LicketyShip: Founding CEO Out, Ditches Business Model To Focus On Couriers As A Web Service

wordpress-logo1.pngWhen Lickety Ship launched in late 2006 to deliver ecommerce items to purchasers within four hours of checkout, I asked if it would end any differently than the ill-fated Kozmo, which burned through $280 million in capital before a spectacular flame out in 2001.

Kozmo didn’t charge for deliveries, and people would jokingly buy a packet of M&Ms or other small item and have it personally delivered for free. A $150 million marketing deal to get Kozmo promoted in Starbucks cafes didn’t help much, either.

LicketyShip, founded by Robert Pazornik, took a different approach. They would charge users a steep fee for quick delivery, leveraging under-used couriers to deliver the goods. The hope was that there was enough demand for super-fast delivery that they could make a business out of it.

It turns out that the idea may not have been so bad, but the execution was impossible. LicketyShip needed to do deals with retailers who had goods physically located near the markets served – they had to be close enough so that a courier could go to the location, pick up the item, and then drop it off with the customer. And since LicketyShip was selling the items from its own site, it had to integrate deeply with these retailer’s inventory systems. If it worked, that integration would be a huge competitive advantage. But in practice, it was impossible.

In July 2007 the company gave up on integrating directly with retailers, and began to focus just on aggregating local courier services. You can now use the service (in supported geographies) to pick up items you’ve bought over the phone with local retailers.

The good news is that the company didn’t waste a lot of money on the first model – they’ve raised just $1.5 million in capital from angel investors.

But the bad news is that investors got tired of waiting for Pazornik to make this thing work, and about a month ago they made a switch. Pazornik was out of the company he founded. John McGrory stepped in to replace him as CEO.

Now the company is preparing a relaunch, and will be focusing on aggregating courier services for more than just deliveries of retail goods. In effect, they’ll be taking the huge but highly fragmented courier market and turning it into a web service.

25 million courier packages are delivered each month in the U.S., McGrory says, at an average cost of $100 per delivery (implying a $30 billion market annually). There isn’t much price sensitivity – people want reliability more than anything and tend to build relationships with individual courier services over time (law firms use them extensively, and pass the cost on to clients, for example). The key to cracking the market, McGrory says, is to provide bookings via a web service or by phone along with a service guarantee. Think 1-800-Flowers for couriers.

And LicketyShip is also building an API to turn courier services into a web service. Any ecommerce site or retailer, for example, could build in an option for immediate courier delivery. All that would be required is that they have a warehouse near the customer. Best Buy and Barnes & Noble would be ideal customers. This would also help brick and mortar competitors to better leverage those physical assets by allowing immediate fulfillment, on the same day as purchase.

The company is now out pitching this new strategy to investors, and hopes to close a new venture round this summer.