eBay buys U.K. same-day delivery service Shutl, upping the ante in fast fulfillment fight with Amazon

eBay Inc., the online auction giant, said today it has acquired Shutl, a U.K.-based firm specializing in same-day delivery service. The transaction, terms of which were not disclosed, raises the stakes in the turbulent world of rapid-fire fulfillment of e-commerce transactions.

Founded in London in 2009, Shutl provides traditional retailers that also have an online presence with same-day, and sometimes same-hour, delivery options for Web-ordered goods delivered mostly to residences. Orders can be delivered within minutes of purchase or within a customer's one-hour window of choice. The service, which uses local courier networks, operates around the clock. Shutl charges about $10 an order, and many retailers offer the service free to the end consumer.

In a statement, eBay said it plans to make its "eBay Now" delivery service available to 25 U.S. and international markets by the end of 2014. The service launched in Chicago today. It will be expanded to Dallas later this year.

"The world is changing, with the lines between online and offline commerce blurring, and the expectations of buyers and sellers rising rapidly," said Devin Wenig, president of eBay Marketplaces, in the statement. Nearly two-thirds of U.S. consumers use multiple channels to shop, eBay said.

Shutl founder Tom Allason told DC Velocity earlier this year that he projects the U.S. same-day delivery market would be worth $26 billion a year by 2016.

Shutl was designed to level the fulfillment playing field between bricks-and-mortar retailers and Amazon.com, the world's leading online retailer. Shutl said its service gives retailers with physical stores an advantage over pure e-tailers by allowing stores to be used as de facto warehouses and distribution centers where inventory can be held. A multichannel retailer can integrate Shutl's IT platform into its system and offer Shutl's services as a fulfillment option to its customers, according to the company.

Today, Amazon fulfills and delivers orders from regional distribution centers located far away from major urban areas. Shutl has said it isn't cost-effective for an e-tailer like Amazon to locate warehouses within 10 miles or so of its customer base.

Amazon offers same-day and next-day service at a cost of $8.99 per shipment. The Seattle-based giant is adding density to its distribution network by opening more locations. It is also mulling an expansion of its same-day and next-day deliveries to augment its bellwether two-day delivery product, called "Prime." Subscribers to Amazon Prime pay a $79 annual fee for unlimited two-day deliveries.

Shutl in late February announced plans to launch in the U.S. with service in New York City, San Francisco, and Chicago. Those plans were subsequently tabled, although Shutl has been providing service to select U.S. retailer customers. Shutl will continue to serve its retailer customers in the U.S. and U.K. after the buyout, Allason said. (The company has refused to identify its customers.) Allason will remain with the company after the buyout. It is unclear if Shutl will operate as a stand-alone entity or be folded into eBay.

In a blog posted today on Shutl's website, Allason said that about 75 percent of commerce occurs within 15 miles of the consumer's home. Not surprisingly, Shutl's couriers don't deliver beyond 15 miles of a retailer's storefront.

"E-commerce is quick and convenient, two things that delivery is not. Together with eBay, we believe that we can transform this market and fulfill our mission" Allason said in the blog.

Shutl was funded by approximately $5.2 million in venture capital investment, including $2 million from the UPS Strategic Enterprise Fund, the private equity strategic investment arm of UPS Inc.