April 6, 2020
The JetRails Podcast: Can you compete with 2-day shipping?

The JetRails Podcast: Can you compete with 2-day shipping?


Welcome to an episode of the jetrails podcast this is Robert Rand your host for the day coming to you from
sunny South Florida it’s been a few weeks since we posted our last episode
we’ve been having some great times at irce and other trade shows we got to
host the jet rails bourbon barbecue up at a great venue in Chicago and are really
thankful for our clients, partners and friends in the industry
that got to join us speaking of which I got to catch up a little bit with a
friend George, one of the cofounders of ShipBob and we’ve been talking a little
bit about how merchants can compete with two day shipping.
you know Amazon’s taught everyone that products should be at your doorstep
before the blink of an eye and it’s definitely caused some logistical issues
around the e-commerce industry in recent years so George has been kind enough to
give us a little bit of his time today to tell us a little bit about it. George
would you mind introducing yourself? thanks for having me on Robert I’m
George Wojciechowski co-founder of ShipBob we’ve been in business five years we
came out of YC in the summer of 2014 and our goal has always been to give the
new generation of e-commerce merchants the same tools reach and scalability as
the bigger players in e-commerce and yeah I’ve been waiting to ask you and I
never have before but as a Robert I’ve kind of wondered how the name ship Bob
came about there’s a lot of shipping companies that use the word ship in the
name so you know exactly what industry you target but weird Bob come from well
it’s kind of a funny story initially we wanted a different name
when we when the company was starting out it was ship tiger but that URL was
taken and so we came up with a placeholder name for the time being
initially which was Bob and we got so busy after a while that the name stuck
and in our early days in our first iteration back in 2014 the hot space was
the you know being in the Ebor of so you know
demand shipping on demand you know house cleaning on demand there was all sorts
of startups that were on demand and we were – in the initial phase where
customers would take a picture of items that they would want shipped and we
would dispatch a curlier courier to bring those items back to our office
where we would package it up and ship it out for them and charge them a pickup
fee and the cost of postage but what was happening in those days is that people
weren’t shipping cookies to Grandma or letters – or like small packages to
their friends and family on a regular basis what they did want shit was awful
stuff to package and pick up like golf bags TVs artwork and so we we started
telling clients that Bob stands for bend over backwards so over backwards for you
and we literally were on a regular basis in that we would be dispatched to go
pick something up it would have to maneuver it down like three flights of
stairs and into a car and then back to our office where we would package it and
then drive it over to FedEx or UPS or USPS well the customer is always right
exactly I had a feeling that there was gonna be a good explanation I didn’t
know it was gonna be quite that good that’s amazing I’m glad I stumbled into
that one you know let’s talk a little bit about traditionally e-commerce
fulfillment so you know it sounds like in your history you’ve gone through some
iterations and you know figured out that that there were use cases for businesses
to sell items and then to have them transmitted to have them delivered or
couriered that that needed to be met I’m certainly as more and more of commerce
in the United States goes into digital commerce and e-commerce you know I know
that most businesses have started out warehousing
some of their own goods or you know working with a more traditional
footprint what’s your experience with some of that evolution with where
merchants perhaps have started their journey into warehousing and holding on
to Goods and fulfilling orders and where it started to lead in the last few years
yeah it’s a great question we were lucky enough to get in very early on the trend
in which platforms like big commerce WooCommerce Squarespace Shopify we’re
really able to democratize the ability to take an inspired idea and take that
business online and start it up and have a cool website or whatever in a matter
of a couple hours and and that technology kind of formed the thesis of
why ship up was started so like I said earlier we started five years ago and
our goal as a company was always to provide the new generation of e-commerce
merchants with the same tools reach and scalability as the bigger players in
e-commerce you and I and everyone knows that when you order something from
Amazon or Nordstrom or Jet Walmart any of the bigger brands you don’t have to
think twice about the cost of shipping because it’s almost always free and it
almost always is going to arrive in a day or two and that’s because these
companies can spend hundreds of millions of dollars and billions of dollars in
their logistics infrastructure well if I’m an e-commerce merchant with a
Shopify store or a big commerce store and I’m selling vegan handbags on the
Lower East Side of Manhattan or homemade pomade in Austin Texas I’m at a distinct
disadvantage compared to what the standard is in e-commerce meaning I’m
usually shipping from one singular location if I’m not I may be doing it
myself when I’m starting off or at some point down the road I may use the local
fulfillment center but almost always its location with you know large square
footprint and low cost per square foot and and your shipping from that location
to all the different shipping zones around the country and around the world
so a lot of your shipments are not local there’s only
five six seven and eight and how shipov addresses this problem is in two ways
one we feel like we’ve built a great technology that allows ecommerce
merchants to have a source of truth for all goings-on in the shipping logistics
part of their business it integrates with a lot of almost of all the relevant
ecommerce platforms out there and secondly we own and operate our
fulfillment centers around the United States so we have fulfillment centers in
Chicago at Los Angeles San Francisco Dallas and now just recently opened up
Bethlehem Pennsylvania and that allows us to work with our merchants to
distribute their inventory around the United States and thus making the
majority of the shipments the ones who choose to optimize their optimize their
inventory around different locations it allows them to basically have the
majority of their shipments is on one and Zone two and arrive to their
customers within a day or two so it’s providing a better customer experience
experience for these merchants customers as well as lowering the cost of shipping
for the majority of the shipments because they’re all very local who’s
owned one or zone to the majority of the time yeah
and how does a merchant figure out where they should you know when you’ve got
that logistical need you know someone is going from self shipping or shipping
from their retail locations in one region or you know some other more
natural startup footprint in e-commerce how do you figure out where their goods
need to be because you know you don’t want to send a bunch of product to let’s
say San Francisco when it’s really not going to move well in that region this
is where communication with merchants really you know optimizes how we plan on
how to distribute inventory first and foremost we’ll look at the last six
months of shipping data and we’ll evaluate with the
where their orders are going and based on that information we can make
recommendations as to which FCS and what percentage of their inventory should be
distributed to different regions in addition we’ll have a conversation of
the merchant about what they are planning in terms of their marketing and
if they’re you know focusing on for example like the northeast of the United
States or Canada during the winter months because they have a cold weather
product we’ll take that into consideration as well but normally the
first go-to is to be able to evaluate the last six months of shipping data and
then make a recommendation based on that and then have the conversation to say
hey what’s coming down the pipeline for you are you doing anything unique in
certain regions that we should know about and then we’ll come up with a
recommendation to them and how to best distribute that inventory just think so
in the case of your team you’re connecting directly with their
e-commerce platform helping to really pick up the order for fulfillment you
you’re already helping them to figure out where that those items should be
we’re housed in the network so that they’re already offering faster shipping
and better prices I imagine that your team because you’re
such bold shippers coming out of your fulfillment centers that you’re getting
some discounted rates as well that you might be able to pass on some savings
yeah you know cuz you’re you’re shipping on behalf of a lot of folks yeah so
we’ve got over you know over at this point 2,700 clients and just should you
know around 30 countries around the world so that does afford us to have
great relationships with USPS FedEx DHL UPS in all the subsidiary services that
they have when a customer comes on board we’re able to look at their previous
order history the amount of volumes that they’ve been shipping out over the last
three to six months as well as what they plan for the future and pass on a
competitive shipping rate plan to them based on the amount of activity they
they’ve been doing and what they expect to do you’re interesting
oh yeah obviously Amazon has their own warehousing Infrastructure FBA
fulfillment by Amazon they as most folks in the industry know command a certain
size maybe not the same customer service as a team like yours or I’m sure that
there are other differentiators for customization and and for unique things
like you know kidding or we’re dealing with with wholesalers with EDI what are
some of those things that you run into that you think you know
well Amazon might be okay for you know for some needs that would push a user to
maybe a more a more personalized service like yours or you know a more defined
service yeah I think it all comes down to are you building a brand or are you
selling a commoditized product at the end of the day in Amazon is a very
useful tool for thousands and hundreds of thousands of merchants around the
world but at the end of the day when you’re building a brand and you need
things like custom unboxing experience certain branding within the box if you
want to most importantly have a relationship with that customer and have
your customer identify your product as something distinct and unique when
you’re on a big marketplace that’s not afforded to you more often than not that
email address for that order went through you never get to see so you you
know the customer buys your product then tomorrow on a large marketplace at that
marketplaces order it comes in that marketplaces BOTS and you have no
relationship with that client for future sales they would have to go through that
marketplace or they’ll just have to remember your product what we’re finding
out is that the most successful businesses are ones that have you know a
unique branding that customers identify with and the way to consistently build
that build from that foundation is to have a relationship with the customer to
be able to have their email address let them know what’s going
with your product or any special offers and things like that in addition like I
said earlier having some unique collateral or marketing about how the
package arrives what it looks like look what it looks like and what’s inside and
brands having control over that and creating an image or a or a campaign
based on their brand identity I think is super important now more than ever for
grants to distinguish themselves by utilizing things like that but
ultimately I think for me personally the most important thing is having that
relationship and being able to capture that email address so as your business
grows you’re able to keep your customers informed of everything going on with
your brand that you want them to know and you know it’s interesting that in
hosting very much like some users might go to Amazon FBA we certainly run into
Amazon’s AWS cloud hosting you know we happen to you know to provide service in
that realm in some cases you know we get users that vehemently would rather be in
our data centers than have us place them on AWS that I guess at best some
merchants see Amazon as a frenemy you know that it’s someone that they feel
compelled to interact with in order to to provide for shoppers in order to be
where they need to be when they need to be but when you can get service
elsewhere that’s gonna be more cost effective more user friendly better
service you know I don’t think there’s many departments in Amazon that are
known for their service to the sellers to the merchants for going above and
beyond and I think that’s where Amazon certainly leaves a lot of room for for
the rest of the market and do you run into customers that maybe mix and match
your service you know you’re warehousing with drop shipping or with some of their
own warehousing are you some tough or do you normally come in as the be-all
end-all or are there those use cases where you’re part of their logistics
yeah so you know going back to well we were just talking about with
Amazon Amazon and other marketplaces are a relevant Avenue to sell your product
and to you know as an additional revenue channel but if you’re building a brand
and a brand identity you need to have that independent website that
independent opportunity to connect with your customer I think nowadays as
businesses are growing additional sales channels are more popular than ever and
it’s not you it’s not out of the ordinary for a merchant to have for
example a big commerce store and then also be selling on Amazon or Walmart or
some other marketplaces in addition to their main store I think that it as
businesses grow they you know these marketplaces present an opportunity to
you know have additional eyeballs you can’t argue with the fact that these
marketplaces have millions of people looking at the products that you know
under you know in different search categories when you type that into to
absolutely Amazon for many shoppers you know maybe more than I would choose is
the first place that they search for product so you know where there are
still many users that search Google first or they go to other places in you
know location location location you have to be where the customer is in order to
capture certain market share well and one of the things that personally that I
like about marketplaces like Amazon or Walmart is that the review system is
reliable when I’m buying a product and I’m unfamiliar with it I feel like one
of the things that they do really well is to be able to give you can read
through reviews and the reviews are usually pretty spot-on and so that’s one
advantage that marketplaces do you have that if you’re just rounding a if you’re
running a big commerce or who commerce store people can look into your product
and there are places where to get you know reviews on on the products that
you’re selling but it doesn’t compare to just like the mass amount of input that
these marketplaces get absolutely well and you know just
sometimes having enough reviews to look at where you know one merchant may have
a handful but Amazon may have dozens or hundreds or thousands of reviews on a
product so yeah but it also comes down to how you want your product I seen and
viewed by the by the customers meaning that you know it may be an that it may
not be advantageous for you to have a product that’s for example the vegan
handbags that we were talking about earlier it’s great if you are you know
you’re selling them on your ecommerce store but do you want that product you
know being compared with you know two dozen other potentially similar products
and merchants choosing the one that you know is you know a dollar 70 cheaper or
something like that a lot of merchants want to avoid that race to the bottom
and want to create a unique identity that customers can identify with versus
just entering a marketplace where there’s a lot of different products that
are very similar and oftentimes consumers just choose the one that is
lowest priced absolutely and there are a lot of knockoffs that come pretty
quickly so if you hit a streak of success in Amazon whether it’s Amazon
making the product or someone else that you know decides to just make a complete
knockoff even you know using some of your branding it can be a real challenge
to fight those those kinds of inevitabilities so when you are a brand
obviously selling directly through your own site through some of your own
channels is always going to be the healthiest opportunity and I know we’ve
covered it a little bit and in some of our earlier podcast episodes you know
and so in terms of the logistical side of that so you might have a user that’s
selling in multiple sales channels that you’re fulfilling for and then are there
cases where the orders get split some of it ships from your warehouses some of it
ships from maybe their retail locations or their warehouses where they might
have some purpose to to split some of them
yeah we don’t see that as often where we’re like an order comes in and perhaps
the merchant is using a you know their own retail store or to ship out you know
one of this views while another SKU comes from us what does happen is if a
skew is diminished in one of the FCS but an order comes in for ski that we do
have inventory of but we’re out of inventory in a certain other SKU it’ll
just get shit from the nearest fulfillment center but we don’t see it
very often where an order comes in and there’s inventory in two different
locations with two different distributors or fulfillment partners or
whether it’s the merchants own bricks and mortar location and us and them
fulfilling the same order separately because that probably brings up the
price now you have to send out two shipments with two costs from whether
it’s UPS or FedEx or USPS or DHL or whatever that definitely needs margin
what we what we do see is a lot of merchants who come on board with ship
Bob and they have a lot of SKUs but the 80/20 rule holds holds true where 20% of
the inventory is 80% of their revenue so they’ll store their top you know five or
ten SKUs with us because they know the majority of their orders are those SKUs
and then the slower-moving snooze they’ll hold it on to themselves and
when those orders come in they might self fulfill them because they come in
once every couple of days or so but the fast-moving SKUs what you’re seeing like
hundreds or thousands of orders per day they’ll warehouse that with us within
our fulfillment center Network and in charge us with getting those out to the
customers yeah and drop shipping has been a big topic in recent years that Lo
and I I know if their items that I know if I order from Costco they’re not
shipping from Costco they’re gonna ship from the manufacturer from the brand
it’s gonna you know whether it’s EDI or some other you know some other method of
moving data around you know back to that split order situation something that
comes up on occasion yeah it comes up on occasion
think dropshipping is still fairly relevant but I see that being kind of
diminishing a little bit only because of the reason that I think merchants more
often than ever before are interested in creating brands like we talked about
earlier with a unique identity and are not as often selling commoditized
products that is just you know trying to you know market something and capture
the arbitrage thousands of times over I feel like that space personally I feel
like that space that formula has become very very very competitive and it’s not
as profitable as it used to be and so we’re seeing merchants who do want to
aspire to be commerce merchants and start their own business not looking to
that route as much as they did maybe in 2015 2016 and are instead looking to
create a brand you know I and I would tend to agree that even in messageboards
places like Reddit I see a lot of folks asking about drop shipping because
they’re trying to get into it I think in some ways you know they’re you know they
think it’s easy you know they don’t have to put up a large investment in order to
do it so you know but like you say it’s it’s been done it’s become a little
saturated and in some ways I think it may almost be like being an Amway or
Avon salesperson that you you know you signed on maybe they have some good
product you know perhaps I mean that’s that’s up for debate but but that that’s
true about just about anything but now where’s the market you’re gonna sell to
friends to family to you’re gonna sell through social media there’s lots of
other people doing the same so where does it end I’m with you the building a
brand is absolutely you know where I think businesses that are gonna stick
and thrive for years you know where the winners are gonna be bite of percentages
there’s always gonna be someone that figures out a good model for something
like dropshipping but yeah there was a sliver of time yeah it worked really
really really well and then all of a sudden it’s like got supersaturated
and I think consumers too are a little bit exhausted from products that they
may view is like commoditize products you know that people like to buy value
and things that they personally identify with and it’s harder to do that when
there’s you know 300 different businesses selling the same tchotchke
all doing a different marketing strategy on you know on Facebook or something
like that – it’s essentially saying to sell the same product that there’s
really no identification or connection or to what the brand is trying to
identify what consumers are identifying with about the brand yeah I mean oh you
you want good brand affinity you’ve got to stand out from the crowd you have to
be able to you know in essence to tell a good story you know make people feel
like you’re a reputable company to work with you’re an expert in your field so
there’s content there’s you know social good there’s all sorts of things that
you can do in different brands different businesses obviously take different
approaches and choose different things to pick off the list that it’s gonna
build that brand affinity but I’m with you there and you know we’ve talked a
lot about shipping what happens when it comes time for returns cuz that’s sort
of the bane of most shipping and fulfillment operations that you know
that’s where things can get a little bit costly and you know a little out of
order yeah so I feel like that’s the next frontier right now there’s a lot of
exciting companies getting you know venture backed money to address the
problem of returns we’ve always had an internal solution it’s not
the most perfect solution in the world but it’s been very functional and it’s
worked for for you know last few years oftentimes you know the way that returns
will work is that customers will take a white labeled link from our from our
dashboard be able to put it on their big commerce or whoo Congress or Squarespace
or Shopify store and when customers need to return product they can click on the
link type in their information and it creates a PDF for return label on the
spot and then they have to print it out and then drop it off at a local post
office or FedEx UPS whatever that solution is fine and in a ghost than
your ship of fulfillment center to be processed that solution is fine but
there’s also a lot of innovation going on we have a partner in a company called
return Lee which is one of the more exciting companies out there right now
in regards to returns they have a cool function which you want to return
something from a merchants website they’ll refund you the money immediately
before even the product gets back to the fulfillment center and thus allowing for
Less cart abandonment meaning people take their $240 and instead of like you
know sending it back and waiting for the return to hit their credit card they’ll
get refunded the money immediately which will then allow them more often than not
to go back to the same web site and buy a product that they do want that or that
may work better for them there’s also a really innovative company called happy
returns who were really happy to work with and they’re doing something really
cool in which they’re creating kiosks in locations around the United States
college bookstores department stores things like that where customers can
very easily use their software and get a return label and drop it off somewhere
locally where the return can will eventually be picked up and processed so
there’s a lot of innovation going on in the field we’ve got a solid solution in
ship but we’re also partnering with and keeping an eye out for other solutions
that are moving the in terms of progress how to make returns
more optimized it’s really interesting you know I I’m a partnership guy at
heart so I always see I love to see when good technology comes together good
service providers come together at the end of the day it takes a village and I
think that any strong midsize or enterprise e-commerce organization has
gone into that that you can try to really keep you know keep as lean as
possible when it comes to software vendors and such but you know if there’s
ROI to be had if you can improve your processes improve your bottom line may
have happier customers honestly you know it’s all about how do we give a good
user experience how do we get the stuff out to them fast how do we handle
customer service effectively I’m with you 100% and that’s a really good point
you know one of the way you can keep on top of that and one of the things I’m
super proud of that we do is ship up you know we own our entire text that we’ve
both our WMS in the fulfillment centers we’ve built our dashboard everything is
vertically integrated so that allows us to listen to what our merchants are
telling us like hey we need when we hear something enough that merchants have a
specific need or they’d like to see something we’re able to either one build
it out ourselves because we own the tech stack and we have the engineers to be
able to add on an additional service so that has been very useful to our
merchants over the years but as you said create a partnership with somebody who’s
doing something innovative that maybe we don’t want to build out or we don’t want
to own and their services are very complementary to what we’re doing it’s
funny like I come from a finance industry and if you’re a trader or a
bond trader or something like that you have a Bloomberg terminal which is an
end-all be-all to everything that you need to basically do your job function
have research beyond today in the news there’s nothing like that in e-commerce
and there really shouldn’t be but it stresses the importance because there’s
nothing like that to be able to rely on partnerships that are complementary to
your product there’s a lot of talk about the term headless Commerce and I
actually I believe that’s true I think you know doing something really specific
in the supply chain or in the e-commerce value chain
is a great benefit and then creating partnerships that are complementary to
what you’re trying to achieve I think is the way to go there’s no one source of
truth for everything I feel like finding the you know three
four or five different cogs in your value chain and and integrating them is
the way to go we we have jet rails but I just recently launched a partnership
with big commerce which a couple of years ago would have been surprising for
a web host to partner with you know with a SAS platform of that nature but I
always loved unlikely alliances and at the heart of it their push into headless
Commerce you know having you know work with partners to create plugins
extensions that will connect their SAS ecommerce platform with front end
systems like WordPress or Drupal gives us a great way to support their users
especially those that need more customization that need more flexibility
that the benefit from those kind of headless applications I know that at
Shopify unite there were some good conversations around graph QL and
headless you know certainly Magento’s releases even a you know we do a lot of
work with Magento a jet rails but you know they’ve done a lot to allow users
to go headless that we’re definitely seeing that that trend in the industry
and at the same time you know we also from time to time run into folks that
for instance they’ve written apps for these systems like Shopify and big
commerce and you know those need to be hosted somewhere so you know our
mission-critical hosting our our white-glove service starts to stand out
because if if there’s any blip on the radar with those apps those sites are
negatively impacted right you know that they don’t you know that your e-commerce
site might be a brick because your custom app or your you know the app that
you got out of an app store isn’t it isn’t really hosted an environment
that’s being well monitored and maintained you know so we’ve run into
these interesting things in the industry where it’s not what you to expect but
companies need come together around solutions around
the end-user both the merchants and the shoppers and what’s gonna work best
what’s gonna you know get through the entire process so always really
interesting looking at all that always interesting and always evolving and
that’s what’s interesting there’s new ideas coming into the marketplace of
ideas almost on a weekly basis so it’s an exciting time yeah and with that I
hope you’ll come back on at some point in the future and we can look at some
new innovations and changes because we know they could come down the pike real
fast yeah I really appreciate you taking the time to chat with me and share some
information with our listeners today and any final thoughts no it’s always great
to talk with you we always have great wide-ranging and candid discussions and
I’m happy to do it any time either on a podcast or in person and continue
continue our partnership and relationship going forward awesome well
to our listeners we really preesh appreciate you tuning in for another
episode feel free to subscribe wherever you listen to podcast we’re in dozens of
podcast networks we will have videos up as well from this particular episode and
and feel free to follow us on LinkedIn Twitter or Facebook whatever your
favorite social media is to stay tuned for new episodes we’ve got a bunch that
are gonna be coming out over the next few weeks and we love comments we love
your feedback so if you’ve got ideas if you’ve got a great guest for us or
something that you think you know we can add to our notes or our episodes by all
means we love to hear from you thanks and happy selling thank you Robert

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