I’m thinking eBay Now is making money on a percentage of top-line revenues generated by each retailer. And inventory turns seem to be the only retailer benefit. In a defensive move, many eBay Now partner retailers are spreading their risk by joining Google’s Shopping Express and are also investigating bringing same-day delivery fulfillment in-house.
It’s perhaps a boondoggle. I wonder how many repeat customers these online same-day marketplaces actually have. When I lived on the 26th floor in a downtown Chicago high-rise years ago, I frequently used a grocery delivery service because lugging a 64oz. jug of Tide and bags of produce down Michigan Avenue in 10-12° temperatures was most assuredly not fun. This service served a distinct purpose and worked quite well. But it seems that to take advantage of the “want it NOW” customer mentality for all types of products, some companies have adopted the same instant gratifying attitude and rushed into a solution without really thinking through how it should be properly integrated and executed.