Shipwire Gives Mom-and-Pops the Fulfillment Services of Big Retailers

2/25/13Follow @xconomy

Shipwire CEO Damon Schechter started his company with a simple goal: “To help small businesses take on the efficiencies that big businesses have.”

He cofounded the Palo Alto-based order fulfillment services operation with chief technology officer Evan Robinson at the end of 2006, but to get there, he had to wait until the timing was right.

Schechter had been in the tech and shipping world since the 90s, but took a break after the dotcom crash of the early 2000s to write a book on logistics. An interview with Costco’s head of logistic helped him figure out what he should do next: Find a way to give smaller companies the same logistical efficiencies

But at the time, the market wasn’t ready yet.

Back in the early 2000s, consumers as a whole were just not accustomed to doing a lot of online shopping. By 2006, that had changed. Shipwire built a platform that would work with merchants’ sales software, set up warehouses internationally, and began to ship products on behalf of businesses.

The main idea was to make it possible for small companies to have a third party store and ship their wares so they didn’t have to take on the enormous job themselves. Tiny companies trying to ship a large volume of orders can only answer their own phones and lick their own stamps for so long, and outsourcing locally has its limitations, Schechter says.

“There’s a whole tech world that you can’t really handle yourself or locally with local help. You need a bigger partner. But the problem is the big, big partners are helping the Target and the Walmart. Who helps the little guy? We fill that void.”

The Shipwire customer dashboard

The Shipwire customer dashboard

Tom Gerhardt and Dan Provost , designers of an iPhone 4 stand and tripod mount called the Glif, turned to Shipwire after going through the pain of shipping 500 orders themselves. When business took off, the logistics company shipped 7,000 orders in a single day.

Small businesses with big shipping needs make up a segment that has grown bigger in recent years with the success of crowdfunding platforms like Kickstarter and Indiegogo. Now, newbie entrepreneurs can start taking orders for products they’ve never even manufactured, and then all of a sudden have to take on the logistics of getting them produced, stored, and shipped, sometimes internationally.

“Brands are going to market faster than ever before,” Schechter says. “Kickstarter is allowing a guy with an idea the opportunity to sell 5 to 50,000 products without an idea of how to ship one of them.” And the explosion of 3-D printing has made prototyping a much faster process, shortening the time it takes to get products out the door.

Shipwire offers its customers seven warehouses in the U.S., Canada, China and the UK, and expects to bring on Germany, Brazil and Australia soon. It also integrates with a company’s existing order capture systems—including partners like Amazon and eBay —so that customers can see real time shipping rates as well as inventory status. And like other major fulfillment companies, it offers same-day shipping, manages freight movements, and can even provide expedited delivery service.

Having warehouses around the world has become increasingly important as consumption patterns shift. In the U.S., the consumer market crashed with the economy in 2008. But an interesting thing happened, Schechter says. Instead of the global market going with it, demand simply shifted. “When the U.S. consumer died the world of personal consumption didn’t die, it just became volatile. It moved around. Europe became the great consumer place and then Australia and Canada.”

As consumer demand moves around the globe, Shipwire can deal with logistics that companies just don’t want to have to bother with—like which warehouses are the best to store their products in and how to deal with non-roman characters in shipping addresses.

“What if only part of the order is available in that warehouse?” Schechter says. “You have to add an amplifier to the power of ten to the kind of complications that can be inserted that the brand doesn’t want to think about and the customer doesn’t care about.”

The company charges its clients on a sliding scale based on the number of products shipped per month, the average number of products per order, and the amount of storage space needed in their warehouses.

So far, the company has raised $15 million—including a 2007 Series A round of $4 million from Meakem Becker Venture Capital, and a $6 million round in 2011 from Meaker, eBay, and Newell Rubbermaid.

Shipwire solves problems for small businesses, but it doesn’t cater exclusively to them. Bigger companies looking to get a product out the door quickly can bring their business to Shipwire too, and may choose to even if they have their own operation. Sometimes new products need to move as quickly as if they were coming from a smaller business with a smaller focus. Or bigger companies who don’t usually deal in manufactured goods can turn to Shipwire to handle the logistics of shipping.

“Look at the product,” Schechter says. “If the product is moving quickly and going across multiple channels and needs to go global very quickly, that’s where Shipwire fits in.”

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  • Skillings

    Outsourcing locally may have its limitations, but US businesses are outsourcing overseas with disastrous consequences in some cases. There are US businesses that use freelance workers to provide services which they then refuse to pay for (www.skillingssucks,com), This is having a detrimental effect on small businesses overseas who are actually going out of business as they cannot afford to provide US businessmen with free services in this way,