A shipping service for small online sellers receives $1 million in funding
May 11, 2015 10:49 AM
At 9 a.m. every morning, Dhruv Saxena arrived at the United States Post Office in Chicago’s iconic Willis Tower, and stood at the entrance. The entrepreneur asked people who appeared to be small business owners if he could ship their packages.
“After two months I stopped standing outside the post office, and started driving to do direct pickups at company offices,” Saxena says. “The number of ‘Yeses-’ I got just started going up and up.”
In July 2014, those yeses inspired Saxena to start ShipBob, a delivery service for small-and medium-sized online businesses that picks up, packages and mails clients’ items.
Now, nine months since the company launched, ShipBob has earned nearly $1 million in revenue from its 200 online Chicago business customers, Saxena says. It’s processed nearly 40,000 shipments. The company’s success attracted a round of $1 million in seed funding led by investment firms SV Angels, Funders Club and WeFunder in late April.
ShipBob plans to use funding to open a new office in Brooklyn, N.Y., as well as add four developers to the ShipBob team and integrate its shipping software with additional e-commerce platforms, such as Bigcommerce and WooCommerce. ShipBob currently integrates with Shopify and eBay.com; it’s also testing Etsy.com, an e-marketplace for sellers of crafts and other products, with eight sellers. In the next month, it plans to integrate with Amazon.com so that it can service merchants that sell on that platform.
Clients that operate their own web sites can connect to ShipBob’s system to process orders. Clients can also manually enter orders on ShipBob.com.
Saxena expects ShipBob’s new facility in Brooklyn will drive sales growth beyond the 30% month-over-month rate that ShipBob currently sees in Chicago. The number of Chicago customers is increasing by about 20% each month, he adds, and the number of packages these clients ship through ShipBob is growing 35% month over month.
Customers can create a user account on ShipBob.com, or on the company’s mobile iPhone or iPad app. When a client indicates it has parcels ready to ship, ShipBob then forwards each pickup request to one of its contracted independent drivers. The courier brings a client’s products to ShipBob’s Chicago warehouse for packaging and handing off to a shipping carrier. ShipBob also sends mobile messages to clients to alert them when a driver is about to arrive for pickup, and to let them know when a package has been handed off to a shipping carrier.
ShipBob checks for the lowest available rate from among DHL, FedEx, UPS and the United States Postal Service for each shipment, then pays the chosen carrier based on the discounted bulk shipping rate ShipBob receives from carriers. ShipBob earns most of its revenue by charging its clients the carriers’ standard shipping rates, and then keeping the spread between the standard rate and its discounted high-volume rates.
ShipBob provides its own discounts on the standard shipping rates based on a client’s shipping volume. It offers discounts of 5% for 40 or more shipments per month, and 10% for 200 or more shipments. For 500 or more shipments, it works out discounts separately for each client.
For clients with at least 40 shipments per month, it charges no extra fees for picking up products brought to its warehouse, or for packing materials.
For clients with fewer than 40 shipments per month, it charges a $5 pickup fee and provides no discount on shipping rates.
ShipBob also has a 500-square-foot warehouse located in downtown Chicago that stores products for 18 of its customers, offering the same pricing structure on shipping.
Brittany Chibe, the CEO of food distributor Paleo Scavenger, stores approximately 160 6-ounce bags of her custom granola at the ShipBob warehouse. Before ShipBob, Chibe used to go to the post office daily to mail out packages to her 500 customers, including such grocery stores as Whole Foods, Treasure Island and Green Grocer. Chibe says she manually enters each order at ShipBob.com, but plans to integrate her site’s Shopify platform to ShipBob soon.
“ShipBob saves me anywhere from 5 to 10 hours per week,” Chibe says. “Before I was packing orders and bringing packages to the post office on a daily basis. Now, ShipBob comes to my house once a month, wraps my packages in boxes, creates labels for me and gets the best shipping price for me that they can.” ShipBob makes monthly pickups of Chibe’s granola, then ships orders from its warehouse as they come in.
Space at the ShipBob warehouse is priced at $5 per shelf. Chibe estimates she saves $20 monthly, and one day’s worth of shipping process time weekly by using ShipBob.
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