LicketyShip will announce a partnership with the Los Angeles Times-owned Recycler.com today to provide a same-day local delivery option for classified customers. This sounds ominously like bubble era companies that went bust, for example, Kozmo.com, which burned through more than $200 million in venture funding. Or who could forget the wonderful Wired articles of Webvan drivers forced to repeatedly deliver packs of gum to eager college students who thought repeat deliveries for low-cost items was the joke du jour? It turns out that the LicketyShip strategy is a little different – an interesting hypothesis with a few surprises.
LicketyShip, unlike its early market predecessors (read, Strategy & Business, Q3, 2000), does not own or operate the fleet of couriers. The company’s strategy is to aggregate existing courier networks, source demand and schedule deliveries through its Web application. Consumers can rate couriers on their delivery experiences. LicketyShip already has nearly 500 couriers on-call in California markets. That is more than Kozmo.com had in the state at its peak in 2000, and about half of Kozmo.com’s national courier fleet.
Law firms and architects have long utilized couriers to deliver legal documents and plans. After all, who could forget Kevin Bacon’s breakout role in Quicksilver as a down on his luck day trader turned NYC bicycle messenger? The heading Delivery Service generates 11 million references a year in print Yellow Pages and $10 millions in advertising fees. Estimates vary but a Canadian study suggests that local city next-day delivery was roughly 14 percent of all delivery services made by large operators. On the other hand, same-day local couriers are a fragmented market, dominated by small mom-and-pop operations that source leads through Yellow Pages and existing client relationships.
This simple concept has brought investors to the company like Kendall Fargo, CEO of StepUp Commerce. Kendall’s company was acquired by Intuit last year for US$65 million. He liked the idea so much he personally invested in LicketyShip.
The biggest surprise here is the price of local same-day delivery. If you thought a service like this was expensive, you’re not in the minority, but you would be wrong. According to Founder Robert Pazornik, the price of same-day in-city delivery is close to a next-day FedEx. Prices for a four-hour delivery start at $19.99. That price includes 10 miles and up to 200 pounds. The weight included in delivery does vary by market. Additional mileage varies from courier to courier in different markets but is roughly ~$1.20 to $1.85 per mile.
Newspaper classified companies, like the LA Times, are interesting partners for more reasons than you might think. You’ll certainly never escape the fact that for some items consumers have a clear need to “see and feel” what they are purchasing. Nevertheless, given the types of goods that are exchanged locally, many are heavy and hard to transport. The previous local delivery option meant calling the friend with the truck to help you out.
Then there is the payment, usually cash or a check exchanged between two individuals who only a few days before had never met. This is a little ominous under the best of circumstances. “Sure. I’ll meet you somewhere I’ve never been and bring cash.”
EBay, of course, solved this issue with PayPal. Similarly, LicketyShip offers to transfer funds between buyers and sellers using PayPal or Google Checkout. Traditional classified companies have long been denied capturing the true value at the point of sale on these cash transactions.
Even as just a simple incremental revenue program for newspapers, assuming the LA Times performs well, LicketyShip will likely strike more of these traditional classified deals with other news groups.
“We are doing a revenue share with LicketyShip on every completed transaction,” Jeremy Woodlee, GM of the Recycler, told us. “We’re forecasting very low numbers 1 [percent] to 2 percent of total visitors to be conservative. It would be nice if the service really took off, but I think that even if a handful people find it useful then it will be worthwhile. It’s a good feature for our users.”