Should You Bid on eBay's Same-Day Delivery?
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Although eBay (NASDAQ: EBAY) is usually thought of as a great place to buy some Atari 2600 cartridges, Pink Floyd LPs and other random knick-knacks, the company is making a bold departure from its usual business model with the announcement of same-day delivery.
The San Jose, Calif.-based online auction giant is testing its new service in its home base of the San Francisco Bay Area. The announcement comes after Amazon (NASDAQ: AMZN) announced they were doing the same thing. eBay managed to beat Amazon to this market.
The new service, dubbed eBay Now, has the company partnering with some other major retail giants, including Best Buy (NYSE: BBY), Macy's (NYSE: M), Target (NYSE: TGT) and Toys R Us.
Traditionally, online retail has been ideal with people with more time than money. Since even people with Mitt Romney-level incomes love saving money, it's obvious why businesses like Amazon and eBay have become so popular.
This service combines some of the best features of both online and brick-and-mortar retail. Customers have the ability to buy things like stereo systems, clothes and even a few toys for the kids all in one fell swoop without even leaving their homes. Even if it does appear anti-social, the convenience factor alone makes the idea extremely attractive.
What eBay Now lacks in warmth and customer service should translate into higher sales. Since the customers can whip out their credit cards and have their items show up quickly, the retailers can benefit from something that they've only been able to get from their physical locations: impulse buys.
Even better, the service works over iOS, letting iPhone users scan items in the store and have them delivered to their homes. This eliminates one of the most notorious features of online shopping, where customers come into a store to try out an item, only to go home and buy it online. Do you think that a person checking out TVs at Best Buy will go home and surf their website? If you've been giving the company's stock price at least a cursory glance lately, you can probably guess what the answer is.
One advantage of retail is that customers can really handle the merchandise and see it close up. Since customers usually buy things they handle (if they're not contributing to what's euphemistically called "shrinkage," that is), they can so so much more easily then having to schlep a 42-inch LCD home.
This may seem like a radical departure from a company that's become synonymous with buying older and oddball items, optionally in a late-night alcohol haze. Successful companies, and ones that wise investors should choose, will continually to try to reinvent themselves.
On the other hand, investors have every right to be skeptical. If same-day delivery from online retailers sounds familiar, it's because Kozmo tried a similar concept at the height of the dot-com era using bicycle couriers. The company failed simply because the business model was not cost-effective. On the other hand, since eBay is partnering with established retailers, ones that have experience with delivery, the service seems to be on much better footing. This kind of experimentation is the sign of an agile and healthy company.
Fool blogger David Delony has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com and Best Buy. Motley Fool newsletter services recommend Amazon.com and eBay. 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.If you have questions about this post or the Fool’s blog network, click here for information.
