EBay's One-Hour Delivery Service Expands to More Cities

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It looks like eBay's crazy experiment in one-hour delivery is going well.

The company announced Monday that it will soon expand eBay Now, its same-day local delivery service, to Dallas and Chicago. The company had initially tested the service in San Francisco before expanding to New York last fall and San Jose, Calif., earlier this year.

Those aren't the only changes coming to the service, which uses couriers to purchase items from local retailers and deliver them to your door ASAP. Initially available only through a mobile app, eBay (EBAY) is unveiling a desktop version of eBay Now, a decision that reflects what it has learned about how people use the delivery service.

"A lot of the purchases happen during work hours, and deliveries are there as well," says Dane Glasgow, eBay's VP of mobile and local. "It peaks on Fridays. People are getting the things they need before heading out for weekend."

In other words, it's not just for travelers who need a new phone charger in a pinch -- it's also for people sitting in offices who can't get away to run errands during the day. Glasgow says another typical case involves people realizing they forgot to pick something up while they were at the hardware store, and deciding that they'd rather not have to run out again. (It's also good for last-minute gift shopping.)

Having a courier hand-deliver a power drill because you don't want to make another trip to the store might seem ostentatious, but the cost and speed of the service makes it a viable option for regular shoppers. Delivery costs just $5, and the company says the vast majority of deliveries happen within an hour. EBay's "valets" can make deliveries by bike, by public transportation or by vehicle, enabling delivery of everything from headphones to air conditioners.

At that price, it's hard to see how the venture can really be profitable for eBay. Amazon can ship a TV for free and still make money because it's using existing shipping services and making margins on the product itself; eBay is delivering purchases from other retailers, using its own fleet of couriers, and doing it all in less than an hour.

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Company executives we spoke to were evasive on how the profit math works out, insisting that the service is still in a "test and learn phase" and that the company isn't really focused on monetization. It's possible that eBay is getting referral commissions from its retail partners to keep it from being a money loser, but again, executives weren't saying.

But whatever the business realities for eBay, there's no doubt that it's a great deal for shoppers who can't be bothered to leave the house. And in addition to expanding to more cities, eBay is making improvements to the service. The new desktop version will have a tracking system that allows shoppers to see where their delivery is (and, as with the mobile app, communicate with the courier with special instructions). There will be an option to shop by neighborhood rather than just by store. And later this summer you'll be able to schedule delivery, allowing you to decide both where and when your delivery will arrive.

When we first heard about the program, it seemed like the kind of crazy idea that Silicon Valley tech companies test out in their Bay Area backyard before realizing it's not feasible. But with delivery now available in five cities, it looks like eBay is working out the kinks and finding a way to make it work.

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.