Doorman – the future of E-Commerce delivery?
You love to buy online – but you are getting sick of missing your delivery or have your parcel stolen in front of your door? You can imagine better things to do on your Saturday afternoon than driving miles away to the next delivery depot? Then “Doorman” may be the solution to your problem – but will it really be the future how we receive our online deliveries?
You love to buy online – but you are getting sick of missing your delivery or have your parcel stolen in front of your door? You can imagine better things to do on your Saturday afternoon than driving miles away to the next delivery depot?
Then “Doorman” may be the solution to your problem. The recently founded startup is offering evening delivery within a one hour time interval to E-commerce shoppers living in San Francisco, Chicago or New York. Once registered for the service and downloaded the mobile app, customers can manage the delivery of their parcels and select a one hour time slot to receive their orders between 6pm and 12am. “Doorman”, charges its customers $3.99 per delivery or $19 per month on a subscription base.
The E-Commerce delivery industry in the United States is growing at 16% to about 3.5bn delivered parcels per year ($20bn Revenue). Improving efficiency and customer experience at the point of delivery is of immense value to both, the retailers and delivery service providers. If last mile delivery is conducted in a more convenient fashion to consumers, online Retailers who are investing heavily into customer acquisition, can improve repurchasing rates by more than 10%. This would in turn help them to reach cohort profitability much faster. In addition, the cost pressured delivery service providers like UPS, FedEx and USPS suffer from productivity losses due to traffic jams, missed deliveries and a lack of consolidation points (dropping off multiple parcels at a single location) especially in inner cities.
The Doorman business model tackles some of the key challenge of the industry, making it interesting to take a closer look at. Will the service be the method of choice to receive our deliveries in 3 years from now? I personally doubt that the companies operating model is designed to deliver on its business model in a scalable and sustainable fashion and here is why:
1) Doorman innovates the last mile delivery business model, but largely copies the traditional operating model of a delivery company.
The company utilizes last mile delivery operations of existing carriers to drop off parcels at its local warehouse in a city to then again deploy a costly last mile delivery fleet for transporting orders to their clients. While delivery companies save money due to the increased density (higher number of parcels dropped off at one transaction), customers ends up paying twice for their delivery.
2) Productivity gains are difficult to realize making the doorman operating either expensive to customers, or less attractive to couriers – especially in direct comparison to Uber.
Doorman will employ couriers with own vehicles. Shipments are picked up at the companies’ local transit warehouse and are then delivered to customers who live within a designated area. One car is assigned to each area for the entire period delivery services are offered. One of the key challenges doorman is facing is that its deliveries are not evenly distributed among offered time intervals. In other words, more people would like to receive their parcels at 9pm rather than at 6pm, which in turn results into downtime and productivity losses. As a result, doorman couriers deliver less than 5 parcels per hour compared to the industry standard of about 10 per hour. Even if a courier would receive the entire shipping revenue of $4 per parcel, his per hourly wage would be less than $20 and hence significantly lower than the $30 average wage he would earn as an Uber driver. In addition, his work schedule as an Uber driver would be much more flexible as he can choose to only work in for him suitable time intervals rather than the entire period of time.
3) Larger scale will require Doorman to move its warehouses further away from city centers, intensifying productivity problems
The larger Doorman will grow, the less likely it will find warehouse space within city centers due to space and cost restrictions. As a result, the company will have to move operations to the outskirts resulting into higher unproductive times needed to travel between transit warehouses and their designated delivery areas.
I strongly believe in the business model of doorman but in order to scale its business, the company needs to find a more sustainable operating model. A crowed sourced multi warehouse approach that is integrated with existing inner city delivery services like postmates or doordash might be good starting points for designing a more flexible and cost effective solution.
Sources: Shark tank (see attached youtube link), TechCrunch, Uber Website, Doorman Website, Lamoda.ru customer experience department
Student comments on Doorman – the future of E-Commerce delivery?
I think this is a really cool business. Last mile logistics has always been a tough problem to solve in a profitable manner. One question for you: do you think there is any risk of disintermediation by UPS or FedEx? In other words, do you think that FedEx or UPS might start offering a premium service to customers in which a customer could pay UPS or FedEx to deliver their package late at night or within a specific time window outside of normal delivery hours. Obviously both of these logistics businesses have the scale and operating model already set up to service these customers, and it seems like a fairly easy additional service that they could add to their core competencies in a much more profitable and easily scalable manner then Doorman. The other risk I worry about with this business is disruption from Amazon who is also starting to launch its own fulfillment business. Not sure how you think about these risks as Doorman continues to grow.
I really agree with your point on the Doorman service not being attractive to potential deliverers. When I drove for Uber, I found the biggest challenges were the time spent driving to the customer and the difficulty parking to wait for a customer. I believe Doorman would only excerbate this problem, as the time spent driving from the warehouse to the first drop off destination would not be earning the deliverer any money. As you pointed out, as these warehouse locations get larger, they will need to move outside the city, increasing the distance, and the cost to the deliverer in time and money. Additionaly, parking will be difficult and costly. Finding a parking spot in NYC and San Francisco is time consuming, and meters are expensive. I believe Doorman would need to drastically raise prices to offset these two issues, turning off potential customers.
As I read this post I had similar thoughts to Shultzy above. As you mentioned, customers for Doorman are effectively paying twice for their delivery. I wonder if there is an opportunity for Doorman to try to capture some of the value it provides to the delivery services as a way to improve profitability. Additionally, in the case of lost or stolen packages, I wonder if the issue is large enough for Doorman to partner with some of the retailers such as Amazon who is on the hook for replacing the lost/stolen packages to capture some value there by reducing the retailer liability for losses. Finally, a major point of concern for me is the subscription service. As someone who shops almost exclusively online, this subscription model would attract expensive customers like myself who may have the highest willingness to pay but end up reaping the most benefit from the business model. As a result, I think this model may make sense most for Amazon Prime in which the customer pays a premium for additional levels of service, but each delivery brings additional revenues for the company as well to help with profitability. Maybe they should consider selling?