
Deliverr raises $7M to help e-commerce businesses compete with Amazon Prime - arturnt
https://techcrunch.com/2018/10/05/deliverr-raises-7m-to-help-e-commerce-businesses-compete-with-amazon-prime/
======
jbob2000
Any company who uses Deliverr is going to quickly figure out that they have
placed their most important business process in the hands of a third party,
and that they have very little control over it.

eBay, Wal-Mart, and Shopify are in the business of delivering products. They
don't make the products, they make them available to the consumer. Delivery is
like 90% of that. This is why amazon runs their own fulfillment centers, it's
the most important part of their process.

It would be better for eBay, Wal-Mart and Shopify to merge and compete against
amazon as one, rather than fighting over the table scraps that amazon leaves
them.

~~~
habbott
I disagree with you on many fronts -

First any business should ask for metrics on past performance and that is how
you should judge the performance and not by assertions or business models -
Case in point -- Taxis were fully controlled they all looked the same, the
drivers were all trained the same way -- yet the consumer experience was bad.
Then Uber/Lyft came in and they don't drive the taxis but they are able to
orchestrate demand and supply and offer visibility and a better price to
customers. So going by your analogy Taxis >> Uber. But I think it is settled
that Uber/Lyft >> Taxi. Judge Uber/Lyft with their metrics such (a) time to
get a taxi (b) on time delivery and (b) cost to consumer. And businesses and
consumers are smart enough to do that.

Second - marketplaces are in business of connecting buyers with sellers;
laying out rules of engagement so trust is built for discovery and
transaction. They are enablers. But a merchant participates in many markets
and not just one. You cannot ask each marketplace to do fulfillment for the
merchant because that will mean the merchant will have to predict and send
inventory for eBay and Walmart and Shopify separately which is not efficient
for anyone in the market.

~~~
jbob2000
Ok, I hear you, but I think you're missing the forest for the trees - Why did
amazon beat these businesses in the first place?

It wasn't because they connected buyers with sellers, people have been doing
that for decades. It has nothing to do with the rules of engagement, amazon is
full of fake products and reviews. It wasn't because the user experience was
bad, the amazon UX is pretty bad, it's very cluttered, and Shopify's UX is
really impressive.

Amazon beats Wal-Mart et al. because their delivery is faster. And that takes
control. The difference between delivering in two days and delivering in three
days comes down to seconds.

And for what it's worth - Sometimes I am unable to get an Uber, but every time
I call the taxi company, a taxi shows up.

(All of this isn't to say Deliverr won't provide value, just that I am
doubtful it can beat amazon)

~~~
wpietri
Personally, I think Amazon's original advantage was definitely in a high-
quality experience. (FWIW, I've been a customer since 1997, but didn't join
Prime until 2010.) They used to have pretty reliable reviews and real
products. They used to have better prices. And they used to have a much better
user experience.

What I really want is shopping as a _utility_. I want to spend the minimum
time possible and get great results with no worries. Speedy delivery is
sometimes part of that, but not always. If there were something as reliable as
the Amazon of 2010 but defaulted to 3-day delivery for free, I'd switch in a
heartbeat.

~~~
habbott
Interesting so in your opinion Amazon has gotten less reliable for you? In
what regards ?

~~~
wpietri
A number of ways:

I trust the interface much less. Just this week I had to send back two things
that were mistakenly ordered. One was clothing. I set the size I wanted, then
clicked on the color I wanted. The size I wanted wasn't available, so it
switched the size without telling me. The other was a tool. I was searching
for Dremel sanding accessories. Mixed in with Dremel-specific stuff were
things that weren't compatible, but I didn't notice the switch.

It is now packed with ads of various forms. I want them to be on my side,
showing me the best stuff. But instead, they are getting paid to show me stuff
without regard to quality or usefulness.

The mixing in of stuff from others stores is another area where my trust has
declined. If it were a separate site, that would be fine. But when I want to
just buy something from Amazon, I now have to evaluate a bunch of possibly-
dubious vendors on the basis of too-little information.

The reports of counterfeit products and comingled inventory has left me much
more skeptical when buying things there.

The reports of terrible warehouse work conditions mean that I trust them less
to take care of the people doing the work.

The way many people are now making bank doing store arbitrage, where they buy
things at Target, Walmart, Trader Joes, etc, and sell it at high markups means
I trust the pricing much less. I also suspect Amazon of marking things up more
now than they used to.

And finally, their experiments with various shipping options means less
reliable delivery. If something comes via UPS or Fedex, I know when it will
arrive and trust the drivers will put it in the right place. But their various
other shippers provide a different and usually worse experience.

When they started, it was magic. They took all the confusion and stress out of
mail order. Now they've slowly been putting it back in. I'm sure it has
increased the revenue metrics of various sub-sub-teams. But they've taken me
from being a loyal customer to one ready to switch.

------
arturnt
I run engineering at Deliverr. Happy to answer any questions.

~~~
arosier
“Uber didn’t change the physical infrastructure of cars. They didn’t build
their own taxis. What they did was create software that could connect excess
capacity drivers,” Krakaris told TechCrunch. “Most warehouses aren’t going to
be full. We are going in and filling that extra space they wouldn’t otherwise
fill.”

Does Deliverr rely on the third party warehouse staff to perform fulfillment?
How do you ensure SLA's are met?

~~~
arturnt
That's right. Effectively we measure everything and have multi-factor
performance metrics with our partners. So it's a bit more objective than Uber
which is entirely based on user feedback. If we detect that a node in the
system is performing poorly we will not use it.

------
MetalGuru
Isn’t this what selling 3rd party on Amazon is? They handle fulfillment and
delivery? I think it’s a good idea since I don’t think eBay or Walmart offer
this service (?), and I’m continually hearing how Amazon is screwing over
their 3rd party sellers (Amazon basic to replace 3rd party products that sell
well, etc). What would you happen to you guys if say Walmart started offering
3rd party fulfillment? Think they could do it well?

~~~
arturnt
Amazon has a program called Multi-channel fulfillment. But there are
significant drawbacks to sellers and marketplaces:

1\. It comes in an Amazon box. Large marketplace have started penalizing
sellers for that.

2\. They don't integrate into fast shipping programs that act like Prime, as
an example eBay eGD.

You are right that eBay and Walmart can offer this service, but most sellers
will sell in multiple places, and splitting inventory across different
facilities is expensive, inefficient, and difficult to manage. Isolationism in
this market hurts everybody.

------
throwawaylalala
I’m am ecommerce seller; why Deliverr inatead of Shipmonk, Shipbob, Easy Post?

Do you have clear and transparent pricing?

~~~
habbott
Absolutely the pricing is per unit per SKU - all inclusive of receive,
shipping, box and pick pack. I think you will find pricing to be at least 30%
lower. You can check out pricing for your items here -
[https://deliverr.com/fulfillment-cost/](https://deliverr.com/fulfillment-
cost/)

However the bigger reason for our existence is faster shipping. You can now
affordably do 2 day shipping on Walmart and Guaranteed Delivery on eBay and
offer 2 day shipping on your Shopify store. You can see here the sales boost
we are seeing with fast 2 day shipping --
[https://deliverr.com/walmart/](https://deliverr.com/walmart/)

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technologyvault
The article talks mostly about Wal-Mart, eBay, and other very large retailers,
but I noticed that they also have options for small businesses.

~~~
habbott
In fact it is designed for small merchants - and enables you to sell on
Walmart, eBay and Shopify stores with fast shipping

------
bvssatish
We use "AWS" :)

------
arosier
I was interested, so I dug a little. Here is my conclusion: While Amazon
continues to lower the cost of fulfillment through management and the
development of new technology that is driving operational efficiencies,
Deliverr tries to lower fulfillment cost by gaining access to excess warehouse
capacity for pennies on the dollar.

The below pricing shows that Deliverr is able to drive value by offering
competitive pricing on the fastest shipping times over other third party
logistics providers (3PL). They claim they are able to achieve this cost
savings through their "machine learning and predictive intelligence" which
they use to determine which of its warehouses to store its client’s goods.
However, they go on to say they typically only store the good's in 3-5
warehouses. This means any 3PL should be able to compete on pricing for "2
days shipping" by having 3-5 properly placed warehouses.

It seems the key cost saver for Deliverr is their outsourcing of the
fulfillment to the excess capacity of the third party fulfillment centers.
Using a similar model as Uber.

According to this article that states the amount of warehouse space that goes
unused on any given day is 4 billion square feet, or roughly 30 percent of
total warehousing: [https://www.pymnts.com/matchmakers/2017/warehouse-space-
matc...](https://www.pymnts.com/matchmakers/2017/warehouse-space-matches-
customers-with-unused-storage-spaces/). If deliver is able to unlock only 1.7%
of this space for pennies on the dollar, they will achieve FBA warehousing
scale (77 million square feet: [https://archpaper.com/2017/08/architecture-
fulfillment-cente...](https://archpaper.com/2017/08/architecture-fulfillment-
centers/)) and FBA pricing.

In determining if they will be able to gain access to the 1.7% of excess
warehousing and maintain SLA's, it is interesting to see what the current
warehousing market is in the US. According to this report:
[https://www.logisticsmgmt.com/article/cbre_research_shows_th...](https://www.logisticsmgmt.com/article/cbre_research_shows_that_many_u.s._warehouses_are_under_equipped_to_meet_e),
it seems the majority of this excess warehouse space is most likely not well
suited to efficiently deliver on the type of fulfillment Deliverr is
advertising. "In data analysis for 56 major U.S. markets, a key finding from
CBRE showed that the majority of facilities built before the mid-2000s have
certain limitations that hinder e-commerce distribution usage, including low
ceilings, small footprints, uneven floors, and inadequate docking."

The article goes on to mention that only 11% of total warehousing in the US (1
billion square-feet) was built within the past 10 years. It does not mention
how much of this space is not being occupied on a daily basis. It would seem
Deliverr will need to access about 7% of this warehousing, at a fraction of
it's 3PL rate, to reach FBA scale.

Unlike Uber drivers, let's hope Deliverr's fulfillment partners are pricing
their excess capacity appropriately so as to be able to afford to pay their
employees a living wage.

Deliverr pricing example for an iMac: [https://deliverr.com/fulfillment-
cost/B071G2S8LZ/apple-imac-...](https://deliverr.com/fulfillment-
cost/B071G2S8LZ/apple-imac-mne92lla-27)

Amazon Multi-channel:

Standard: $29.07

3 Day: $30.07

2 Day: $30.07

Deliverr:

Standard: $26.73

3 Day: $29.70

2 Day: $29.86

Typical 3PL:

Standard: $19.74

3 Day: $83.29

2 Day: $83.29

~~~
habbott
I think you analysis is extensive but misses a few points. To analyze the
economics you have to look at the entire value chain. For e-commerce
fulfillment it looks likes this roughly - sending products into the warehouse,
receiving, storing and pick packing the products in the warehouse, shipping
the products out. Traditionally each of these items are decided on
sequentially in isolation. Without any regard on how it impact the others in
the value chain. This causes inefficiency in the system and bloated costs for
everyone.

To consider all of these value chains at once requires your to evaluate
literally millions of data points (no exaggeration here) for every SKU
inventory placement decisions; evaluate different states of the world and
choose the is likely to represent the future. Majority of efficiency comes
from this and that is what is reflected in the cost savings merchants get from
using Deliverr.

Second - the state of the world is changing and we hope to be leading that
change - 1 day shipping and same day shipping are not far away. That requires
more distributed infrastructure and radically different placement strategies
to keep overall costs in the systems down.

~~~
arosier
Thanks for the response, I definitely see the potential of Deliverr (related
to the use of excess warehousing capacity) as expectations move to 1 day and
same day shipping.

It seems inventory placement strategies developed by demand prediction models
are only as good as the data set used to build the models. Obviously it's
going to be hard to compete with Amazon on the breadth of data you have access
to.

Where has Deliverr gotten the data to feed the prediction models in the early
days?

Do you require your customers to provide historical sales data?

Do you pool customer data to improve the models for all of your customers? If
so, do customers have a way to opt-out of their data being pooled?

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abtinf
Commenting only on the title here (I haven't RTFA yet or heard of Deliverr
before)...

Amazon is a logistics powerhouse. $7M probably wouldn't even cover the capital
investment of a fraction of their equipment in just one of their warehouses.
Claiming a series A startup is going to compete with that is a surefire way to
discredit it.

~~~
tcho
I'm part of the team at Deliverr. The implication that the $7M will go towards
building a parallel infrastructure is not an accurate view of the strategy.

This company is setting up the infrastructure to leverage the vast investments
in warehousing that already exist all over the US.

Definitely recommend reading the article, it does a solid job of summing the
mission up :)

