eBay's Massive Retail Opportunity


Due to high associated costs, it doesn't make sense for the majority of individual retailers to develop a scalable same-day delivery network. Now, if there was an on-demand same-day delivery network of drivers available to any retailer, it would have far-reaching implications for the entire retail industry. With the help of eBay , this seemingly impossible dream is about to become real. At the Goldman Sachs Technology and Internet Conference, eBay CEO John Donahoe positioned the company to become the same-day delivery platform for the entire U.S. retail sector.

I want it now!
eBay is currently trialing eBay Now, a same-day delivery service available in San Francisco and New York City, which generally allows goods to be hand-delivered about an hour after being ordered. Companies like Best Buy, Macy's, GNC, Home Depot, Office Depot, Radio Shack, Target,and Walgreen have signed up to participate in the trial, which gives them the opportunity to stand out more against price-competitive e-tailers.

Innovate first, get paid later
The first order of business for eBay Now is to drive innovation to the platform by developing a delivery network that leverages excess delivery capacity in a local area. Donahoe wants investors to think of eBay Now as the Uber of delivery networks, in the sense that the delivery platform sends out orders to highly reviewed delivery drivers that are available in the next hour. While still in beta, eBay Now's pricing structure requires a $25 minimum order and charges a $5 delivery fee. If eBay can manage to successfully add value to retailers, it will be able to aggressively monetize the service in the future. For the time being, the focus is more on eBay to build out the service beyond two trial areas.

The power of being first
In the world of business, sometimes being first carries more importance above anything else. That's why Google also has been trialing its own same-day delivery service in San Francisco that relies on excess delivery capacity. For Google, the intent is to collect more data so that it can better target advertising campaigns and further unlock the true potential of the Android ecosystem. Over the long term, Google envisions deploying a fleet of its driverless cars for a same-day delivery network, which could give it a cost advantage over eBay's approach and would also allow it to theoretically operate round the clock.

With over 4,000 stores in the U.S. alone, Wal-Mart is in a unique logistical position to offer its own same-day delivery service. By leveraging its existing store network, the company began testing a same-day delivery service late last year. For a $10 fee, consumers can have goods delivered via UPS within a four-hour window from select stores. If all goes to plan, Wal-Mart can seemingly turn its 4,000-plus store network into a warehouse network that would make Amazon's network look pathetic.

In response to the same-day delivery mania, Amazon announced plans to expand its network of warehouses in order to reduce its two-day shipping times by one day. Within certain metropolitan areas, Amazon will have the capacity to offer same-day delivery. How successful same-day deliveries become will likely dictate Amazon's position on delivery times.

The bigger picture
eBay has had a successful history of investing early in opportunities that went on to become multibillion-dollar businesses in the years to come. Most recently, eBay invested heavily into mobile, and now the company expects both eBay mobile and PayPal mobile's transaction volume to exceed $20 billion each this year. Same-day delivery has become eBay's latest "early" investment, which not only has the potential to revolutionize the way commerce is conducted, but also opens up another outlet for eBay's existing businesses.

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The article eBay's Massive Retail Opportunity originally appeared on Fool.com.

Fool contributor Steve Heller owns shares of Google and eBay. The Motley Fool recommends Amazon.com, eBay, Goldman Sachs, Google, Home Depot, and United Parcel Service. The Motley Fool owns shares of Amazon.com, eBay, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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