Last mile, same day logistics provider Deliv secures $28 million from UPS and other investors

Menlo Park, Calif.-based last-mile logistics services provider Deliv said yesterday that a group of investors, including transportation and logistics titan UPS, have poured $28 million into the company, which Deliv said will go towards supporting the company’s growth, augment its product depth, and expand its national footprint.

Deliv’s service offerings focus on same-day delivery and returns for various entities, including: omnichannel retailers, local businesses, and e-commerce providers like Google Express, Farfetch, and Plated, among others. Its primary focus is on moving goods in focusing on same-day delivery for more than 4,000 companies in 17 markets and more than 100 cities, including Macy’s Best Buy, Kohls, and Walgreens, among others.

In an interview, Deliv Founder and CEO Daphne Carmeli explained that Deliv is unique in the sense that no other company has the same business type of business model as it does.

“In the broad space of delivery, there is restaurant delivery, grocery delivery, among others, as well as the incumbents like UPS and FedEx,” she said. “We are not an in-store marketplace, and there is no Deliv app to download or go to our site to buy anything to get it delivered. That is how it is for other players like Google Express, Postmates, or others, where you order something through their app and they figure out how to get it to you. In our world, we are kind of the behind the scenes logistics provider that simply picks up and delivers at a specific time.”

Consumers don’t find Deliv until they arrive at a checkout page of a retailers’ Web site, when they are presented with shipping options akin to PayPal for payment options.  And when presented with shipping options for same day delivery, Carmeli said consumers are presented with the opportunity to choose a very specific time window for a delivery to be made, for a specific time window that is set up in terms of how a retailer wants to operate.

“What we have learned in retail delivery is that predictability is the value and not the sheer speed; predictability trumps speed,” said Carmeli. “If you buy your lunch from us, you want it in 20 minutes, but if you are buying from Kohls, then what you want is the ability to set the specific time wanted from consumers and have the flexibility to change it if their schedule changes.”

When a consumer places an order, it “hits” the Deliv system, which is based on its own proprietary algorithms for real-time route planning. So if a customer orders a flat screen TV, it will not be dispatched by a driver riding a bike. Instead, she said, Deliv matches orders to drivers, based on capacity, the route a driver is on, and where the driver is and optimized to change in real time.  And a consumer gets the opportunity to map the delivery to see it in transit and the estimated time of arrival, and when the drive drops off the package the consumer has an opportunity to rate that experience, which is key because the routing optimization engine is ratings-based so the top drivers get more business.

“That is important because retailers really don’t want a middleman…taking their transactions,” said Carmeli. “Our focus is not on on-demand getting something delivered in 20 minutes, because that is not the value proposition, which is instead the stability and flexibility that trumps speed.”

Deliv is very much aligned within this model, as UPS is also at the check out page of retailers’ Web sites, with Deliv also plugged into all the demand sources available like omnichannel retailers, e-commerce players, and small business services like accounting and law firms and small merchants.

Other investor partners in this round of financing include Upfront Ventures, RPM Ventures, REIT Investors, and mall operators General Growth Properties, Simon Property Group, Wesfield, and PREIT, among others.

From a logistics perspective, Carmeli said the mall operators provide “hub economics,” as a mall is a collection of stores with a collection of products, or a hub of inventory. When an order comes in and is fulfilled through a store at a mall, the mall operator’s staff grabs the item from the store and stages and stows it at a consolidation point for all orders and mall tenants so when a driver shows up to pick up orders they are all bundled together in one place, which saves time and reduces costs.

“Those mall operators also became investors about two years ago and that experience of working with strategic investors has been very positive,” she said. “When it was time to do this round of financing, we looked for who else in this big ecosystem of logistics can really help us learn and we thought about the traditional logistics carriers, and UPS being the biggest one immediately came to mind.”

Carmeli said that there is the hope to learn a lot from UPS and for UPS to learn from Deliv going forward, with the UPS model being heavily asset-based, which is much different from Deliv’s same-day delivery that presents UPS with the opportunity to learn a new business model of how to leverage on-demand labor, and certain types last-mile operations, too. And she added UPS is in several markets Deliv does not have a presence in, like healthcare, which presents further growth opportunities.

“Deliv has gained a strong position in the same-day delivery market by offering a unique solution that serves some of the largest retailers in the U.S.,” said Alan Gershenhorn, executive vice president and chief commercial officer for UPS. “Our Strategic Enterprise Fund continues to invest in companies that have innovative business models, and we look forward to gaining further insights into the market dynamics of same-day delivery.”

A Wall Street Journal report noted that last-mile delivery has been a “hotly contested battleground,” with many startups, the USPS, and Amazon in competition for business with retailers, restaurants, and grocery stores for home delivery, with delivery typically within an hour for a fee of $5 or in that range.

From the perspective of the parcel duopoly of UPS and FedEx, Rob Martinez, president of Shipware, echoed UPS’s Gershenhorn in saying that UPS is making an investment into Deliv and to observe the same-day market. As for FedEx, he said that it is already in the same-day market through its FedEx Same Day service, which operates out of FedEx Office store locations.

“If ‘crowd sourcing’ companies like Deliv, Uber, Roadie and Lyft offer merchants pricing that is similar to UPS and FedEx – or if retailers subsidize and price same day shipping costs in line with standard shipping – we anticipate market adoption especially for younger, more affluent consumers living in major metropolitan areas,” said Martinez.

“Multiple surveys of online shoppers conclusively indicate that consumers are willing to wait multiple days in order to get low cost or free shipping,” he said. “Other concerns of the crowd sourcing model include package security, delivery agent image and quality control, regulatory concerns (including taxi regulations), and handling attempted deliveries and product returns.  Shipware works with hundreds of retailers to optimize their parcel delivery pricing and services options.  To date, only one has asked us to include crowd sourced delivery providers in our recommendations. Same day delivery will grow significantly in the next few years, but not enough to significantly disrupt FedEx and UPS next day business models.”

Deliv is different with a focus on inexpensive same day delivery from retailers to consumers, explained Jerry Hempstead, president of Hempstead Consulting.

“Retailers are trying to cope with the pressures that Amazon is putting on the gratification timeline,” he said. “The UPS investment gives them access to information into the workings of what may appear to be a competitor. What remains to be seen is the reaction of the Teamsters to the outsourcing model of using independent drivers rather than card carrying union members. But since this is just an investment on the part of UPS and a minority stake, it’s not UPS doing any subcontracting. UPS may figure out that its own cost model is prohibitive in attempting to duplicate what Deliv is doing, at the price point Deliv is offering to the marketplace.”