It’s here, at the Southern California facility of e-commerce fulfillment and technology provider ShipBob, that one can get a window into how small retailers can leverage the power of the internet to potentially compete with the scale of larger online marketplace sellers.
Founded in 2014, ShipBob provides outbound logistics services for e-commerce orders from retailers that would ordinarily struggle to meet demand. The outsourced fulfillment provider takes orders from wherever they may have originated - e-commerce platforms like Shopify and WooCommerce or marketplaces like Amazon and eBay - and provides customized packaging and delivery at their warehouses in Los Angeles, Chicago, and New York.
When they started the company in the summer of 2014, Shipbob's co-founders, Dhruv Saxena and George Wojciechowski, were fresh off of their graduation from the technology start-up incubator Y Combinator. The pair literally went door to door to high-end boutiques in Chicago's posh Oak Street area scaring up business, and spent many days standing outside local post offices pitching small business owners as they went in to drop off their daily outbound shipments.
For many online retailers, the customer experience extends not only to the online buying experience, but to the way the product is packaged as well. It’s a sort of gray area in logistics that has emerged in the past few years as e-commerce sales have exploded. Who exactly is looking out for burgeoning retailers that have outgrown the “do-it-yourself” model, but want to retain the personalized experience customers have come to expect as they grow?
These retailers often have little or no experience in freight logistics, but are still trying to capitalize on demand from markets that wouldn’t have been open to them just a few years ago.
E-commerce sales account for around 8 percent of total U.S. retail sales, according to U.S. Census Bureau statistics, but that likely underplays the role of e-commerce in product categories where online is a reasonable alternative to buying in-store. For instance, e-commerce’s share of apparel sales is estimated to be around 17 percent. Nearly two-thirds of apparel buyers surveyed in 2016 by the research firm HookLogic said they usually buys clothes online, according to a report in Women’s Wear Daily.
The metrics on e-commerce’s impact on overall sales are difficult to quantify for a number of reasons, according to industry experts. For one, not every retailer categorizes an e-commerce sale the same way, and since most statistics are self-reported, this presents a challenge. In addition, some retailers separate out their reporting of e-commerce sales completely from overall sales figures, making comparisons more difficult.
But e-commerce as a whole is growing at an explosive rate, and what’s more, cross-border e-commerce is growing faster still. Research and advisory firm Forrester estimates global cross-border business-to-consumer e-commerce will more than double over the next five years, reaching $424 billion by 2021.
“Cross-border sales will take an increasing share of online commerce, rising from 12 percent in 2015 to 15 percent in 2021,” Forrester said.
At ShipBob’s expansive warehouse in east L.A., workers diligently fulfill orders from the company’s nearly 1,000 customers, companies that range from a local sweatpant designer to a spice maker in Germany.
In many ways, the ShipBob model is a micro-counterpoint to the massive robotic distribution centers Amazon and other companies are using to fill thousands and thousands of orders at scale.
If they’re going to have a chance of competing with this kind of operation, small retailers need fast, reliable, and high-quality fulfillment options of their own that aren’t prohibitively expensive. One of the few alternatives? Amazon’s own Fulfilled by Amazon (FBA) program, which provides small retailers with massive reach and simplicity.
“Getting goods to the customer [using FBA] is an automated process characterized by instant access, simple ordering, streamlined shipping, excellent tracking, and virtually no paperwork,” John Hammonds, a marketing specialist with the online freight rate marketplace provider Freightos, wrote in a November blog. “FBA sellers leverage Amazon’s network of fulfillment centers and robots to take care of inventory management and product picking.”
For a company like Gents Co., for instance, that might mean sending 10 hats to 10 different regional fulfillment centers closer to its retail customers in those regions, instead of sending 100 hats to a single fulfillment center for direct-to-consumer distribution.
The goal is to build a network of strategically-placed facilities that lets ShipBob customers make intelligent fulfillment decisions beyond just what the packaging looks like.
“Entrepreneurs need access to their inventory,” said Wojciechowski.
ShipBob, meanwhile, can reap the benefits of regional rate arbitrage across all its facilities and pass them on to their customers. Shippers are largely responsible for providing transportation of their product to ShipBob’s warehouse, and the service provider takes over from there. The company effectively acts as an inventory manager for its customers, providing a cost-effective place to store stock, while also allowing orders to be fulfilled more quickly from existing inventory.
Hammonds said the real trick in cross-border e-commerce is getting goods to the stage where they can be fulfilled. In other words, the freight component of that product’s journey is far more opaque from a price and visibility perspective than fulfillment.
“Freight technology is at last automating the last fully manual step in the FBA seller end-to-end process,” he wrote. “With it comes the quick, reliable tools - and low-touch automated processes - that underpin the FBA seller business model. It is now just a matter of time before getting the goods is as satisfying for Amazon sellers as it has long been for their buyers.”
In truth, ShipBob is just the tip of the iceberg when it comes to technology providers working to enable e-commerce retailers. In theory, so-called “pure play” e-tailers are better suited to fulfill online orders because their supply chains are built solely around such orders, avoiding the trappings of more traditional brick-and-mortar-focused supply chains, and because they tend to see more clearly the value of working with like-minded internet-based supply chain technologies.
This is the leapfrog effect in practice, where a smaller, lesser known company is able to scale more quickly because it’s not burdened by processes or technology that are either already obsolete or trending in that direction.
That’s a totally different proposition than large sellers face in meeting the challenge of cross-border e-commerce. A multi-billion dollar retailer generally has a sizable logistics or freight transportation staff and access to advanced supply chain technology. That technology, however, may not immediately (or ever) be suitable for fulfilling direct-to-consumer orders. Those major retailers could also theoretically be bypassed by suppliers using the Amazon FBA program or services like those of ShipBob to reach customers directly, and in a customer service-oriented way.
No one ever said the evolution to e-commerce sales was going to be easy, but the good news is that there is no shortage of options emerging for small retailers and manufacturers in search of help in meeting the ever-higher expectations of online consumers.