Lessons from Delivering Valentine’s Day

Valentine’s Day!

The day of romance named for a Christian martyr dates back to the 5th century, but has origins in the Roman holiday Lupercalia and is recognized as a significant cultural and commercial celebration in many regions around the world.

More…to give you an idea about the value of its cultural and commercial power in the United States alone:

It’s a $13.5 billion industry; almost 200 million roses are produced and distributed just for the day; 53% of women said that they would end their relationships if they didn’t receive a card or gift and some 11,000 babies are conceived on averagesee Barbara Streisand’s view in Funny Girl

However, I leave it to you to follow up on your country’s statistics and share them, as you will. Suffice it to say — it is a global phenomenon.

Truth is my interest isn’t in the Day itself – but rather in one of its critical and powerful drivers of commerce…and that is DELIVERY…same day or otherwise, as so many of those cards; gifts; flowers and such are meant to be delivered by others – in time to make the impression that was intended.

The Big Data starts flowing; the powerful algorithm starts cranking; the digital magic starts streaming and once again we have created true, high-value disruption…getting “stuff” in people’s hands in ways never before contemplated…quickly, cheaply, for free even… changing the course of human behavior and altering the world for all time…NOT!

PURE AND UNADULTERATED DIGIBABBLE!!!

Listen from this week’s New York Times, “Startup Delivery Services Run into a Reality”:

Trying to duplicate what local pizza shops have been doing for decades — usually for free — is not necessarily innovation…

Investors put more than $730 million on companies like DoorDash, Instacart and Postmates from early 2014 through the first half of 2015, according to data from CB Insights, a venture capital analytics firm. The hope was that once these companies became big enough, they’d be very profitable….

But as delivery start-ups like Kozmo.com and Webvan discovered in the dot-com boom, getting to that point is not easy. For starters, you have to pay for drivers. Then you have to cut deals…and manage orders from customers. And you have to find lots of people willing to pay a premium…

Will this new generation be a cautionary tale for the next generation of…delivery start-ups? Perhaps not. But turning this tricky business into a profitable enterprise is proving, yet again, to be elusive.

And then again…will people pay a premium or expect it for free?

Said another way…will they be lured into addiction by companies losing massive amounts of money to “build a customer base” and then be hit with high costs when dependency hits the tipping point…when I need that Valentine delivered so my relationship doesn’t hit the rocks….

The “Last Mile” is typically the term used to describe this “new and exciting” opportunity so ripe for investment and subsequent disruption.

As a term, it is particularly well suited to Digibabble, as it has been used to refer to technological issues – that is, the final connection between a network and a consumer/final user where the data/information/signal/whatever leaves the “firehose” and enters the narrower capillaries of non-commercial pipes. It also refers to the final journey of any package when it leaves the huge machinery of global distribution and enters that last leg to you.

Interesting that around the world, the last competitive value of any Postal System is the Last Mile…unless you actually believe that millions of drones will be the solution…more on that later.

The upshot of all of this has been a huge amount of investment…with little to show for it…

From yet another New York Times piece on the delivery dilemma— “Delivery Startups Face Bumps in Quests to Capture Untapped Market”:

Based on a belief that the companies would succeed once they grew to enormous scale, investors poured more than $730 million into delivery firms like DoorDash, Instacart and Postmates from early 2014 through the first half of 2015, up more than 1,100 percent from the same period a year and a half ago, according to data from CB Insights, a venture capital analytics firm.

But entrepreneurs and investors are beginning to find that the economics of making a delivery service work are far from easy.

The problems are rooted in the high operating costs of the start-ups, which typically act as middlemen between consumers and restaurants or grocery stores. The companies not only have to pay for large fleets of drivers, they also have big groups of employees who receive customer orders from the apps and who then manually make calls to the restaurants to order food. At the same time, to attract customers, many of the start-ups offer introductory prices and discounts, often making delivery free for first-time users.

Hmmm…so you need drivers? Customer service?…You mean it costs money?

And yes…lots of money given away to hook the newbies.

Yet…as if The Last Mile wasn’t enough of a challenge…Amazon — no doubt feeling that they have licked that problem at least with their investors — has begun to focus elsewhere…

At first it seemed like Amazon was focusing solely on the last mile, or local delivery. That’s where things like drones would come into play, or even Amazon-owned trucks and vans. But then there were reports in December of Amazon leasing its own jet planes to use for cross-country delivery, which certainly wouldn’t qualify for the last mile.

Subsequently, there was a report that Amazon might be buying a French shipping company called Colis Privé, in which Amazon already has a 25% stake. Again, probably not for the last mile.

Most recently, Amazon China has registered to operate as an ocean freight forwarder in the U.S., meaning that Amazon can deliver products from China to the U.S. on its own ships.” — The Street

Is Amazon becoming a logistics company and just outsourcing merchandising to others?

And interesting to see how Amazon is copying Postal Services and building lockers for personal delivery…not drone-like, but smart… while other entrepreneurs are also tackling the real issues and looking at garage door security…check it out….

Somehow it all comes back to Pizza…

All across the Valley, the majority of big start-ups are actually glorified distribution companies that are trying, in some sense, to copy what Domino’s Pizza mastered in the 1980s when it delivered a hot pie to your door in 30 minutes or less.

Uber, Lyft, Sidecar, Luxe, Amazon Fresh, Google Express, TaskRabbit, Postmates, Instacart, SpoonRocket, Caviar, DoorDash, Munchery, Sprig, Washio, and Shyp, among others, are really just using algorithms to deliver things, or services, to places as quickly as possible. Or maybe it’s simpler than that. As one technologist overheard and posted on Twitter, “SF tech culture is focused on solving one problem: What is my mother no longer doing for me?” — Vanity Fair

And there you have it…although I think the algorithm reference is way off…

One last thought…

As flowers are so key to Valentine’s Day – I took a look at how “Digital Disruption” is affecting an industry that has always been about personal delivery:

The industry’s current financial structure has its roots in a century-old practice. In 1910, a group of 15 American florists formed a cooperative, the Florists’ Telegraph Delivery service, to exchange orders. A customer in Denver would, for example, be able to walk into a local flower shop and arrange a delivery to a friend in Boston. The originating florist transmitted the order through the florists’ wire service and received a commission for the effort; the rest of the money was passed on to the fulfilling merchant.

Real Local Florists, an advocacy group, began working several years ago with Sundaram Natarajan, a software developer,on an e-commerce system for florists’ websites that would offer a less expensive alternative to the wire services’ systems.

“We had the idea that we wanted to create our own florist-to-florist network,” said Mr. Fiannaca, one of the group’s founders. “I can send an order to a member florist, and his or her products would populate on my web page.”

So a century later, Real Local Florists is essentially working to recreate the kind of co-op that FTD pioneered. When asked about the similarity, Mr. Fiannaca laughed…. 

LISTEN:

“It’s a good model,” he said. “It just has to be one that helps keep local florists in business.” — New York Times

And there you have it – we need good models that keep the stuff we want in business…

What do you think?

PS…HAPPY VALENTINES DAY…I hope you got what you wanted…

 

 

 

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