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Mall Companies Deliver Answer to e-Commerce

07/08/2014 | By Sarah Borchersen-Keto

Deliv logo

In the competitive world of retail, mall operators and their tenants have an advantage that Daphne Carmeli, founder and CEO of same-day delivery service Deliv, is working to exploit:  inventory that is conveniently located to a large number of consumers.

Web-based retailer Amazon.com has “completely changed” the landscape of the industry, the Silicon Valley-based entrepreneur explains. The online giant has “declared one of the last battlegrounds for establishing a customer experience is in how fast and flexibly you can get products into a consumer’s hands,” Carmeli comments.  As a result, brick-and-mortar retailers are looking for ways to compete with  Amazon and other e-commerce firms now focusing on rapid delivery.

Carmeli notes that the inventories of traditional retailers are generally being held in stores located within five miles of 90 percent of the purchasing population. By offering  same-day delivery service at prices equal to or less than standard shipping, Deliv hopes to play a vital role in the transformation of brick-and-mortar stores into mini distribution centers that can compete with the biggest e-commerce players in today’s aggressive retail  environment.

Deliv, founded in 2012, is backed by a number of venture capital firms and some of the largest names in retail real estate: General Growth Properties, Inc. (NYSE: GGP), Macerich (NYSE: MAC), Simon Property Group, Inc. (NYSE: SPG) and Westfield Group (ASX: WDC). In February the company closed on a round of investment that raised $4.5 million. That followed a round completed last summer that raised nearly $8 million.

Until now, Carmeli explains, consumers have been accustomed to paying the highest charge for the fastest delivery. Deliv is looking to change that. “We’re disrupting the transportation market by turning the economics upside down,” Carmeli says.

Deliv uses crowdsourced teams of drivers with GPS-enabled smartphones. They are independent contractors with “sales and customer service mindsets,” according to Carmeli.  She says most are college-educated individuals looking for 10 to 20 hours of flexible, on-demand work per week. As a result, Deliv has none of the asset-related costs associated with a traditional delivery company. The goal is to offer brick-and-mortar stores a flexible, affordable delivery option and win back some of the business being captured by online competitors.

“We’re giving the mall operators an opportunity to get part of a revenue stream of a high-growth, e-commerce segment,” Carmeli says.

Omni-Channel Retail-Ready

Deliv fits with the mall operators’ efforts to aid their tenants in adopting a strategy that crosses all purchasing platforms. Known as “omni-channel” retail, the evolving system offers customer the convenience of having a range of channels to browse, purchase and return items.

“The store has become a strategic element in the mix as it relates to the fulfillment of transactions that are occurring through other channels,” says Mikael Thygesen, Simon Property Group’s chief marketing officer. “That’s an interesting new avenue of value that the store delivers to the retailer, and we’re excited to support that evolution.”

Retailers can add the Deliv option to their existing online, mobile or in-store checkout processes. Customers can schedule exactly when and where they want to receive their orders  within 15 miles of a participating store. Deliv also allows in-store customers to collect packages at one central location within the mall at the end of a shopping trip. For the foreseeable future, mall operators are subsidizing the $5 flat fee that Deliv charges retailers per delivery, Carmeli notes.

Thygesen says he is “very encouraged” by what Deliv has achieved so far at its malls in Los Angeles, San Francisco and Chicago, adding that Simon is in talks with the company regarding expanding into new markets. He notes that he anticipates additional rounds of funding for Deliv as it continues to expand.

“We’re at the early stages of retailers’ collective pursuit of omni-channel retailing,” he says. “We envision that over the next three years or so, we’ll see a significant increase in our retailers’ omni-channel capabilities.

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