FreightWaves Classics articles look at various aspects of the transportation industry’s history. If there are topics that you think would be of interest, please send them to firstname.lastname@example.org.
The many industries that make up the world of freight have undergone tremendous change over the past several decades. Each week, FreightWaves explores the archives of American Shipper’s nearly 70-year-old collection of shipping and maritime publications to showcase interesting freight stories of long ago.
In this week’s edition, from the July 1999 issue of American Shipper (virtual Pages 37-38), FreightWaves Flashback looks back at eBay and how it tackled residential-to-residential deliveries.
Here’s a problem. You’ve built a nice-looking website for electronic commerce. It’s attracting some hits — first hundreds, some days thousands.
Then, virtually overnight, millions of people are logging on to your site every day to sell each other everything from Beanie Babies to computers. And you’re caught with your supply chain down.
Under similar circumstances, eBay, the Internet auction house sensation, recently joined with Mail Boxes Etc. and software firm iShip.com to develop a parcel shipping system for eBay users.
eBay started operations in 1995 with a website that allows people to sell goods online within an auction format. The company, which grew out of a dinner conversation, now handles more than 1.8 million auctions online each day.
“The growth of eBay’s person-to-person online trading has created a demand for improved shipping solutions for our community of 2.1 million users,” said Meg Whitman, eBay’s president and chief executive officer. “MBE, with its network of more than 3,000 centers across the country, and iShip.com, with its innovative online shipping, pricing and tracking solution, are the ideal partners for eBay to join with in developing an integrated, full-service retail shipping service to handle this demand.”
Indeed, Mercer Management Consulting says the sometimes overlooked function of logistics is becoming one of the keys to e-commerce success.
“Undoubtedly, e-commerce is the most dramatic new distribution channel since the supermarket and the shopping mall, and it can be expected to find its way into almost every segment of commerce,” Mercer consultants said in a recent report. “Supply chain factors will be important determinants of the degree to which new e-commerce business models are successful. In fact, many new e-commerce entrants are likely to fail because of ill-conceived supply chain designs.”
Of course, a supply chain is the last thing investors think about while they pour money into Internet stocks. Amazon.com’s stock price was selling at more than $120 per share earlier this year; eBay’s at more than $160.
However, Mercer believes that logistics will play a key role for Internet companies in creating sustainable profit, without which stock prices will drop like stones. Unless Internet retailers “can process and ship orders efficiently, they may not be able to gain the operating leverage necessary to produce acceptable profitability as revenue grows,” the consultants said.
Bridging the gap
James Amos, president and CEO of Mail Boxes Etc., says his company, the world’s largest franchise operator of shipping service centers in the world, will offer eBay what it needs most — a taste of reality.
“Our mission is to lay a hard pipeline of service and distribution right along side the information superhighway,” Amos said in an interview. “We have the brick and mortar. We have the physical persons to do what is an anomaly in the world of e-commerce today. And that is to provide customer service.”
Amos said MBE will be the bridge between eBay’s virtual world of Internet shopping and the real world of picking, packing and shipping. eBay users will be able to drop off and pick up shipments at MBE locations and eventually inspect goods bought on the eBay site at the MBE store before paying.
“We can provide security for the financial transactions. We can provide hold for pick-up services to eliminate fraud when people are not sent what they were supposed to be sent. We can provide automatic returns management,” he said. “What MBE becomes is the merchant of the Internet.”
Steve Teglovic, co-founder and CEO of iShip.com, said he hopes to have a shipping software application up on eBay’s site by the end of July.
Teglovic and a team of programmers started iShip in 1997, after developing UPS’s OnLine Professional shipping application. The company has created a website that small package shippers can use to access pricing and tracking information from multiple carriers and has joined with eBay to develop a co-branded interface to its shipping applications.
“One of the big things on eBay is that you may have multiple buyers bidding on a product, and the cost of shipping can be a major component in the overall price of that product,’’ Teglovic said. “So, each bidder wants to know what the shipping cost is. But, you could have 10 or 15 bidders, all in different places, looking at a different shipping price.”
In the iShip-eBay system, eBay sellers will set up shipping profiles including information on what carriers they use, and what kind of service they are willing to provide. The sellers may also mark up the shipping costs for his troubles and include the shipping data when they present a product for auction.
Based on the seller’s profile each bidder can use iShip’s web software to calculate shipping costs and explore shipping alternatives. The software can also help with manifesting and label printing, tracking and e-mail delivery notification.
eBay’s new distribution network raises many questions for express carriers, which are struggling to handle business-to-residential deliveries, never mind the residential-to-residential shipments of eBay users. But Teglovic said the eBay-MBE-iShip tie-up could actually help private carriers compete for more residential business.
“All of the carriers look at companies like eBay with a desire to make that e-commerce shipping transaction fit into a mold that is profitable to them,” Teglovic said. “eBay business is primarily consumer-to-consumer, and that is not shipping volume that is attractive or profitable for carriers like FedEx and UPS.
“Those carriers are happy to see eBay direct its shippers to aggregation points, like Mail Boxes,” he said.
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