Well Made

Laura Behrens Wu, Shippo: Personalizing Shipping – Well Made E31

January 4, 2018 · RSS · Apple Podcasts

Laura Behrens Wu is the CEO and co-founder of Shippo, a platform that's powering ecommerce shipping by simplifying the world of parcel delivery. From getting labels to tracking info, Shippo is a platform that's offering competitive, carrier-agnostic, parcel shipping solutions at any scale.

There is no one-size-fits-all way to ship, but customers' expectations have changed in the last few years, thanks to Amazon. Amazon has shifted the status quo, and now customers to expect free and fast delivery from businesses of all sizes, without compromising the product or process. Building for this speedy future of ecommerce is where Shippo shines, innovating to reduce friction from the time a customer checks out to the time they receive their package.

In this episode, Laura breaks down why shipping dates are pivotal for customers, and how to use shipping to differentiate and grow your brand. Full episode transcript below.

Also mentioned on this episode:

Header photo by Emily Shur for Inc.

Stephan: You're listening to Well Made a podcast from Lumi about the future of ecommerce. I'm your host Stephan Ango. Today on the show we're talking to Laura Behrens Wu. She's the co-founder of Shippo. Laura grew up all over the world in Germany, Ecuador, and China. Today, I'm talking to her from her offices in San Francisco. Shippo, if you don't know, is a shipping platform that helps you get postage and great shipping rates for the packages that you send. Laura started Shippo in 2014 with her co-founder Simon. After selling sustainable handbags online and discovering firsthand how hard it is to ship efficiently. So in a world where you can order from Amazon and receive your package to the next day, it's really important for brands, especially young companies, to rise up to that expectation and offer fast and efficient shipping. That's what Shippo does and that's what we're talking about today. Now, Laura's done some really great talks lately, giving more background about the founding story of Shippo and we've linked to some of those in the show notes. Before this episode, I really wanted to dive deep into some pretty nerdy logistics and shipping topics that we think about all the time at Lumi and I knew that Laura was going to be able to rise to that challenge and she totally delivered, pun slightly intended. Hope you enjoy it. Laura Behrens Wu, welcome to the show.

Laura Behrens Wu: Thanks for having me.

Stephan: I'm going to try and explain what you do and you tell me if this is, if this is correct. You're CEO of Shippo and it's an API mostly that helps companies, brands who are selling things online, get rates and shipping labels and tracking information. And you also provide a web interface where people can log in and create those types of things so that they can ship packages more easily.

Laura: That is pretty much what we do.

Stephan: What else do you say about it?

Laura: We are, as you mentioned, a platform that sits between ecommerce stores and a network of different shipping providers. So we connect to all different shipping providers here in the US, but also internationally. And then we help our customers ecommerce stores compare rates across providers, get shipping labels, get customs forms, if it's an international shipment, get the tracking data and send the tracking data back to the customers. Figure out returns, and then manage the shipments across different providers on a single unified platform. And we try to reduce friction as much as possible so that people who aren't logistics experts are able to offer competitive shipping solutions and meet the demands that customers these days have around shipping.

Stephan: When you mentioned carriers, you guys have really expanded a lot. There's, it looks like when you go to your carrier's page, it's like 30 or 40 different carriers from all around the world.

Laura: Yeah. So this year we spent a lot of time expanding our carrier network. Our goal at some point is to have universal coverage. Shipping providers, there are a lot more shipping providers than people would think. Back then when I did my research around our last round of financing, we were able to find roughly 500,000 different shipping providers and career services worldwide. So that's a step that most people don't know when people think about shipping providers, they think about Fedex, UPS, DHL, but in fact the market is a lot more fragmented. So we've got like regional shipping providers such as Ontrack here in California. We've got courier services like Deliv and Postmates. They're intracity or on demand shipping options such as Uber Rush. What I'm trying to say is there are a lot of different shipping providers out there and now we're also talking about drone delivery or talking about delivery robots. So the market is also innovating and our goal is to have every single shipping option on the platform at some point and help our customers access all of the options. Data will help them ship faster, ship better or ship cheaper to their customers.

Stephan: Yeah, and a lot of these companies have API's. They have ways that you can connect and get information like tracking information or get labels or buy shipping. But they're all different. They're all, each of them has their own API. And so it makes it really complicated if you're trying to integrate multiple different carriers, so what you do really makes that a lot easier.

Laura: Yeah, exactly. When we talk to customers, most of them are using a multi carrier strategy, so most of the ecommerce stores want to work with different shipping providers at the same time to be able to offer different shipping options to their customers or to be able to optimize. What you described, the problem is exactly accurate, so different shipping providers offer different kinds of technologies. There is really no standard or unified system and given that these technologies are so different, it makes sense for us to build an interface in between that connects to all different technologies at the same time to be able to allow our customers to manage multiple different shipping providers. And then to be able to turn these shipping providers on and off however they want. So if they want to add another shipping options, it's not a lengthy integration process, it's just a part of the interface that we're already offering.

Stephan: Now when you said 500,000 different carriers exist, does that include freight as well or is it only parcel and courier?

Laura: Yeah, it includes LTL as well. And so it's like all different shipping providers, but it does not include ocean freight. So it's just land delivery.

Stephan: Break that down. What is LTL? What is a parcel? What is freight? What is courier? Just describe at a high level, what are all those different things are

Laura: For sure. It depends how much you're trying to ship. So let's start with ocean freight. There you typically ship an entire container, at least one container if not multiple containers. And then when the ship gets to the port here in the US from wherever you are sourcing your items, it typically breaks down into freight shipping that is like a truckload or less than a truckload. So LTL means less than a truck load. And from there you unbundle your container and you deliver the items to your warehouse. And in the warehouse you unbundle it even further. So it gets to the individual items and then someone orders from your ecommerce store, whatever item they'd like to purchase, and then you ship the items individually with a parcel to the end customer. So these different shipping options, they're just part of a supply chain and sometimes people don't do ocean freight, they do air delivery if it's something that is smaller and very urgent or higher value. So there is really no one size fits all. It depends on where you're sourcing from, what you're trying to ship. But these are all different options that fit that go along the way of the supply chain.

Stephan: Yeah. And if you're someone at home, typically you're interacting mostly with parcel carriers, like UPS or Fedex or the courier ones are the ones that are inter-city trying to do something same day, right?

Laura: Yeah, exactly. So when you're at home, you're typically getting a postman from one of the better known shipping providers to come to your place and deliver whatever you ordered online. Some people also get less than truckload deliveries if they're ordering furniture or like larger items, then it won't be delivered by UPS or Fedex. It'll be a specialized larger, less than truckload moving company. The interacity providers most people these days interact with them through the on-demand apps. So like ordering food online, you probably have a courier service delivering the food item you ordered in a timely manner to your home.

Stephan: So who are your customers, who's using Shippo these days?

Laura: Yeah, so our customer's are ecommerce stores and also platforms and marketplaces and we are typically working with independent brands selling their items or unique items online either on Shopify, on Etsy, Magento, or building their own homegrown shopping cart systems.

Stephan: What's the benefit to them aside from the API integration that makes it a lot easier. I know you also have the web version where you don't have to connect to the API, you can just log in and create a shipment through that interface.

Laura: Yes. Our goal is really to reduce friction as much as possible. Our customers can integrate the technology, the API if they want to. And the integrating the API allows them to automate the the label creation and the shipping rate comparisons in the background or if they don't have a developer in house and that is very common for smaller mom and pop ecommerce stores, then we don't want them to go through the trouble of finding a freelance developer and hiring one. But we offer a web dashboard that anyone can log into and use that web dashboard to create shipping labels. Either one off or in a batch system. We can get hundreds of labels at the same time. And the benefit for customers is really most of our customers don't enjoy thinking about shipping. It's something that they would like to outsource to a third party. They want a shipping expert to be able to handle that for them. And we want to be that shipping expert for them. So instead of having to worry about integrating and maintaining multiple different shipping technologies or even relationships with the shipping providers, they're able to just connect to us either through the interface or through the API. And we're that layer in between that helps them figure out how to ship best.

Stephan: And so that kind of range in scale, it sounds like you have on one end people who are using Ebay, Etsy, that kind of thing to ship small volumes of things. And then on the higher end what are the biggest customers on your platform doing? Their big ecommerce companies?

Laura: Yeah. So we have bigger ecommerce companies that ship out of their warehouses. Some people have multiple warehouses. That's actually one of my favorite shipping problems to figure out: When people have multiple different warehouses and then some items you get an order for multiple items and there is no warehouse with every single item in one warehouse, but you have to ship different items from different locations and then you have to figure out how to combine them in a way that is most cost effective. So that's a really interesting shipping challenge for people with like multiple warehouses and inventories spread across multiple warehouses.

Stephan: How does Shippo deal with that problem? It's all computed automatically through the API?

Laura: Right now it is not fully automated yet. We're working on that. So we started as a company first for S&B customers and now we're going upstream, so slowly understanding these problems for larger customers and building algorithms to automate that. Right now we work together with the customers to help them figure out how to build an algorithm that makes sense for them in a case-by-case scenario. But yes, the goal is to have business rules in place and that is something that I'm very excited about for the 2018 roadmap to be able to allow our customers to set up business rules. Meaning that if a customer chooses the cheapest, always go with, for example, USPS or if the end customer chooses the fastest option, always go with Fedex. Like being able to set up a couple of these first simple business rules and then going more and more complicated for automation to just help our customers save more time.

Stephan: I have to say that for us at Lumi the biggest thing that we deal with is actually freight shipments. Because we're usually delivering pallets of packaging boxes to our customers and most of the time we're not delivering straight to their office, we're delivering to a warehouse or to a third party logistics firm. I really wish there was Shippo for freight or that you guys go in that direction someday because as complicated as it is for parcel shipments and things that go from warehouses to homes, it's even even more complicated. Even more regional and low tech in the world of freight. And so man, that is a big problem that someday hopefully we'll get into.

Laura: Yeah, at some point. So right now we're very much focused on parcel delivery and the parcel delivery space is large enough and growing given that e commerce is growing so fast, but at some point I would love to be able to move into freight as well and offer a one stop shop for our customers managing inbound shipments and then also outbound shipments. But it's something in the more distant future.

Stephan: I think that is a good strategy because there's so much low hanging fruit already in the parcel world and freight is going to require a whole different strategy, which is actually convincing some of these local carriers. You might have to start building software for them in order for them to even be able to manage their process because a lot of it is very analog right now. So there isn't even an API that you can connect to and integrate yet.

Laura: Yeah, we're seeing that with some shipping providers that are more specialized and more regional. but yes, that is a huge problem. If there is not even an interface for us to connect to, it makes our job a lot more difficult. But what you said about like shipping, I do think that the parcel delivery space, it's at a very interesting inflection point given that e commerce stores- Most ecommerce stores these days are looking for different ways to innovate around their shipping strategy, given that Amazon and Amazon Prime has really taught end customers, online shoppers to expect free and fast shipping. These kinds of expectations are- Well, Amazon can meet them because Amazon, they're spending roughly this holiday season, they're spending roughly 7 billion on shipping in the US only and they're able to do that because they've got very profitable segments such as AWS as part of their business and most other like retail or ecommerce who are out there just can't follow suit. It's interesting to be in the space when people are suddenly looking at shipping very differently. It's no longer just something that happens in the background. It's something that end customers care about. And that's like a perception that changed in the last, I'd say five to 10 years.

Stephan: This is great. There's a couple of stories that you shared on twitter recently that I wanted to dive into. And one of them you already mentioned was this story that came out. I'm not sure if this was the original, but Todd Bishop on GeekWire wrote about this fact that it looks like Amazon is going to be spending $7 billion on shipping this quarter and it's been gradually rising. I mean alongside the fact that Amazon in general as a business is growing, but for context their sales this quarter might be in the range of $150 to $200 billion. So they're spending somewhere in the range of like sometimes up to 10 percent of revenue for the ecommerce business alone on shipping. And like you said, are able to offset that. First of all, they're not a very profitable company currently. So they're like maximizing every dollar. But they also have these other business units that allow them to pour all the profits back into offering everyone free shipping. And I think that the customers that you're talking about, Shippo customers are similar to Lumi customers, they're ecommerce businesses, some of them do ship through Amazon. They use fulfillment by Amazon or sell through Amazon, but most of them also have their own ecommerce store and fulfill from their own warehouse and that more and more creates the expectation that the same level of shipping the same speed, the same price is expected of any ecommerce business. And so it seems like you really have to design your price points and your products from the beginning to be able to be shipped at low costs. Is that something that you advise customers on or how do you guys help people understand that?

Laura: Yeah, that's in my mind, the most exciting part about shipping. So when we started this business, I first looked at shipping as a way for our customers to cut costs, to be able to save more money, to save time. Not trying to figure shipping issues out, but what we then realized is it's actually a way for our to grow their business. It's about cutting costs for sure, but if you have the right shipping options at checkout and you're able to use shipping as a tool to grow your business and to acquire more customers and like to take a step back here. I think the frustrating part for our customers as they found an online shopper who is excited about their product, puts the product into the shopping bag at checkout and then at checkout they realize shipping is too expensive or it does not arrive on time or the shipping options are not stated clear enough and then they decided to close the window and buy somewhere else. It's such a weird lost opportunity because the customer has intended to buy that product. And then what causes the customer to walk away is the shipping option. Like something that should not be a competitive strength of like small and midsize businesses. But Amazon has turned that into a competitive advantage. So our customers are looking to innovate there as well. Anyway, so there is really no one size fits all. So it's very hard to tell our customers you have to offer free shipping in order to convert more customers or you have to do this or that. Like it really depends on what kinds of items our customers are selling. So normally if you offer multiple different options at checkout, you're able to meet more indifferent customer preferences, meaning you can have a free shipping option that takes a little longer to arrive then some mid level of shipping option and then also offer an option that is like super fast, maybe overnight delivery but it costs, but it's fairly expensive. That way a customer can opt into waiting longer but not paying for it and another customer with a different set of preferences, they can opt into paying $25 but getting it tomorrow. And that's especially important if the getting something tomorrow option is especially important if you're selling products that are easily being used as gift options. So something that people need in a predictable manner. And I think that's the other point, showing customers exactly when it'll get there. So not just saying this will take two days to ship, but I'm saying it'll get there by Friday, December 15th. So being very specific about delivery times and then a lot of people forget to mention how long it'll take for the item to ship out. So if it'll take more than a day for the item to ship out, that's something you should mention on the checkout page as well. So, it's two day deliveries, but it'll take an extra day for the item to leave the warehouse. And then the customer expectation does not stop there. The customers are expecting the ecommerce store to keep them updated about what the tracking status is. What's going on with the package and these are great options to make sure that customers don't write in and don't take up customer support time, but for you to proactively send out tracking updates around, it's on its way. It's reached this facility. It's out for delivery today. That's a way for the ecommerce store to give the end customer peace of mind and to make sure that customer support is not constantly dealing with shipping questions. Then last but not least, customers are also always looking for what the return options are. So if there will be free returns and if the return label will be in the box and I think that's a great way to increase customer loyalty even if the item did not fit or was not what they expected. If you make returns as smooth as possible, the customer is more likely to come back and try something else.

Stephan: It's fascinating. I'd be curious to know if you have much data around what the conversion rates are or the differences if you provide free shipping or not. I'm assuming like you said, it's very case by case because it depends completely on the type of product, but there's this misconception that there is such a thing as free shipping, but there isn't. Someone pays for the free shipping. It's either the customer or the business. Has taken a loss or something is happening to provide you free shipping, so you would think that people could be maybe a little more rational about that, but people make very emotional decisions when they're shopping in that extra $10 or $20 or $5 might make them decide to buy something or not to buy something. If all it costs for you to offer free shipping as an extra $10, is it okay to put that in the price of the product and then it looks like it's free shipping and that is better. Do you know what I'm saying?

Laura: Yeah. It's a great question and unfortunately there is really no one size fits all. To give you an example, let's say you're selling postcards, a postcard is maybe a dollar and then if you bake, shipping into the postcard costs, the postcard would likely be, I don't know, $2 50. And then it seems like you're selling really expensive postcards, so like baking the shipping costs into your postcard costs would probably not increase your conversion rates because people would think you're postcard is overpriced, but if you're selling luxury handbags and the handbag is $2,000 and then you're adding $20 in there, it's easy to hide the 20. I do think that it sounds very irrational, but if you're already spending $2,000 on a handbag, you would probably not want to spend another or see another $20 at checkout for shipping because you're expecting shipping to be covered in such an expensive purchase already.

Stephan: When people are trying to figure this out for their business, do you encourage them to test different things out or how do you. How do you find the right sweet spot between what you can amortize and what you have to charge the customer?

Laura: Yes, and that is where I would love next year to be able to offer features that help our customers test these different options in more flexible and convenient way. The easiest way to do this is to offer multiple different options at checkout so that customers themselves can opt into whatever preference they have. And what we've heard anecdotally from our customers is that if they only offer free shipping, shipping typically has to take a little longer and customers have started complaining. But by offering free shipping plus an auction that customers need to pay for and that's faster. And then people still decide to opt into free shipping. They're accepting that it'll take a little longer and there are fewer customer complaints. So it's an interesting like psychology thing that's going on with the customers. You just want to give them more choices. So it's your own choice. If it takes a day longer, it's not something that the ecommerce store is forcing upon them. Then another interesting experiment we heard about as one of our customers started offering free shipping and then conversion rates went down and it was very surprising for us. And they interviewed a couple of their customers and what they then realized was because they didn't tell the customer how long it would take for the item to arrive, customers start associated free shipping with something that'll take longer and the customer was selling wedding gifts or items that you would typically use at your wedding. And they wanted a very reliable time for this item to arrive and free shipping just sounded too risky to them. So our learning from there was whatever you say around shipping, you always have to tell the customer how long it takes for the item to be there.

Stephan: Yeah. I think that is another aspect of Amazon that is maybe under appreciated, which is when you check out, everyone's used to seeing the options there which provide an exact date at which you're going to receive that product. And that is actually, I mean, it's amazing that Amazon can do it at that scale with so many different warehouses, shipping different things from different locations, but it's something that through your API people can do or if they're using Shopify or some of these other platforms, is it possible to do that so that the customer actually sees the date?

Laura: Yeah, it is possible. So we have the data information is one of our end points. So you're able to show that to your customers at checkout as well. It's also available through our Shopify integration.

Stephan: Yeah. Because it also has to take into account like you said, how many days it takes you to prepare that if there's any sort of level of customization or something that needs to happen before the product is ready to ship, that might add a day or five days or two weeks. And so predicting the date of arrival can be pretty challenging. But it seems like Shopify and other ecommerce platforms are really trying to help their sellers reduce the friction as well. I've noticed that Shopify lately will save your preferences, including shipping information and payment information across all different Shopify stores, not just the one that you go to. So when you get to the Shopify checkout, oftentimes if you've used a completely different ecommerce business to buy something previously, you already have some of that saved information there, which helps reduce that friction to some extent.

Laura: Yeah. So you were talking about the online buyer perspective, right?

Stephan: Exactly. Yeah.

Laura: That's awesome. Yeah. It's like pre-filling your shipping address for example, that just makes life for the buyer so much easier not having to type that in every single time. Understanding just shipping preferences, it probably is something that's fairly consistent. If there is a willingness to pay or willingness to wait longer. I have not seen that feature in Shopify myself yet. But if they're doing that already, that's a really awesome first step into making sure that first of all they are ecommerce sites are able to convert better, but then the buyer is on these ecommerce sites are just more satisfied with the entire experience because it's just smoother and less friction.

Stephan: I think Shopify offers it as an option that you can select as a store owner to activate that and allow your customers to reuse information across different Shopify sites. But it does introduce this sort of trade off that exists from the store's perspective. And I'm curious your thought on it because you offer an API which is, people can build any experience they want on top of that. They can build their own checkout system completely from scratch and make it look very personalized. So a lot of the ecommerce businesses that people are familiar with, the Warby Parker's or Casper's and stuff like that. They've gone down the route of creating something very custom that preserves the look and feel of the brand throughout the whole experience. If you're using Shopify, you can't do quite as much in that direction and so you're kind of left in this moment of trade-off of do you want to maintain that brand experience all the way throughout the checkout process or do you want to make things a little bit easier for your customers and allow them to have they're saved information in there and that seems like a really difficult choice. What's your take on that?

Laura: Yeah, so if we like I often get the question: Why ecommerce stores don't just all sell on Amazon because it's so much more convenient. Amazon has a big database. People go there to find things and then they could use Fulfilled by Amazon to get it out and they wouldn't even use Shippo anymore. So I normally get that question from potential investors and I think what most of our customers are really good at is building their own brand and building, like owning the customer experience, making sure that they are very well differentiated from any other ecommerce store out there. Not just in terms of the products they're selling, but also in terms of the story they're telling. The experience, the messaging that they have online. The lifestyle they tried to convey. They do that across different channels on their own website, but also on Instagram, on Twitter, on Facebook. Just telling that story consistently and building a real emotional connection with the end customer and that's how they stand out in a world where Amazon is just competing around price and like having the biggest database of I'd say more undifferentiated goods and so tying that back to a question around whether it's important to have an online presence that is more differentiated. I would say the trade off here is if you're investing in an online experience and you're able to afford investing in that, it's not just the website that you can differentiate in. It's also important to have all of the other channels. All of the other social media channels and be present there. So if you want to offer an experience that is built on Shopify, there are a lot of other channels that you can use to still stand out and you don't have to invest in the in house development resources to build everything yourself and for a lot of, especially smaller ecommerce stores or ecommerce stores just getting started, I would say that's the perfect option and they should just focus on making a very unique and product and building a great brand and telling a great story. It's good for them that the different infrastructure pieces are already readily available, that they don't have to worry about that. As the company grows, I think you can start replacing some of these prebuilt infrastructure pieces with an experience that you've built in house. But for companies just getting started, I think the existing components provided by Shopify just as an example, they're very well made and great for people getting started.

Stephan: It's also interesting that there's some other things that you can do to reduce friction. I know that actually Shopify uses the Google API to actually autofill addresses, so when you're starting to type an address in a checkout, there's a really good Google API that lets you auto fill that really quickly so that you only start typing in one box and then the zip code and state and country and all that kind of stuff all fills in. Each little piece of friction like that, if you can remove it or simplify it, that really helps. Is that something that you guys have considered offering an API like that or other API's that would help people who want to build really custom checkout systems.

Laura: So I completely agree that these small items like wherever you reduce friction, it adds up and it's not just about making it easier for the customer. It's also like if you pre-fill addresses it reduces risks around failed deliveries because the address was incorrect or the address was invalid. So these are like pre-filling addresses and then doing an automatic address validation is something that we do as well. It's mostly making sure that like when you order something online, you don't have to deal with issues around calling up the shipping provider and like correcting your address later on. Or paying for extra surcharges if there was a failed delivery attempt and they have to try again. The API that we built, we make sure that people can use it and build whatever checkout experience they want and that filling out addresses automatically or address validation or some of our customers start shipping internationally. So we have global address validation in there as well that we think through all of these potential pitfalls and try to like foresee them. Because as I mentioned before we don't expect our customers to be shipping experts. We want to have thought through all of these potential issues in advance and offer them the right tools to be able to deal with them before they even happen.

Stephan: It seems like there's a big opportunity out there to create some sort of identity that people can use at checkout. Because there's a real explosion of ecommerce companies and I think that I don't foresee Amazon taking over 100 percent of the market. I think you're right that there's still going to be a lot of people who want to create something that's more differentiated, more special than just the default Amazon checkout or Amazon store experience. And have you guys ever considered doing something like that where you would try to remember people's address settings or billing settings across different checkout?

Laura: Yeah. So what we have brainstormed internally quite a lot about is our goal is to help SMB's be as competitive as Amazon in terms of shipping and how do we make sure that they're actually able to use shipping to grow their businesses and convert more customers online? And the one idea we had was, it would be great if customers going to an ecommerce store and maybe seeing a little Shippo logo at check-out knowing that Shippo is a brand that will take care of your thing. Like Amazon Prime or Verisign. It's a trustworthy brand and we'll take care of your shipping in a way that makes sense. So we would like to eventually have a touch point or a brand awareness with the end customer as well. And that would include being able to remember shipping preferences. Offering the end customer an app or something similar to that where all of their different packages that are in transit are aggregated and shown. Right now we're focused on the seller and the seller only. So that's our first problem that we're trying to solve. Would love to be able to move into the buyer experience at some point as well. But it would only make sense if we can find a real link between how offering a buyer experience will help our sellers convert more customers and grow faster.

Stephan: Yeah, I mean people are pretty used to the idea of logging in with Facebook today for something and it'll automatically authenticate them, bring them their email address and their avatar or into whatever system. Facebook hasn't gone in this direction. I know that Amazon has an API that allows you to check out at. Kickstarter used to use it for their checkout system where you can pull in your addresses, but it's very Amazon branded and so it seems like there's room for something that feels more neutral that is helping all these different ecommerce businesses solve that friction problem.

Laura: Yeah, and I think that's the important part, being neutral. Neutral on the shipping provider side and on the customer side. So we're very clear about being carrier agnostic as well, so we never push Fedex or UPS or whatever shipping option on our sellers. On the carrier side there is also no one size fits all. So whatever our customers want, we'll show them the right options for them. And then on the seller side, like being platform agnostic, so not just being an option for Shopify or for Ebay sellers, but being able to provide the same kind of shipping back end to ecommerce sellers no matter how they've built their ecommerce stores.

Stephan: Another thing that we haven't talked about is international. When I started my first business we started off with Kickstarter and the first thing that we started shipping to 130 different countries. We opened it up from the beginning. For me, I was actually born and raised in France and so it was important to me that my French friends could get the stuff that we were making. It was really cool to be able to do that. And I was totally amazed by the fact that it worked pretty well. We had some issues here and there, but for the most part it's kind of amazing that you can start a business and start shipping stuff to people all over the world. And if they can find you, they can buy from you. Is that something that you advise to people or how does Shippo help with that?

Laura: That's a great point because I do think that ecommerce does not know any geographical boundaries as you said, like when you find something online, when you find an item that you love, like you can't really tell if that store is based in France, in Germany, in the US, in China and you don't really care about that either. You just found something you really like and you would like that item to be able to arrive at your doorstep in a reasonable amount of time and you don't want to pay too much for shipping. The unfortunate part here is that a lot of the small mid sized ecommerce stores and even larger ecommerce stores like international shipping comes with having to fill out customs documents. Many times you have to work with a shipping provider that then offers end to end tracking as well. So as an example, USPS for instance, if you use them to ship internationally, the tracking status stops tracking as soon as it leaves the US. So to offer a smooth and a risk free shipping experience. Most of our customers, they then decide to use DHL or Fedex or one of those like international shipping providers to take care of their international shipments. Then many times our customers then also have to deal with import taxes and figuring out how to calculate that in advance and if they're going to pay for it and bake it into the item price or if it's something that they're then charging the customers later on and how to communicate that to the customer. So it's not like an unexpected fee that is coming afterwards. If it's too unexpected or surprising, it might make the customer angry because they didn't sign up for that. So it comes with a set of additional challenges. Oh, and not to forget international returns. How to do that in a cost effective way is another problem that our customers are often dealing with. So I would say, our customers typically when they do international shipping, given that these are S&B customers, they mostly either open up to like different regions, one by one or meaning that they start to ship to North America. All of North America, Canada and the US. Or they start shipping to Europe and Europe only. Then they try to do more targeted mortgage marketing in those areas. Driving demand specifically from these countries. We do have customers that just offer international shipping anywhere and then they rely on inbound traffic for people to find them. Typically most of their volume is in the US, but sometimes they get an odd order from like an international customer as well.

Stephan: I want to come back to some of those things because I want to go to this link that you shared recently. It was a TechCrunch story titled Predicting Success in Startup Consumer (https://techcrunch.com/2017/11/26/predicting-success-in-startup-consumer-brands/) brands by Matt Heiman. You summarized it in a very friendly emoji filled tweet, which basically summarize the five kind of big points that he was making in the piece. So he's talking about all the brands that we've mentioned already like the Warby Parkers, Away, Casper, Glossier. These types of brands that people are looking at that have been called vertical commerce brands. VCB's. So do you want to describe roughly the five points that you summarized?

Laura: Yes, yes. So, that TechCrunch article, it's a really awesome one. It talks about if there are a common set of factors that can help us predict whether a startups can be- Consumer brand startups can be successful and it starts with giving examples around whether this is a product that is difficult to purchase and you can make it easier to purchase or cheaper to purchase by moving it online. So the examples that are given in this article are it's really difficult to purchase mattresses and there are different options. You have to go to a mattress store that is typically outside of the city. People don't understand a lot about mattresses. So like there was a great opportunity for brands like Casper, Tuft & Needle or Purple to move that online. Same with buying contact lenses. You have to go to doctor to get a prescription. These are difficult items to buy.

Stephan: Reducing friction. Again, it's always about that.

Laura: Yes and by moving it online and by making it just a lot more accessible and also simple to purchase, that's the opportunity there. And then the next factor that's mentioned in the article is that we're looking at items that are either a high order value. So a mattress is an expensive item or a repeat purchase. So back to the contact lens example, you're going to reorder that every half a year or year and you're doing that pretty consistently. And other examples here are like StitchFix for instance, where it's a monthly subscription, so items that are going to be delivered to your doorstep every single month because it's a subscription box service. Then he also talks about how the items you are selling, have to have the margins that support a direct to consumer model. Then the point that I'm most excited about is the ability to build an emotional connection of brand awareness with a customer. Like Glossier, for instance has started out first as a blog and they have an amazing Instagram presence and people follow Glossier even if they're not looking to buy makeup every single day. But they get inspired by the pictures posted on there, the lifestyle being conveyed in those Instagram posts and people get really excited about buying from Glossier. They get so excited that they also Tweet and Instagram their own glossier products and create some sort of vitality around the product. And I don't think people ever get that excited when they buy something from Amazon. You would not Instagram your Amazon purchase unless you're getting like a huge box with only a single tiny product in there and you Instagram it to ridicule Amazon. Anyway, and then last but not least, you have to have the ability to ship these products. So the example in here is the innovation that Casper made around selling mattresses online also includes being able to ship mattresses in a box a carrier like Fedex can move. So they are able to roll them up and ship them in a very like, dense and small box.

Stephan: Yeah. And I mean that's a huge one from the perspective of how your shipping rates end up costing because, well, maybe something that you can mention is cubic pricing. That's the thing that's come about in the past few years that a lot of the carriers are pushing. Do you want to explain what that is? That's kind of related to can you ship it easily?

Laura: It's a good point. Cubic pricing, that's one thing that's been an interesting change recently and the question is really how do you calculate your shipping rates? You calculate your shipping rates just by size or by weight? Or do you use a combination for that? And most of our customers, they have not worked with cubic rates before because it's not the most intuitive way to calculate your shipping. Some of them missed out on saving opportunities because they don't know that it falls into a certain cubic tier and they've been calculating it differently and overpaying. So it's also an optimization opportunity that we take care of for them either both in the API and in the dashboard.

Stephan: Yeah. So in this article from TechCrunch, there's these five high level principles that are trying to determine can we sort of predict whether this company is going to have long term longevity. Like you said the repeat purchases or the high value, those things are important because if you don't have that as a business it's going to be hard for you to retain customers or make enough money to be viable as a business. But when we talk about things like the margins that are necessary, if you are offering free shipping, that's going to cut into your margin. So all of these things are kind of intertwined. It seems like a lot of the businesses that have found really good success. You mentioned Stitch Fix is another great example where they built a whole business model around the two way shipments. So they send a box to the customer, the customer picks out two or three pieces of clothing and then sends back the rest. So the whole business model is completely integrated into the packaging that's needed to make that round trip. The shipping has been figured out because that's all "free shipping and free returns'' and the margins that have been built into the clothing accommodate the cost of shipping and packaging that are involved. So like the whole thing has been designed from scratch with the ecommerce approach in mind. And that's a really interesting thing that it seems like there's so many other product categories that haven't really gone down that evolution yet.

Laura: I would agree. And then the other interesting part here is that it's easier than ever to be stronger given that people are more and more accustomed to buying stuff online. You don't have to have a brick and mortar presence anymore. Having a brick and mortar presence is fairly expensive. With very low initial cost, you can get started easily on the Internet. Most of the infrastructure pieces are readily available. You can connect a shopping cart system with an inventory management system with a 3PL, all of it just online without having to leave your home. Without having to build any of that yourself or invest in resources to build that.

Stephan: You mentioned the point about the emotional connection and I think it's really interesting because it ties into what you do as an API as well, which is I think all the really successful ecommerce brands try to find at each touch point an opportunity to do something that's a little bit more personal for the customer. And in your case that might be your shipping. Your shipment has left or your packages arriving. Those are a lot of touch points that through Shippo you have an opportunity to create a little bit more emotional connection. Can you think of examples of companies that do a really good job with that?

Laura: Yes. So I have one of my favorite examples, a Shippo customer, they're called Vnyl and they ship subscription boxes of records. So vinyl records and what they do with the tracking statuses, they know when the record box has arrived and then once it has arrived, they also populate all of the songs into your Spotify account. I think there are a lot of these smaller, cool things that you can do. It's not just about sending tracking updates. You can send more personalized tracking updates. You can send a survey afterwards, you know when the package has gotten there and then you can send a survey to make sure that people liked it. Or you can send very specific, follow on email communication, maybe even recommend items that other people have bought together with this one. As another example, some people send certain devices that they only activate as soon as they know that the tracking status says it's been received.

Stephan: Yeah. That's fascinating. Do you know that platform If This Than That? There's another one that's more focused around businesses called Zapier. Actually does Shippo connect with Zapier?

Laura: We don't right now.

Stephan: That would be cool because you could really start to connect things together where you could take your- You know, the Spotify example is really interesting because in theory you could do that all automatically in a pretty easy way with some different plug and play tools, where you could take: Okay, we know that this customer has received the product, so when that moment occurs, send them a message, go create a Spotify playlist and include that in the email or something like that. You can start to connect these disparate different systems and create something that's really personalized that's not just like, hey, you got it, please share it on social media or something. That's become a little bit boring at this point.

Laura: Yeah, agreed. So we give our customers tracking updates in a proactive way and meaning- So to take a step back, in the API you can either pull for information, so like pinging our API to get information back or we push information from the API to you. And with tracking updates, we push that information to you letting the customer know, letting the ecommerce store know that now is the time to send a tracking update so it can get done in a very efficient and timely manner.

Stephan: Another aspect of can you ship it is, I also think of Warby Parker is a great example of this. They created that sample pack where you can get that for free, do the home try on before you buy. And that's a completely free experience that Warby Parker has done the math on that turns out to be worth it because if they send that, a certain percentage of people will convert. But some of the things that they did to design that have a lot to do with the shipping rates that they can get. For example, first class shipping from USPS has a specific rate that has a really good value, but it's only available under 13 ounces or something like that. I forget what the actual number is, but are there other tricks like that that you see your customers taking advantage of that help them create experiences that are special by taking advantage of certain class shipping rates? Do you know what I mean?

Laura: That is a good question. One trick that I see some of our customers doing is around transit times and I guess that is tied to different classes of shipping rates. So they're able to look at the data from actual transit times and versus predicted transit times. And then as an example, let's say from here to San Jose, priority mail says it takes, their prediction is always, I think three to five days. But if we can look at data and say from here to San Jose, it actually 99 percent of the time always takes just one day. Instead of using the overnight shipping option to reach one to make it arrive within a day. You can also use the priority shipping option and we're fairly certain it'll arrive within a day. So these are some other optimization opportunities in terms of transit times and looking at just enough historic data that our customers have been looking at and asking us to build out for them to like optimize and save more money.

Stephan: Are you familiar with Lob? Do they use Shippo.

Laura: Yeah, I know them well. They don't use Shippo. They are taking care of the direct mailing component. I think, I don't remember that stat very well. So I'm friends with Leore, their CEO. I think he said one in seven Americans has received a direct mailer from Lob, in the past already. They've been growing very fast.

Stephan: Lob.com. Yeah, they are similarly an API that allows you to send postcards, send letters via API, which is really, it's so powerful. And when I was mentioning If This And That and Zapier, which are both kind of tools that help you connect different things together, it's almost overwhelming how many different things you can connect to each other now that we have this huge box of Lego bricks basically of things that you can do to create really unique experiences. And I feel like that's an area that's really under utilized at the moment. Now that we have so many of these different API's that let you do things. Connecting them in weird and interesting ways is a big opportunity. I feel like Shippo is a big part of that.

Laura: I do think that shipping updates and tying, like helping customers interact more with the ecommerce experience while the package is in transit is a big opportunity because the customer is at home, is excited about receiving their item and instead of getting bored or forgetting about having purchased something online, it's a great time frame to engage with the customer, to get them excited. To make sure that gets top of mind for them that something’s in the mail coming to their home.

Stephan: Yeah. So as we wrap I wanted to say if people want to know more about Shippo, they should definitely go take a look at the recent talk that you did at Y Combinator's female founders conference, which I thought you did an incredible job. That was a really good one. And you've done a lot of interviews which we'll link to in the show notes. Before we wrap up, I was curious about something. I noticed that you share very often photos from bookstores. I'm curious if that's just a hobby of yours. What are the, what are some books that you've been reading lately or are you just taking photos of bookstores? Because they are beautiful.

Laura: Bookstores are kind of my happy place. So one of the other issues I have with Amazon is the paradox of choice. I normally just go on Amazon knowing exactly what I want, but it's not great for discovering new products. And that's what I love bookstores for. It's curated you go in and it says best fiction books of 2017 or best nonfiction books and they have curated there with a lot of times small handwritten cards. The best liked books or whatever the store owner has put on display and it's just so much fun to go in there and spend some time reading or like looking at the different options. Just opening up a book and reading a couple of pages and then leaving with books that you normally wouldn't have found on Amazon because you didn't really know what to look for. And I think my favorite book this year has been Shoe Dog. I think it's written by Phil Knight and it's a book about how Nike got started. Building their now a very well known and very successful athletic clothing company. But it talks about their humble origins. It talks about starting a business and then almost failing so many times. And it's crazy to think about that because now you look at Nike as a global brand. It's very well known. I think it's important to keep in mind that all of these very successful companies and business people, they all started like everyone else. They were dealing with failure, a lot of failure and people don't talk about it. They only look at their success now, but they've overcome a lot of these challenges to be where they are today. And the other fun part I like in there is that it talks about building a startup in a time where the Internet wasn't existent yet, so like he would write letters to his Japanese counterparts which would take three weeks to get there and another three weeks for him to get a response. It's just crazy in today's world where we can send an email, even track the email, know if it's been open by our BD partners or not, and then immediately expect a response. So I really liked the entire story of just dealing with failure many times and then dealing with business relationships in different cultures and then his overall business philosophy.

Stephan: That's awesome. I haven't read that one yet. I'm going to have to pick it up. Nike is obviously a pretty incredible brand. It's probably like in the top three of all the logos that if you ask people around the world, everyone recognizes that logo.

Laura: He also talks about how he picked the name and the logo, how it happened by pure chance. Yeah, I don't want to take anything away, but it's a very fun read, especially because it's the logo and the brand is universally present today and it talks about it just from the super early days.

Stephan: I'll share one book that I just finished reading over the weekend that I devoured, which was, I don't know if you've read this: The Three Body Problem.

Laura: Oh yes. Did you read the first one or all three?

Stephan: I've only read the first one, but I'm flying to Japan this week and I've never been there before and I've got a long flight and so I've got the other two now. I'm hooked. I got to read the next two.

Laura: That's very high on my list too. I loved reading all three books. So much fun.

Stephan: It's a Chinese author, a science fiction story. It was written recently in the past, I think three or four years, but it's very much about some of the current scientific, science fiction challenges that people are thinking about around- I don't want to spoil too much, but about I think intelligence in general in the universe and what that means for humanity. It's actually when I was looking up the wikipedia page about it, Obama had a really good quote about it. He was saying that he read it while he was president and said that it made his problems with the Congress feel really petty in the grand scheme of things. Yeah. Anything else that we should cover before we wrap up? If people want to find out more about Shippo and about you, what should they do?

Laura: So I'm fairly active on twitter, so if you like bad puns, shipping related tweets, and an occasional tweet about my cat, you should for sure follow me on twitter.

Stephan: That's just your full name. We'll put that in the show notes. Laura Behrens Wu @ Twitter and then Shippo is goshippo.com. You can sign up, find out more about it. You can just sign up for free and try the dashboard. Is that right?

Laura: Yeah, it's pay as you go. You don't have to commit to anything. And that's because a lot of our ecommerce stores are just getting started at the beginning, they can't really predict how much they're going to ship. So pay as you go as a great way for people to just start very easily and then they can ramp up and eventually switch to a plan if they have a more predictable shipping volume.

Stephan: If you're sending a package to your mom for Christmas, you can use Shippo. You don't have to be a business. Whatever you're doing, it's pretty straightforward. It's great. You can print a label on your home printer. Cool. Well thank you so much. It was great talking to you. Hopefully we have you again. I have so much more to ask you about. Shipping is something we think about a lot over here, so have a lot more questions.

Laura: I really appreciate being on the show, thank you.

Stephan: Talk to you soon. Thanks for listening. If you enjoyed the show, if you got something useful out of it, I would love to hear what that was. Consider writing a short review. It could be just a sentence long by going to iTunes and searching for Well Made. I want to hear it all. I want to hear good, bad. I want to hear your constructive criticisms. I am just trying to make this show as useful as possible for you. So tell us what you think that is the very best way that you can support the show. Thanks and see you next time.

You can find this and all future episodes on iTunes, Google Play, and here on the Lumi blog. This episode was edited by Evan Goodchild.

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