February 24, 2016 / 10:01 PM / a year ago

With Deliv investment, UPS hopes to study same-day delivery market

A UPS delivery truck is seen in New York City March 6, 2014.Mike Segar

CHICAGO/SAN FRANCISCO (Reuters) - United Parcel Service Inc is investing in Deliv Inc as a way to study the same-day delivery startup's business model and see how that segment of the market evolves, the world's largest package delivery company said on Wednesday.

"We don't participate in the on-demand business as much, and the consumer side of this is still a bit of a mystery to us," said Rimas Kapeskas, managing director of the UPS Strategic Enterprise Fund, the Atlanta-based company's corporate venture arm.

"This is a rapidly evolving marketplace and we thought we could learn more by being close to it," Kapeskas said in a phone interview.

UPS will lead a $28 million funding round for Palo Alto, California-based Deliv, although the company would not disclose the size of its investment. UPS will take a minority stake in Deliv and sit in on board meetings.

Deliv is an Uber-like startup that uses a fleet of contract drivers, thus avoiding healthcare and other costs, to pick up online orders from stores and malls for a fee.

The company has raised $40.5 million from investors including Upfront Ventures, RPM Ventures and mall operators like General Growth Properties.

The company is in 100 U.S. cities and handles last-mile delivery for malls and retailers like Macy's Inc, Kohl's Corp and Best Buy Co Inc.

"We are solving a different problem in the last mile," Deliv Chief Executive Daphne Carmeli said in a phone interview, "and they (UPS) are looking to learn that model and looking to learn about growth in same-day delivery as we are interested to learn from their success."

Traditional retailers use Deliv's crowdsourced same-day delivery services as part of a strategy referred to as "omnichannel." That means retailers increasingly see stores also as distribution centers for e-commerce sales to local customers.

That allows traditional retailers to compete with the likes of Amazon, which is pushing faster same-day delivery services through its Prime Now package.

Satish Jindel, a logistics consultant and president of SJ Consulting Group, described it as a "smart move" for UPS.

"For what is a few nickels and dimes for them, they get to see how this model works, and if there's any validity to it they can apply it in their own business," Jindel said. "But for Deliv, this is like letting the fox in the henhouse by allowing UPS to see how their model works."

Editing by Peter Cooney

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