Speedy Delivery: When Overnight Isn't Fast Enough, Sameday.Com Can Help
an Interview With Andrew Krainin, co-Founder of a New Kind of Distribution Firm.
By Don Hamilton (email@example.com)
As the name indicates Sameday.com is about speeding the online commerce experience. Sameday wants to make delivery of products cheaper and faster.
For consumers, that means ordering a bottle of wine in the morning and having it with dinner. For retailers, it means reducing the bottom line and helping make sales that might otherwise have gone to the brick-and-mortar store down the street. If you can have a purchase waiting for you at home when you get home or have it before going home, you are likely to think twice before searching for the product in a store after work.
Sameday performs this trick at about 36 facilities scattered across the country. If you are within 60 miles of these locations, you can get same-day delivery. Sameday believes 40% of online purchases will be made from within these areas.
Will this revolutionize the Web economy? I don't think so, but it is a good first step. Part of the Web advantage is to bring immediate satisfaction. We want the thing right away. What is the cost of going to a store and looking for the item you want? You lose time from work, play or both and you use gasoline along with wear and tear on your car. Calculate the time spent, the cost of driving and you get a number that often beats the cost of ordering online and overnight delivery. But now you can get it the same day. What a deal!
Think of the business opportunities for an entrepreneur. Things that people might want now to smooth their marriage or relationship. The shit-I-forgot-that-was-tonight, I-would-pay-anything-to-fix-the-problem. Bottle of champagne, dinner for two at home or the perfect gift for her delivered to my office just in time before I go home to face the music.
The biggest part of Sameday's business will come from its support for the back end; setting up distribution channels for other companies. It can probably deliver your products to your retailers or customers cheaper and faster.
Put on your thinking caps as we talk to Andrew Krainin, one of the three founders of Sameday.com, at his Industry Hills, Calif., office.
WWWiz: Your Web page almost looks like a mall. Are you selling products direct?
Andrew: It is not a large component of our business. The purpose of it is actually to provide a service to a number of our customers to provide both a hosting environment and another channel to sell some of their products. The main purpose of our site is to take you to our corporate site that talks about what we do and how we use our services. To the degree that we were going to devote some portion of our real estate to consumers to access some of the retailers using us, we thought we would make that as easy to find as possible. Our corporate customers will make that additional link without abandoning the effort. Our main business is really all about serving companies who have things to move and typically sell online if they are retailers or B2B companies.
WWWiz: Tell me about an ideal deal?
Andrew: I could think of about a dozen but using one for an example, let's take a manufacturer who needs to distribute a product and they have two channels–retailers that are distributing their product through their stores and consumers who also can order directly from that manufacturer. It's an international manufacturer that is looking to break into the U.S. market but has no distributor here. They may have heard about our company so they come onto the Web site and find out that we're the kind of company that provides the kinds of distribution they are interested in. Next they contact us through the Web site. We typically get back to the contact the same day if it's not a weekend. We are better articulating over the phone what we can offer and what might be an appropriate solution for the particular company.
Basically we leverage a single distribution infrastructure to deliver to both stores and consumers. We do that with multiple points of distribution throughout the United States. If this company is looking to get a reasonably quick service level based on the volume they are doing, they may be looking to get into say four of our centers. We can help them understand the cost and benefits of going into more than one center and which ones to pick.
At that point we would look at what kind of volume they are looking to do, the product line and how we would best interface with them both in terms of how we would connect to their consumer Web site and our commerce technology for both retail and consumer. It all goes very quickly and smoothly with all our customers. It is a rapid integration process.
We do a couple of things in parallel. Once we get a letter of intent on the business side that we have agreed to do business together and this is the basic price and terms, we work out a pricing schedule based on some of the specifics of the company's business like product line, volume and some of the costs supporting that product line like special handling. We can get people up and running within a few weeks. Most of our customers call a couple of months ahead of their need. Our average is a couple of months to get a company up and running.
WWWiz: Do you see yourself as a B2B then?
Andrew: Actually in that instance our relationship with that customer is B2B. Our customer in that example is in the B2B and B2C business. We have built a network that allows a vendor to optimize their supply chain. In this case it makes a lot of sense to leverage or take advantage of the same inventory/product moving to both consumers and to retailers. It provides better service and reduces the inventory across both channels.
WWWiz: How much warehouse space do you have currently?
Andrew: The locations that you see on our map are the ones that are owned and run by Sameday.com and capable of the broadest range of activities we have to offer. We have half a dozen of these locations currently including L. A., San Francisco, Chicago, New York, Dallas and now Memphis.
We see ourselves in the business of providing distribution networks. Not just being a fulfillment company. Within our network we actually have 36 locations, some of which we own and some we manage in partnership with other companies. Each facility is optimized for different types of activities.
The facilities you see on the map that we operate ourselves are about 100,000 square feet each. With these we can customize packing such as gift wrap or packaging material. Also a broad range of B2B activities such as managing by lot number, expiration date, et cetera.
WWWiz: How many people work at Sameday.com?
Andrew: About 225 people.
WWWiz: Are you profitable yet?
Andrew: We are not profitable yet.
WWWiz: Do you have an expected date to achieve profitability?
Andrew: I can't give you an exact date. We will not be profitable in the year 2000 but ideally in the following year. We are very focused on the business that drives to profitability and it's a reasonably scale intensive business and we need to be larger than we are now and we are growing very quickly. We have a very well defined plan to take us to profitability and beyond to a company that generates a lot of cash flow ultimately.
WWWiz: What is the range from your warehouses for same-day delivery?
Andrew: Same day is about a 60-mile radius. If you take the six centers we are opening and you take the 60-mile radius you cover about 40% of online buyers. If we look at the next radius that covers all the next-day deliveries you get about 80% of the population of online buyers.
WWWiz: How does the cost for Sameday's service compare with UPS or FedEx?
Andrew: Generally we are a few dollars more for same-day delivery than the comparable UPS ground prices, which is the least expensive price UPS has to offer. It's an impressive value and is a lot less expensive than an air delivery. Basically for a couple of dollars more you get same-day delivery where others that try to do that such as Sonic are much more expensive.
WWWiz: Are there limits to what you will deliver?
Andrew: We have some restrictions. We don't handle hazardous materials. We don't handle large items above 100 or so pounds and we don't handle refrigerated items.
WWWiz: I noticed that you have 24x7 free delivery on your Web site as a promotion. What is that and how long with this offer be good?
Andrew: That's a promotion associated with the shopping site, which is basically consumer type pricing. It has nothing to do with our core delivery with our customers. If one of the companies wants to offer free delivery to their customers they can do that.
WWWiz: How does one of your customers control his back end with your system through his Web site?
Andrew: There are a few levels of integration with the vendor available. I will use the B2C to explain. The vendor has their own Web site and that's how consumers interact with them. We will integrate that Web site content plus their ecommerce engine with our systems so that the Web site can do a few things. It can offer to consumers a real time view of what's available, what's in stock and how quickly it can be delivered and place orders real time. Our product, iShipper, would be used by the vender's Web site–put information in a table, put an icon next to the product image for availability. It's a real-time interface between their ecommerce engine and our system.
We also provide a series of management, administrative and reporting tools. These tools allow the staff at the vendor company to get status like inventory aging from a secure Web site that they use to manage their back end and distribution. We look to provide as much control as possible to our customers.
WWWiz: What is your educational background?
Andrew: I have a BA in economics from Yale and an MBA from Stanford.
WWWiz: Where did your first investor money come from?
Andrew: We got the company seeded with a combination of money from idealab! and the founders. Shortly after that we raised a larger amount of seed capital. Largely with the help of Idealab and Bill Gross.
WWWiz: What was your idealab experience like? Did you start in a cubicle down there?
Andrew: We did indeed. It started as three guys in idealab. Bill Gross is an incredible person and I found him to be extraordinarily creative. He is one of the most enthusiastic people I have ever met. He has a lot of great ideas, and I'm not sure if his ideas are any better than anyone else or if he just has more than anyone else, but he's continually coming up with great products and ideas. He is a visionary and can attract people to that vision, yet he's not a detail manager. He's not hands-on.
WWWiz: Could you have put this together without the incubator part of the process?
Andrew: I think we could have but I think it would have taken a lot longer. Bill's thinking has become part of ours and now Accel Partners have become major investors. Everyone has contributed their ideas to the business and it would have a somewhat different flavor without them.
When we first started, we had the dilemma of going the traditional route with VCs or to go with idealab, the incubator approach. It was a tough decision. We thought in the business we were in we needed to move very quickly and raise a lot of capital and have access to the right partnerships and customers. The tradeoff with an incubator is you end up giving up more equity for less cash up front than with a traditional VC opportunity. We thought that was more than a worthwhile tradeoff given the ability to grow the business quickly in a space where speed is one of the most important success factors.
Copyright (C) 1998 WWWiz Corporation - All Rights Reserved