Courier service Shutl promises a revolution in online delivery. It's about time, says founder Tom Allason

Tom Allason's elevator pitch begins with an anniversary. Give or take a couple of days, he says, e-commerce is exactly 16 years old. In that time the internet has evolved from 30,000 pages to well over a trillion, while e-commerce has "moved light years". What's interesting, he says, is that "the one thing that hasn't changed at all is delivery. Consumers still wait days for delivery, which takes place at a time determined by the courier company."

Allason is hoping to change all that with Shutl, a Web services start-up that aggregates the same-day courier market, allowing low-price deliveries to be fulfilled in a matter of minutes rather than days. Customers choose from immediate delivery, with orders despatched within 90 minutes, or delivery at a later date and time of their choosing. Both options are 24/7, although for now the service is only available in London. Prices start at £4.95, which means that for Shutl's first major client Argos, it's cheaper to have a parcel delivered immediately than it is to wait for it.

How is this done? Traditional courier delivery, explains Allason, relies on the fact that the cheapest way to deliver a parcel within a 10-15 mile radius is by "hub and spoke": vehicles deliver items to a central hub, where they are sorted for despatch the following day. But for shorter distances, it can be cheaper to collect and deliver within a single journey, says Allason. "The problem is that the same-day courier market is highly fragmented. And it's regional. None of these same-day courier companies are large enough to deal with major retailers."

What Shutl does is to aggregate the capacity of these small, same-day couriers into a Web service—producing an online marketplace for short-distance delivery. "We take all the data from the retailer, including collection address, delivery postcode, time of delivery, and generate a price from all of our couriers based on the data they've already provided [which includes type of vehicle, and the minimum price for a two-mile journey]. We weight that price according to past performance, add a margin and return that to the consumer. It all takes milliseconds."

The difficulty, he says, is finding the optimum number of couriers. Shutl has 14 couriers signed up to cover London, but the company is currently only using three. "It's important to manage the tension between supply and demand," says Allason. "We need to make sure we are giving them enough work so that we are a very big client for them, which gives us a very high level of service. But also we need enough of them to provide enough capacity to ensure a high level of service to our customers."

At first glance, Argos seems an odd choice of partner. Is the average Argos customer going to be interested in a 90-minute delivery option? "Everyone assumes that what we're doing is a premium service," replies Allason. "We're not. It's a service for everyone at a price point for everyone. This is a mass-market proposition. Behind Amazon, Argos is the UK's largest online retailer, dealing with over 100,000 online transactions a day."

Allason hopes to scale up the service to nationwide delivery next year. The demand from retailers is already there, he says. "A very high proportion of deliveries fail because the customer is not able to pick a time that suits them." He cites an IMRG report from earlier this year, showing that failed deliveries are costing UK online retailers between £800m and £1bn a year.

Most people that abandon their online shopping carts at the check-out stage, he says, quoting another survey, do so because of the paucity of delivery options available. "Ask any head of e-commerce what they would most like to do to improve their business and I guarantee that nine out of 10 would like to improve the conversion rate, that is the number of visitors who end up purchasing an item."

Allason has relevant experience. He started eCourier in 2003 after a frustrating experience with his local courier firm. He served as CEO of the start-up from launch until 2008, before leaving to found Shutl. "It's a lot easier second time around. With my first business I knew nothing about nothing." At eCourier, he says, one of his worst mistakes was neglecting cash flow, believing that simply sending out invoices would be enough. "Well, no. You pay your couriers weekly and invoice your client monthly and they pay you three months later. So the more you grow the more capital you need, even if the business is profitable." Shutl was built with a negative working capital requirement, he adds.

Allason says building a network of couriers shouldn't present too many challenges. "We're giving these couriers access to a fast-growing market that none of them are big enough to serve directly themselves, so from our perspective it's a much easier sell."

There's promise for investors, too, he says. "What's attractive about this business is that it's a winner takes all market. The first guys there have got a significant head-start. It probably takes two years to build the technology platform. Volume gets you the prices with the courier companies, which gets you the prices with the consumer and the retailers." And with Argos's help, he adds, "we have the ability to get big quick off a single client.

"This is a highly transplantable business," he says. "We are a pure web service with no moving parts so we can operate anywhere where there are retailers and local ground transportation carriers. We're not limited to a particular part of the UK or a particular part of the world." All of which sounds like he's pitching again. Is Allason in search of more funds? "Oh no, we're OK," he says with a laugh.