Deliv still short of viable business model.

Deliv addressed many of the challenges of crowdshipping but will likely struggle proving its business model in the face of the tough economics of same-day delivery.

With $12.35m in funding Deliv is perhaps the most prominent example of company using crowds for last-mile delivery of packages. The company focuses on package delivery for national multichannel retailers with click & collect (order online, pick up in store) capabilities. When available, Deliv simply plugs into the retailer’s website as one of the shipping methods. The package is then picked from a local store by one of Deliv’s registered drivers (who are typically regular people rather than professional drivers) on the route connecting retail stores and customer homes that Deliv planned for her after she had used Deliv’s mobile app to tell Deliv when she would be free to deliver packages. When a package is delivered to the happy recipient Deliv compensates the driver for her time and mileage.

The ability to offer customers same day delivery from stores for just $5 (on average accoding to this WSJ article) is a very attractive proposition for national retailers with physical stores as it allows them to leverage their network of stores to compete with the increasingly demanding fulfilment standard pioneered by Amazon. With clear demand for the service from retailers, Deliv can focus its efforts on building the supply side of the market by recruiting drivers. This reduces the complexity of Deliv’s operations and allows it to move rapidly into new markets (more from the CEO in this interview).

In order to address some of the key concerns and uncertainties related to crowdshipping (This paper from USPA has a good list) Deliv vets drivers through detailed background checks as well as video interviews and asks customers to rate their driver experience. In addition the company provides insurance of packages to put retailers and customers at ease.

With a clear customer value proposition the real question becomes the economic feasibility of Deliv’s model. With a price per delivery of $5 charged to the retailer and the ballpark cost to incentivize a driver of $25/hour for time and mileage a Deliv driver would need to make at least 5 deliveries for Deliv to break even on an hour of a driver’s time. Given that a driver operates in a 15-mile radius, needs to pick up packages, check quality and get a digital signature from the customer delivering 5 packages per hour appears to be a very tall order.

Clever routing and scale can certainly ease some of the cost pressure if they allow Deliv to bundle package pick-ups (either from a single retailer or from a mall) and deliveries but my bet is that it may ultimately be the low price of the service that will have to give.* At a price more reflective of its costs, we might realize that not much value creation is taking place at Deliv.

Many crowdsourcing businesses generate value by increasing utilization of idle assets but that’s not really what Deliv does. Instead of getting a few dollars for delivering a parcel along their way home, Deliv’s drivers have go out of their ways to deliver. This makes Deliv a lot like a second job which drivers will expect adequate compensation for (if only to get some return on the background check fees they have to cover when joining Deliv).

Bearing the economics in mind, it looks like the mall retailers who led the last round of funding for Deliv in early 2014 will need to think hard about whether to keep their wallets open either for more funding or for covering the real cost of same-day shipping just to keep Deliv’s business alive.

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*Cheap same day delivery may work in highly populated urban areas with high concentration of orders (think Amazon Prime in Manhattan) but one would expect these attractive markets will attract competition some of which will benefit from tightly integrated and heavily optimized logistics that may not be available to decentralized crowd-shipping services.

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Sources:

Deliv has created a same-day delivery service for big retailers that’s powered by crowdsourcing, StartUp Beat, 04/18/2013

Crowdsource Your Next Delivery, Entrepreneur, 06/13/2013

Deliv Raises $6.85 Million To Bring Same-Day Delivery To A Store Near You, TechCrunch, 09/19/2013

Using the ‘Crowd’ to Deliver Packages, USPA Issue in Focus, 02/12/2014

Same-Day Delivery Startup Deliv Gets $4.5 Million Vote of Confidence, WSJ.D, 02/24/2014

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