A weekly podcast with the latest e-commerce news and events. In episode 289 is an interview with Dhruv Saxena, co-founder and CEO of ShipBob.
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Dhruv Saxena is the co-founder and CEO of ShipBob, Inc. ShipBob is a tech-enabled third-party logistics provider (3PL) that fulfills e-commerce orders for direct-to-consumer brands.
We discuss ShipBob’s origin story, how the e-commerce fulfillment industry has evolved, as well as the challenges and implications of Amazon and Shopify’s various fulfillment initiatives.
Episode 289 of the Jason & Scot show was recorded on Friday March 18, 2022.
Transcript
Jason:
[0:23] Welcome to the Jason and Scot show this is episode 289 being recorded on Friday March 18 20 22 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.
Scot:
[0:37] Hey Jason and welcome back Jason Scott show listeners
Jason as you know we did a Amazon Fulfillment deep dive a couple weeks ago and that was quite a popular
Topic in episode and we’ve been getting a lot of questions from listeners about what’s going on in the world of
and we are now living in a world where products used to be if you get it in a week that was amazing and now anything that’s longer than 2 days feels like a lifetime
so we thought it would be good to bring on one of the top startups in the Fulfillment area the shipbob and we have with us the CEO and co-founder of shipbob dhruv saxena dhruv welcome to the show.
Dhruv:
[1:20] Thank you so much Scott and Jason for having me excited for our conversation.
Jason:
[1:24] We are looking forward to it as well I’m getting tons of complaints on the feet already that people were expecting Bob to be on the show today so you’ll have to tell us how it became dhruv started shipbob.
Dhruv:
[1:36] Yeah for sure I’ll give you a quick back story on me if that’s the opening question and tell you how did we come up with the name shipbob.
Jason:
[1:46] That would be perfect yes I asked it very awkward we Scott is laughing at me on the back Channel.
Dhruv:
[1:51] Yeah so.
Quick back story on us you know I grew up in Delhi India came to the u.s. in 2007 to pursue engineering my co-founder on shabaab device is also from India we’ve known each other all our lives.
And so we after we both did an engineering in the midwest here I went to Purdue we came back to Chicago and started.
I’ll booking in a full-time jobs at software programmers and on nights and weekends as most Engineers do.
We were trying and experimenting with a bunch of thought of ideas and one of the start-up ideas was in e-commerce.
And be Engineers we were able to automate effectively everything in that e-commerce business except the part around shipping and Logistics.
And so every time you would have a bunch of folders we would have to run to the post office here in Willis Tower Chicago in the basement,
they have a post office and we would have to stand in line and basically ship out those orders out and that became the most manual and painful part of our e-commerce business.
And we wanted to find ways of automating that.
[2:58] And we would call up a bunch of these existing companies 3pls who helped companies with the shipping and Logistics take all three pills third party Logistics providers.
And none of them wanted our business because we were too small for them,
and so that got us thinking as to hey how do others small to mid-sized e-commerce businesses figure out their shipping and Logistics we realize that there really isn’t a good alternative for businesses like ours who are you know ramping up e-commerce businesses and that caught us into,
thinking what should pop can be.
And how did the name come about you know so when we started thinking about building a company for helping businesses with their shipping and Logistics needs.
We were going for like like people want fast shipping so we should have ship and a fast you know like an animal name or something like a ship park or a ship Cheeto something on those lines so that it conveys.
That heylia company which helps you with fast shipping and all of these that domain names were taken,
stop after a while godaddy’s recommendation engine you know started recommending you no other alternative domain names and one of them was shipbob for 299 or something,
and so we say you know we don’t have money but this seems like a cool name and so if you just turned shipbob.com for 299 and that’s the story of her name and so now we have a good messaging around hey,
Bob Means bending over backwards for your shipping or Bob can be a plumber Bob can be you know any
use for gyves but as Bob kennels to be a shipment so that’s like the marketing angle on shipbob.
Scot:
[4:24] Very cool so it’s interesting because this kind of parallels a lot of a lot of companies in e-commerce they start with people building e-commerce stores and then they’re like,
this part of it stinks I’m just going to focus on solving this so what is your original e-commerce store do.
Dhruv:
[4:42] So we started were doing a lot of like printed photographs and so you know this is like 2013 2012,
bear Instagram had just been acquired by Facebook for like a billion dollars and so we thought oh wow that’s photo-sharing seems to be like a heart,
market right now and Instagram is all about digital photo sharing so what if we brought back the Retro way of sharing pictures which is people would print and mail pictures to each other so our e-commerce business was that you would send us a photo.
Honor text bot we would print that photo we would frame it we would write a message at the back of the for any personal message you wanted and mail it to your friends and family all across the world.
And so that was sort of you know our big idea then like physical photo sharing.
Scot:
[5:28] Cool car like frame bridge I think does some of that now cool yeah so then you you did you wind that down as you kind of pivot it over to the Fulfillment center.
Dhruv:
[5:39] Yeah it won’t down on its own to be honest because once we started focusing on on shipbob E that business wasn’t really taking off with shipbob first was was so we started spending a lot more energy on shipbob.
Scot:
[5:52] And then so that was 2015 earlier kind of also 2014 yet.
Dhruv:
[5:58] Now 2014 2015 we got into this incubator called y combinator Scott so.
That allowed us to you know quit our full-time jobs because y combinator gives you like a hundred and twenty thousand dollars so that was enough money for us to like put in you know our notices on a full-time jobs and go all in on shipbob.
Scot:
[6:20] Brickell so you got no Y combinator and then that usually requires you to go out to Silicon Valley for a period of time did you guys do that or are they at some point they introduced remote but I think that was later.
Dhruv:
[6:32] Much later yeah no that’s a good question so.
This is another great sort of Peace around you know building startups and Chicago so when we go into YC.
We were one of the very few companies you know.
Who did not relocate to California so it was it wasn’t mandated or Partners there were very comfortable we okay with us traveling back and forth.
So every week on Tuesday they have these partner meetings but you go and tell them the progress you’ve made.
And so we would fly every Tuesday morning to our Mountain View California do our pitch and you know and learn and then come back and because,
we had to fly and I was you know what a red eye flight Etc it was a lot of effort so we would always try to make sure that we have enough progress that we’ve made in a given week
to make that trip worthwhile otherwise we would go there and we will just come out looking like we didn’t really do much and that would be a waste of our time so that pressure of making that trip by productive I think in the early days for stars to work way harder,
that may be a lot of other companies simply because you know we were putting a lot of effort and these so and capital in making those trips and but we headquarter the business in Chicago.
I’ll see you know which turned out to be you know pretty good decision I guess in hindsight.
Scot:
[7:49] Yeah and then you know what’s really interesting and I kind of live this every day so I’m curious how you
path you took here as software people you know we love to solve things with software and at some point
shipping is not a software problem right you can you can build the world’s best shipping but at some point some human has to and maybe a robot but you know some something has to move a package from point A to point B
sometimes Point c d and e and then someone has to you have this middle Mile and this last mile when did you guys
realize that you’re going to have to actually have like fulfillment centers.
Dhruv:
[8:26] Um right from the prions yeah pretty much.
Because you know coming out of the running your own e-commerce business and then also a couple of other startups before then.
Like.
Be being Engineers yes we were very accustomed to writing a lot of code and then just hoping that users will show up and none of the startups are for shipbob for us worked out,
and one of the realizations that would be in the way had is that just because you build it doesn’t mean that people will come,
and so you would have to spend a lot of your time and energy in making sure that you actually spend you know time on sales marketing and distribution and so when so we were very.
Early before even adding code we were talking to our customers and these customers you know who would eventually become users or loyal users.
Told us very clearly that we don’t really care about great software what we care about is a great product or a great service which helps us in packaging and shipping so that influence the decision-making right.
We can’t be a pure software company these Merchants are paying us because they need great fulfillment service so having our own fulfillment centers probably requirement for us before we can start scaling.
Scot:
[9:36] Got it okay cool so you go do y combinator and then women did you like build your first like when did you have your first fulfillment center.
Dhruv:
[9:48] So right at the you know when you started the company like our office and my apartment became sort of a file template.
Fulfillment center very Loosely here so you won’t really be able to.
Call the Department of proper fulfillment center but you know it did the did the work so there was enough room in our apartment and enough first office.
Which is like I think thousand square feet for us to have some room for people to send us their product and we would store their inventory.
And then have couple of hours basically pick pack and ship you know those boxes out so my apartment was on the 31st floor so every evening we would get a big.
Little trolley and put all the packages and that’s all a and then use the freight elevator to bring those packages to the ground level where Michael ejector words you know use the car and we’ll take it to the post office.
Scot:
[10:41] If you’re in Jason’s building he would have reported you as like a probably a drug dealer some suspicious Behavior going on up on the 31st floor.
Dhruv:
[10:50] Yeah no.
Jason:
[10:51] I’m just grateful the city planners that do the zoning didn’t hear this story.
Dhruv:
[10:56] Yeah you know it.
Scot:
[11:00] It’s not illegal if you don’t get caught.
Dhruv:
[11:02] You know we did get in trouble in the early days with the local post office so what would happen is again you know because we had been.
We didn’t have a lot of successful startups before shipbob Beaver like way paranoid about finding customers.
And we none of us came from the sales and marketing background so we tried to run for this position where you can we find customers in the most cheapest and fastest way possible and the obvious answer to us was let’s go outside the post office because there’s always a line,
people don’t always seem very happy or to go to a post office and so if he.
Can find a few e-commerce merchants in those lines we can pitch them that idea while they are still in the line and convince them to give us their package and not go to the Post Office the second webinar.
And so we spend the first three during by see it is like a first three to six months of our shipbob basically standing in lines outside different post offices in Chicago to convince people walking in that shabaab is a better alternative than you going inside the post office.
So the post office Forks very nice people thought that we were trying to take business away from them.
[12:10] So they were sent they would call up these post office apparently post office has its own police do something so they would send out these post office cops,
who would comment she was away and so we would just go from one post office to the other like based on you know which one had last called the cops on us and so,
I think some post office might still have a picture of Jessica and the way to make sure that they don’t show up again.
Scot:
[12:33] Hello.
Jason:
[12:35] Those cops are federal agents by the way they’re not messing around.
Dhruv:
[12:38] Oh man I hope they did especially because we were immigrant Founders so we can’t get in trouble with the the federal police.
Scot:
[12:49] The federal jails and I hear pretty nice though so good they have tennis and stuff.
Jason:
[12:54] What we’re going to have a separate episode about how Scott knows that.
Scot:
[13:00] Okay cool so you did your wife see then you came back to Chicago and then maybe kind of update us like the bullet points to where we are today.
Dhruv:
[13:10] Yeah so once we you know got back to Chicago post why see we were fortunate enough to raise a seed round of a million dollars and so that allowed us to,
you know take that top pill and hire a couple more engineers and hire a few more sales people and then expand the business so we opened up a warehouse in Chicago.
Where we were headquartered and then we quickly expanded to New York as well so we added a location in Brooklyn New York.
[13:38] And based on the progress that we had made you know in Chicago and New York and remember let’s also limited so it requires Capital because you’re opening up these fulfillment centers at the very beginning and you’re also writing a lot of software which powers.
The inside operations of the Fulfillment center and so we have to raise Capital simply by the nature of the business we are in also fulfillment I’m sure like,
all your list has no it’s not like a software business it’s not an 80% gross margin business we have very tight margins,
and so you are you require a lot of captains in this business to scale and so every couple of years we’ve had to raise Capital simply for us too,
add investment dollars into building,
either the software which powers are fulfillment centers or to open up our own fulfillment centers and so The quick summary of f Bob is today is that over the last five years or so,
we raised you know close to 400 million dollars or so of venture capital,
we’ve added you know be as close to 1,000 employees now a lot of it on the product and Engineering teams and sales and marketing team for us too.
Add many emotions to our network but also write a lot of great stuff in which power is the back end of almost we know back-end systems of all of the e-commerce businesses using a platform.
And the business strategically also has you know evolved where we don’t now need to.
[15:02] Operate our own fulfillment centers because we have four of our own social incentives each one in Chicago New York Texas and California so we kind of know how to run fulfillment centers we now partner with existing.
3pl Zone fulfillment centers who have empty capacity we bring in our software our know how our physical infrastructure into those locations,
we bring them up to the shipbob standard and then we are able to Route our Merchants into those locations and so the business now requires a lot less capital in scaling the infrastructure side of things
but not all of that Capital goes towards you know basically growing out the product capabilities and adding new Merchants into our Network.
And we have fulfillment centers in the u.s. in Canada in UK Europe in Australia.
And we of course added a lot of capabilities on a network all the parts on this wall so truly today now shipbob is a global.
Omni-channel fulfillment solution for a Merchants where we can we are probably you know on power if you were starting an e-commerce business and you wanted to compete very effectively with Amazon and Walmart supply chain we are a great alternative.
Scot:
[16:13] Pickle the way I explain it let me see if this pencils for you so if someone asked me how this you know how
this kind of what I would call your one of these next-generation fulfillment companies my pitch is you had these 3pls but they were really designed for
you’re kind of almost like a real estate thing where you go in and say Hey I want a corner of this fulfillment center and I’m going to lease it and do X Y & Z and then Amazon’s Innovation was FBA where it was you know what much more aligned with the
the e-commerce model of yes I want you to hold my goods but they’re going to turn over quickly and I want to pay more of a per transaction kind of a thing,
and I also want a lot of flexibility about how
fast I can get products to Consumers so 3pls were in this kind of old world where they weren’t really built that way so then part of what you guys did as you built your own fulfillment centers with this new model and then you can kind of take that model and put it into Old 3pls bring them up to kind of like the FBA level of
above standard is that a fair summary of how you explain shipbob to other folks.
Dhruv:
[17:20] Yes that is very real articulated Scott I might actually use that going forward and and the only piece I would add to it is,
of course you hit on the fast piece of it which is very relevant for a merchant,
the second big element of wine Merchants choose us and our network is our ability to customize the unboxing experience which is unique for that particular brand so you know when you order something on Amazon it shows up in Amazon branded box
for a merchant they want that unboxing experience to represent their brands you know.
Ethos and the brand value so whether that’s a custom box you know whether it could be eco-friendly material it could be custom gift notes accustomed shipping labels Etc the ability to customize that you know that.
Transaction is very relevant for them it’s almost on par alongside speed and and so that’s the piece the second element of.
Of customization I guess that should Bob’s been able to unlock that I think FB it doesn’t offer.
Jason:
[18:18] Got it and just to sort of clarify for listeners like so the goal then is it feels like it got shipped by the vendor right so it has whatever
packaging the the manufacturer would want to use and a bill of lading that has their logo and those things on it as opposed to I ordered something from cuts and then I got an invoice from shipbob or something like that.
Dhruv:
[18:41] Yep exactly right we want to be.
In the background you know where the Shopper is building a direct relationship with the brand and and the Shopper is agnostic to whether shipbob ships or whether the brand shifted.
Jason:
[18:58] Yep so and just to kind of frame this like back in that time frame the the idea of B2 C3 PLS was not common today
it’s a it’s a pretty crowded Market space there’s a lot of a lot of options but they’re back then is got kind of pointed out like there was a thing called 3pls but they were more of like a B2B service really right.
Dhruv:
[19:22] That’s right yep and so,
the reason why even we were able to even build a business here is because majority of the 3pls out there were focused on the palette and Palette outside our transaction because most of their customers,
but the bands who was selling predominantly in retail stores like Macy’s no storm or Target Etc and so the concept of this High Velocity two to three units per order was very foreign to them,
and all of the infrastructure was designed to store large number of palettes worth says having inventory in each has or in single units stored in bins and shelves.
And so far from that perspective,
the reason you know if you are doing pallets and pallid out like getting into e-commerce and then getting working with small and mid-sized e-commerce businesses where you don’t make a lot of money for customer Justin.
Pencil for these for these B2 B3 Tails because they were used to having.
A small number of very large customers and then designing their entire operation inside the building’s only for that few number of merchants because they would be able to make a you know the entire earnings ones from that limited set of merchants,
word says it shipbob you know we we have a whole large number of merchants none of our Merchants you know are these are all birds or these massive Brands but these are growing emerging bands and.
[20:50] Productized what is very much like been away service-oriented business.
Jason:
[20:55] Yep and so the profile of the typical shipbob customer is a start-up that’s intending to sell direct to Consumer mostly through their own website is that a fair characterization.
Dhruv:
[21:08] That’s how we got started his and so you know today that is definitely evolved as a capabilities have grown as well so,
I would say like if you have to break down the merchants that we serve are so,
on one end of the spectrum we have these Merchants you know they could be ought to pronounce what just getting started and they’re doing anywhere from you know less than a hundred thousand dollars of annual revenue on the website all the way up to maybe a million dollars or so.
So that’s one and then we have Merchants who are from 1 to 15 million dollars of gmv,
and they are predominantly selling on their own website but they’re also selling on marketplaces like Amazon eBay Walmart.
And then we have a mid-market segment of merchant these are relatively established Brands they are doing anywhere from 10 to 150 million dollars of gmv across all the different channels that they’re selling on,
and for them you know they are in e-commerce which is direct-to-consumer they’re also in marketplaces but they’re also in retailgeek,
and so they and they also are thought getting to be Global and so for them,
they use shipbob because under one umbrella they are they get not only great technology but the Fulfillment solution is able to carry it across all the different channels that they’re selling on,
and it allows them to manage inventory Under One Roof so in the.
I guess the value proposition over the last six years for shipbob has definitely evolved as a capabilities have grown I’ve grown.
Jason:
[22:33] Makes total sense and I’m assuming so in my day job one of the the new categories of business that I see you like getting into direct fulfillment more are
traditional products that used to exclusively sell through wholesale and in some cases these could be quite large companies
that are used to sending pallets to Target and Walmart and now they’re starting to sell some of their own goods from their own website and just like those those startups from 2014
they’ve got to figure out how to do the each’s Fulfillment and I think they turn to folks like you as well now.
Dhruv:
[23:06] Yeah absolutely and so you know that’s the exciting piece of direct-to-consumer is that.
The technology and the infrastructure needed for you to start your own e-commerce business and be able to reach your consumers is has massively evolved so these traditional.
You know Brands who are predominant retail now they are able to participate in e-commerce in the pretty meaningful way as well and they have access to Great infrastructure and.
I think you know the.
They’ve also realized that the infrastructure that they need it for their retail shipping doesn’t look anywhere close to what they need for the direct to Consumer so on the record consumer side maybe you choose Chopper 5 for your front end platform.
Are you choose to do a lot of your advertising and marketing on through Facebook Instagram Snapchat social media is the predominant digital marketing channel effectively.
And then you choose shipbob for your fulfillment and and running your supply chain and maybe use a form or you know or care enough for your buy now pay later like those credit financing options
and so this technology stack that you need to run your direct-to-consumer e-commerce business you know now exists,
and is completely different from what you might have used for running a full wholesale retail operation.
Jason:
[24:27] Yep and I do want to just double-click on one other thing before we turn to two marketplaces and the Frenemy situation there but the
so a couple of your advantages why you develop this software to make the Fulfillment center much more efficient than traditional ones were and obviously efficiency is a huge differentiator and in the Fulfillment
you you enable all this customization and personalization
which is a better match for The Branding that all of these clients want to do one of the other things that I think of is.
3pls from that era that was sort of problematic and that kind of Amazon disrupted is like they used to make you manage your own inventory so if they had to.
Fulfillment centers you as the merchant had to decide how much good you are sending to the West Coast and how much good you are sending to the east coast and and you sort of had to do all those things and.
Amazon through their fulfillment by Amazon kind of took that that
that Inventory management burden away from some of their their merchants and sort of did all that for them and did the load balancing and all those sorts of things
so do you do that like you now it sounds like you’ve got four of your own fulfillment centers and a bunch of virtual fulfillment Centers do you do all of that sort of AI based
inventory allocation for your customers as well.
Dhruv:
[25:56] Yep absolutely so and that’s sort of I guess we can break that inventory allocation into two parts so one is choosing where in the network,
to send your products from your manufacturer.
[26:08] And so that’s based on you know we provide all of that information upfront to a merchant base where you know based on historical
purchase data that we captured from all the different sales channels that you connect into Shabbat we can be have a model that,
Delta to fairly well as to how much inventory to store in which parts of the network,
and so that’s and so you can but we don’t necessarily mandate that because for these brands
you know they want to be one them to have the ability to make those decisions for themselves we provide them with all of the information and if they choose to they can have shipbob distribute that inventory for themselves for them or they can do it directly from the manufacturer
my following our data you know that we give out to them so that’s on the
first half of like sending like the right amount of inventory to the right location so that’s a little bit of a optionality for these bands.
And then the second part of it where we do a lot of the work ourselves is once we start getting these orders into our platform once you buy something from our,
from a branch
choosing which fulfillment center that particular order gets routed to and what shipping carrier is used for that particular transaction that is something that we that we definitely do you know
in the house and so that is a pretty important element of it because as a brand you might off be offering two day shipping on your checkout page.
[27:32] But you actually don’t want you know to be using Ups 2 day or FedEx overnight to do that today transaction because that will be very expensive,
and sociable because we’ve captured a lot of far,
carriers performance data over time we have a pretty built out model which tells us hey if we even if you use this local Regional carrier for this particular order we have a very high likelihood it will get delivered in 2 days or less
and we don’t have to pay for a UPS guarantee today service and so we are able to bring down the cost of two days significantly down at this almost the same price point
as a USB as ground shipping which is a total which is the cheapest form of shipping simply by placing inventory
in better you know better placement of inventory and a fulfillment centers but also choosing where which fulfillment center ships that particular order and what shipping carrier we use for the transaction,
for that was a little long answer but I think that is sort of the secret,
Elemental why brands of any size are able to offer a two-day next a sort of a shipping experience on the checkout page.
Scot:
[28:37] Yeah if that’s helpful at
when I’ve talked to some people about this kind of stuff they’re always like how hard could this be like this comes up in the
Shopify so a lot of Shopify Wall Street folks you know they’ll say well why is this so hard and you know one of my favorite things about e-commerce is going to
tour warehouses because once you get inside of warehoused you realize that this pretty complicated and the way I explain it is once you’ve committed to a.
[29:09] Yo an asset like a warehouse and all the people in everything then it becomes an optimization problem in optimizing warehouses is pretty complicated right so let’s let’s take you guys have
X number of customers in a fulfillment center let’s just keep it one of the ones you own and operate to make it even
simpler and you know there’s a there’s a bazillion questions like how do you if you take
customer 1 through 100 do you intermix there things how do you do the packaging you talked about how do you
how tall are the shelves do you use conveyor belts do you do two floors or one floor and your fulfillment center
so what’s fun about that is an engineer there’s a lot of fun problems to solve their and it’s a lot,
you know your explanation of the shipping is interesting because that’s like yet another one so a lot of people feel like this is too easy is really easy and then they kind of run up against the the the hardness of it and they kind of have to
step back and redo it do you have a point of view of.
You know what Shopify kind of did it seem like they tried to do a software-only kind of a solution and it kind of didn’t work and now they’re trying to get more involved in it and you have a point of view on that.
Dhruv:
[30:18] Yeah for sure but you framed it really well Scott which is.
Once you you know once you go inside the Fulfillment center the number of problems of that that you can potentially solve or almost endless,
and the reason it’s important to attack these optimization problems is fundamentally you know fulfillment is not a software only problem.
And it doesn’t come with 80% gross margins
and so it’s in your best interest to optimize once you get to certain scale because every cent and dollar you share from those operating costs is a dollar that flows to your bottom line
alternatively is a dollar that you can then reduce you know your cause to your brand which then allows them to reduce their fulfillment costs and that way allows them to offer free shipping which then drives,
you know more sales on the website which then drives you no more orders into your platform which allows you to get to scale faster.
And so optimization is you know is key for you to be operating at the lowest cost possible because there are advantages of doing so.
And so there are a lot of different ways to get to Optimum to try to optimize but if you don’t own and operate your fulfillment centers at least the onset you simply don’t know what problems to solve,
and so at shipbob you know what I believe worked really well in our favor is because we operated our own fulfillment centers we saw firsthand.
[31:45] What are the consequences of the choices that we are making.
And that involves you know the physical infrastructure do we mix products of different merchants in the same aisle where in the,
we’re in the Fulfillment Centers do we place the fast-moving skus do we take the loaf slowest moving skills and put them at the back of the Fulfillment centers away from the rest of the merchants inventory or do we place them high up in the,
under racking system how do we think about Labor planning is Mondays.
[32:15] 20% higher than Friday so do we need to staff up in the morning shift Etc and they are all and material handling and and Idol walking is such a big.
Cost of the Fulfillment centers operations how do we try to minimize that and at what scale
there are hundreds of these optimization decisions that we’ve had to make over the last seven years,
which then have been productized in our software in our warehouse management system which then now is being deployed across these Partners sites,
and so I think if we were to
to you know jump ahead and just do our partners sites that we don’t own and operate we don’t own or operate on a day-to-day basis
we would have missed out on all of these optimization decisions that we made over the last seven years which then allows us to operate,
at a much lower operating costs than any of the competition so I think Shopify I don’t know,
you know the products are actually there but I think they might have tried to short-circuit their way into running virtual fulfillment centers to early without having
learned the lessons of our without having experienced the lessons of running your own building which I think they might be course-correcting now.
Scot:
[33:25] Yeah it gives you the ability to go to a 3pl and say hey here’s your you know 3pls are kind of V1 and you guys are like V10 so you can go in there and say
take this section do it this way here’s how you know here’s the barcode reader you need to use yours there’s like all this stuff that has to come together seamlessly with the software to kind of execute and you guys have figured all that out and you can just kind of plop it right into the 3pl I imagined.
Dhruv:
[33:50] That’s right yeah exactly out pitch to these existing 3pls is that you have this unused capacity.
This is like a warehouse in a box that we are providing you and if you follow
you know the product or the our operating protocol then you will be able to make X dollars and order or Y dollars a square foot,
Which is higher than what you are achieving now and by the way you don’t have to spend any money on sales and marketing and servicing because shabab you know these are shipbob merchants and so you should be able to make.
You know.
You should be able to generate a return on that on that space in a relatively short amount of time which makes it a pretty interesting proposition for these existing 3pls who want to participate in e-commerce but they necessarily don’t have the infrastructure.
All the capital to do so as yet.
Scot:
[34:44] Interesting cool so give us an idea of your scale so I saw on crunch basis it says you’ve raised over 300 million so congrats on that the I’ve been raising capital in this kind of more asset heavy World in it’s not not easy so so
kudos to you for being able to fund us at the scale you have
maybe like how many packages a day are you guys processing or anything you can tell us around scale would be kind of interesting.
Dhruv:
[35:10] For sure I won’t be able to get to the.
Exact are approximate taxes but here he is maybe a good proxy you know we have close to.
30 or so fulfillment centers in our Network today we are
adding one fulfillment center a month that’s the relative scale and majority of the reason why we’re adding these fulfillment centers that are rapid clip.
Is because we are you know reaching.
Pasty in these fulfillment centers fairly quickly and the amount of space that we take inside of a fulfillment center is anywhere from.
30 to 40,000 square feet on the lower end as much as 90 200,000 square feet on the higher end so that’s the sort of every sight every node in the network represents at least you know maybe call it average 50,000 square feet and we have close to 30 of them.
Scot:
[36:04] Furcal and then it wouldn’t be a Jason and Scot show if we didn’t at least throw you an Amazon question.
So so it’s easy to kind of you know again for someone to kind of look at this and say hey you’re competing with FBA and I I get that you know.
Amazon’s talked about doing you know a you know just non-market play Style Style fulfillment.
And then but then and then they’ve also talked about yeah you can use your own packaging and but you know my understanding is they’re not really doing that at scale do you
do you guys feel like you compete against them or do you see them the other thing that also blows people’s minds a lot of time is
software and sinners like you guys operate frequently will ship stuff using Amazon’s API so that it can be prime eligible which is also kind of a so-so the 3pl the
shipping partner can be Merchant fulfilled Prime which thus means their products are prime eligible so maybe talk a little bit about how you feel about Amazon.
Dhruv:
[37:03] Yeah for sure and yes you’re right so we do ship inventory sometimes into Amazon Fulfillment centers as well for,
for the fpaa.
[37:15] And some of our some of our Merchants do also you know use the what you call the seller fulfilled Prime option but more on your question on the do we compete with FPA I think it is servicing a slightly.
Different segments of the market and so if you talk to most of our brands,
you know they were they won’t really say that we trust Amazon with all of our data.
And so for these brands that we serve as passing that customer information or who their buyers are,
to Amazon seems like a big business dress because Amazon competes with them,
you know on the Amazon to the Amazon Basics line or you know placing the product slightly differently on the the listing speed and sector so they want to build a supply chain,
and demand you know sort of website which allows them to control their own destiny without having to rely on.
On Amazon which could potentially be problematic for them down the road.
And so in that context they want to stay away from Amazon as much as possible of course they also do sometimes have Amazon listings because Amazon is such a great.
Aggregator of demand that maybe it has a lower cost of acquisition than having to do it yourself on your website but you don’t want to rely on Amazon for.
[38:40] Majority of your sales and so in you know under that,
through contacts then we don’t necessarily compete with Amazon FBA because for these Brands using FPA is not even an option and so and two because then we are there under this ethos of like if I have.
Slightly Superior brand and my brand is represented through all aspects of my branding website supply chain I can I can be a better business,
then you know shipbob stability to provide us a plethora of customization options,
is a real value sell because and I know our ability to match you know this two-day Prime life experience.
I think it’s a real value add and the third aspect of it if I may add is as these Brands grow larger being able to have inventory globally is.
Something which I don’t think is possible with FB and fourth is if you’re also getting into retail,
you know doing being able to ship Ballads of inventory to these retail distribution centers again is not an option with fpso if a brand is thinking about their supply chain as a whole I think shipbob FB is probably not a solution.
Jason:
[39:51] Yeah so that really makes sense
I’m kind of curious how this is going to continue to evolve I mean it seems like there’s some risk that some of these big retailers like or marketplaces like Amazon and Walmart might eventually start selling their fulfillment as
as a third party service that could potentially compete in the 3pl area and I think the the FedEx is and UPS is of the world are leaning more into it as well is.
Is the future going to be kind of all of these different Services kind of colliding and meaning in the middle or how do you see the future of this industry playing out.
Dhruv:
[40:26] Yeah that’s a hard question to answer,
because yes you know e-commerce is growing so quickly that there are so many Greenfield opportunities for different companies.
To play a part in so but I think each one probably you know like this industry benefits from scale.
And so and of course this is a hard business because you’re dealing with physical products and physical inventory and physical assets.
And so I don’t know if the industry would sort of all of us will start doing each other’s work simply because it’s by doing our core businesses by itself pretty hard and getting to scale in our Core Business is very relevant so.
[41:07] I think UPS and FedEx might
I think might have dabbled an e-commerce fulfillment but I think majority of the business still very much remains around transportation and and same for shipbob I think majority of our business is around fulfillment
we are looking at ways of adding value to a merchant Base by taking parts of the transportation and seeing if we have enough density on certain routes,
that can be that can allow us to reduce the overall fulfillment calls for a Merchants but again I think there’s so much you know there’s so much to be done in this space that if you.
Lose focus you can lose the advantage that you have right now so you know I and and businesses are able to grow,
simply by focusing in the core business area so for us at least you know it’s mostly fulfillment and maybe pieces of Transportation sprinkled in.
Jason:
[41:58] Well that seems like a toy reasonable perspective and it certainly is going to be fun to watch but I think that’s going to be where we have to leave it today because as per usual we have used up all of our allotted time as always if this is episode was helpful to you we sure would appreciate that five-star review
but we really appreciate your time today and sharing a little bit more about shipbob with us.
Dhruv:
[42:21] Now thank you so much Jason and Scott for having me this was a good conversation.
Scot:
[42:25] Dexter even if folks want to follow you online do you pontificate or should they just follow the shipbob socials.
Dhruv:
[42:32] The shipbob Socialist would be a great great dad.
Scot:
[42:35] I know I would advocate for you doing more would love to read anything you write about the industry as it’s been a good discussion and you know at least Jason I would read it so we can guarantee that.
Dhruv:
[42:47] It’s great to read as I got I got it.
Scot:
[42:49] Boom and Jason’s mom she always follows Oliver stuff stuff.
Dhruv:
[42:54] I can convince my mom as well.
Jason:
[42:59] The audience is growing by the minute well thanks very much everyone and until next time happy commercing.
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