ShipBob Co-founder Dhruv Saxena (right)
Should retailers outsource delivery logistics?
Promising to help smaller to mid-size online sellers “achieve the scale, speed, reach and efficiency of Amazon,” ShipBob recently raised $4 million in a round of funding to further its expansion.
The Chicago-based outsourced packaging and shipping startup said that while e-commerce platforms have simplified the process of selling online, the fulfillment process remains antiquated.
“My cofounder and I were running an e-commerce store ourselves and every time we got an order, we had to go to the post office and stand in line to mail our items,” said ShipBob co-founder Dhruv Saxena in a statement.
Most SMBs must use multiple products and services to achieve the various steps of the fulfillment process. Often, none of the systems talk to one other, leading to inefficiencies and mistakes. Hiring full-time packers, operating warehouses and postage costs can also become prohibitively expensive.
Using a single platform, ShipBob receives orders made through clients’ e-commerce websites, packs the items up and ships them to buyers. Beyond order management, inventory management and customer communication, ShipBob also optimizes savings for businesses by comparing USPS, UPS, FedEx and DHL for the lowest shipping rates it gains from its bulk deliveries. The company also offers warehousing.
“When a merchant makes a sale, all they have to do is schedule a pickup and ShipBob takes care of the rest,” ShipBob said in its statement.
ShipBob works with sellers on Amazon, eBay or Etsy as well as platforms created with tools like Shopify and Bitcommerce. Merchants pay ShipBob a small subscription fee for any service they use and the cost of discounted postage. For instance, in-store pick-up costs $5.00 plus postage.
Operationally profitable in Chicago and New York, ShipBob plans to launch in another city later this summer and reach another four over the next year.
ShipBob raises $4 million to help small retailers ship goods like Amazon Prime – TechCrunch
ShipBob finds a place serving crowdfunding success stories – Chicago Tribune
Discussion Questions
DISCUSSION QUESTIONS: What do you see as the upside and downside to small to mid-size retailers outsourcing packaging and shipping? What questions should retailers have for ShipBob?
Poll
BrainTrust
Ross Ely
President and CEO, ProLogic Retail Services
Adrian Weidmann
Managing Director, StoreStream Metrics, LLC
This model sounds like a great idea as online merchants typically don’t add value in the fulfillment of their orders. Using an outsourced service for fulfillment makes sense and allows the merchant to focus more on their products and marketing.
As with any outsourced service, the merchant must ensure that the fulfillment house executes the orders quickly and accurately, and that the enduser’s personal information is secure. For functions like fulfillment, it seems that the risks are low and the opportunity for savings in cost and time are substantial.
It’s all about cost and efficiency for logistics. If a third-party logistics provider has a compelling offer for retailers to consider versus their current process and/or partner(s), then they will choose that partner. Scale will obviously help the third-party logistics as they get established in each major location.
I see great upside for small and mid-sized companies, provided ShipBob can seamlessly handle the entire logistical process quickly and efficiently. If, however, ShipBob screws up, the ire of consumers will be directed towards the merchants, not the shipping company, so it’s important that ShipBob demonstrate its ability to get it right around 99 percent of the time.
The obvious upside is that the service eliminates a huge headache and saves time for the sellers. There are several downsides. First, the efficiency of this process will impact the sellers’ reputation which could be positive or negative. Second, to operate efficiently ShipBob needs access to inventory data, delivery dates and customer information. Third, ShipBob will have to be creating most efficient processes for lots of different companies if successful.
The questions sellers will ask: how is this different from a fulfillment company, what is the cost and what guarantees are in place against the company sharing your information?
The upside would be if they outsourced to a company that was more efficient than they were. Customers would be happier and internal resources could be deployed more effectively.
On the downside, if an outsourced service proved popular, the retailer, or retailers, could find themselves at the mercy of a “partner” suddenly anxious to raise rates and, as a result, lower margins.
As they say — a supply chain is only as strong as its weakest link.
Cost efficiency versus competency is a constant issue across all departments in retail. ShipBob is no different. Pick your fights to produce the most profit.
The benefits of outsourcing fulfillment grow as the amount of online ordering does. Retailers (especially smaller ones) need to focus on what makes them unique. Delivery is a utility task, and it should be outsourced as soon as it is feasible, the same as with other utilities like postal service or electricity.
There are tremendous upsides and very few disadvantages to outsourcing delivery logistics for small to medium size retailers. The question is one of focus — smaller organizations must concentrate on reinforcing their key differentiators to their most profitable customer segments. Whether that is finding unique products, delivering support services that are different than larger organizations or providing content, these organizations must be crystal clear in their focus in order to thrive and succeed.
The only downside of outsourcing logistics and delivery is if the outsourced partner cannot be consistent in their services. Then the blame will fall squarely on the retailer, who has limited ability to identify or fix the issues.
Nonetheless, I am a huge fan of this approach.