IS UPS Gearing Up For Fight With Amazon.com?
UPS ( UPS ) has acquired a stake in same-day delivery startup called Deliv, shifting it into competition with e-tail giant Amazon.com ( AMZN ). Palo Alto-based Deliv delivers products from brick-and-mortar retailers to shoppers at their nearby homes — attempting to figure out an efficient solution to the most expensive part of delivery: the last mile. The $28 million of announced funding brings Deliv’s total haul to $40.5 million from funders such as Upfront Ventures, RPM Ventures and mall operators such as General Growth Properties ( GGP ) and Simon Property Group ( SPG ). The Wall Street Journal reported that its valuation was unavailable. Deliv has struck deals with Alphabet ( GOOGL ) subsidiary Google for its Express delivery service, among other clients including several startups. “Same-day is absolutely the new standard. That’s exactly what’s happening in the market. Look what Amazon is doing,” Deliv CEO Daphne Carmeli told IBD. As part of the funding arrangement, UPS will gain a seat on the Deliv board — an opportunity to gather intelligence about a business and market it doesn’t operate in. Currently UPS only offers same-day delivery for high-margin sectors such as health care. Next-day delivery is available for evening pickups — customers generally place orders online in the evening when returning from work. “I struggle to understand what it is that I need in less than a few hours,” Rimas Kapeskas, head of UPS’s Strategic Enterprise Fund, told the Wall Street Journal . UPS is specifically interested in Deliv’s software that connects it directly with a retailer’s website. UPS and Amazon have an uneasy relationship. At the moment Amazon.com is UPS’s largest customer but as the e-tailer’s delivery costs continue to soar, the company has begun to seek alternatives and is widely rumored to be building its own freight operation. Amazon.com offers free two-day shipping and other perks via it’s loyalty program Amazon Prime. The e-tailer offers same-day delivery service via its Prime Now app. On the company’s Q4 earnings call, executives characterized the speedy delivery options as very difficult and expensive but said customers love it. To support its various shipping options Amazon has entered the ocean freight shipping business , is rumored to be flying several flights a day from an airfield in Ohio to locations near its fulfillment centers, has bought a fleet of truck trailers, and is leasing a number of Boeing 767 cargo aircraft. But, it’s still unclear who is going to crack the code on same-day delivery. It’s a complex and expensive business with low margins. Others, such as San Jose-based eBay ( EBAY ) tried to launch in the U.S. but ultimately ended the pilot program. CEO Devin Wenig said at the time the company had “mixed results” for the delivery service.