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EBay Goes All Out to Compete With Amazon on Same-Day Delivery

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Its purchase of a smaller rival puts it in the race to provide almost instant consumer gratification.

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EBay (NASDAQ:EBAY) ratcheted up the competition for speedy delivery service with its acquisition this week of Shutl, a four-year-old venture capital-funded start-up based in London that offers "same-hour" delivery service, or as close to it as is humanly possible.

Its biggest rival could have told eBay that fast delivery is one tough business nut to crack, and it's not cheap, either.

Ironically, eBay's announcement came within hours of word from Amazon.com (NASDAQ:AMZN) of its first-ever increase in the minimum purchase requirement for its Super Saver free shipping service. The minimum purchase is now $35, a $10 jump.

(See also: McDonald's, Amazon, Apple: Consumers Say They Won't Spend More, but Major Brands Disagree)

EBay's acquisition of Shutl will help the company expand its eBay Now delivery service, with a goal of adding more than 20 cities in the US by the end of next year.

EBay Now serves the San Francisco Bay area, New York, and-as of this week-Chicago, where it reportedly has already adopted Shutl's logistics system. Shutl operates in New York as well as about 50 towns across Great Britain.

EBay is clearly betting that the start-up has devised a system that makes it possible to provide fast door-to-door delivery at a reasonable price.

In sharp contrast to Amazon, it's a system that allows eBay to stick to its time-honored strategy of keeping its hands off the goods, and serving primarily as a middleman between seller and buyer.

EBay Now, in its current form, uses a network of couriers to pick up and deliver purchases from participating merchants, including Best Buy (NYSE:BBY), Target (NYSE:TGT), and Home Depot (NYSE:HD), for a fee of $5.

It's impossible to imagine this service not losing money on every single transaction. The merchants, and the areas each serves, are limited, but the service still doesn't stray far from the dot-com days of pie-in-the-sky free delivery.

Shutl has worked out a different system, according to Wired.com. Rather than hiring its own couriers, it piggybacks on existing delivery services in each area it serves. It tracks the real-time locations of their trucks (or bikes or motorcycles), and the available space on each. It matches up new orders and available couriers, and gets the goods delivered as an add-on, either as soon as possible or within a one-hour window.

Shutl also limits its available retailers, with a current list in the UK that includes names like the department store chain Argos, fashion chain Oasis, and footwear seller Schuh.

With this latest acquisition, eBay continues to edge into territory dominated by Amazon.com. Built as the ultimate online auction site, eBay has been moving steadily into fixed-price goods, and building its list of big-name products and retailers in key areas.

Amazon's massive expansion of its warehouses coast to coast was designed to increase the speed and efficiency of its delivery of the most popular items in its stores.

But its Super Saver program was designed to encourage customers to buy more, and more often. The increase in the fee may be intended to move more customers toward Amazon Prime, its membership program that includes free shipping on many purchases. The Amazon Prime price remains unchanged, at $79 per year.

Both those programs aim for second-day delivery-fast enough for most shoppers most of the time. But Amazon also is dabbling in same-day delivery.

Amazon Fresh tested same-day grocery deliveries in Seattle for five years before branching out to Los Angeles last June. In its quarterly conference call on Thursday, a company spokesman said Amazon Fresh customers were adding more non-grocery purchases to their orders because of the same-day service. No real numbers were given, though such a trend could justify the service, even if it just breaks even.

See also:

Tech News: Steve Wozniak Doesn't Want New iPad Air and Amazon Delays Its Set-Top Box
No positions in stocks mentioned.
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