The future of retail commerce is slowly but surely shifting to online. Walk around any city, and you’ll notice the impact of eCommerce on traditional retail. Stores are closing at a record pace. Entire malls are being abandoned. Long-standing retail chains that had weathered severe recessions are shuttering. The U.S. economy is booming and overall retail sales continue to climb, and yet household names like Sports Authority, Payless Shoe Source, Radio Shack and The Limited have all filed for bankruptcy, and other retailing icons like Macy’s are struggling mightily.
Replacing traditional retail is Amazon plus a host of new eCommerce companies. In fact, many new retailers now typically start online and often forgo a traditional physical store. There are examples of these new successful retailers in almost every sector, such as Wayfair for furniture and home goods, Dollar Shave Club for shaving, Casper for mattresses, Warby Parker for glasses, Zappos for shoes, and Bonobos/Trunk Club for Men’s clothing. In the rare occasion these new brands do have a physical presence, it is to drive traffic to their online stores. The American dream of opening your own retail store has morphed into opening your own on-line store.
Fortunately for those starting a retail or consumer products business, it has never been easier to launch. In less than 30 minutes, you can set up an online store through companies like Shopify or BigCommerce. Once set up, most online merchants market their products via multiple outlets including Amazon, eBay, Etsy and their own web-site.
While marketing and selling online have become much easier, small and medium sized merchants are still faced with the daunting task of meeting the delivery demands of consumers that have been trained by Amazon to expect 1-day or 2-day shipping. Merchants are faced with the time-consuming and often frustrating responsibility of storing, packing and shipping their own orders. In many cases, this responsibility for inventory management and fulfillment has become the biggest constraint for merchants, as well as a massive risk to their business.
Enter ShipBob. ShipBob takes over the entire fulfillment process, including the challenges of storing, packaging and shipping out merchandise. ShipBob manages its own warehouses in major cities, and keeps accurate inventory levels across all marketing channels. Maintaining these precise inventory totals allows merchants to avoid costly stock-outs. ShipBob also helps merchants provide for fast and cost-effective shipping by systematically distributing inventory across ShipBob’s warehouses in New York, Los Angeles, Chicago and San Francisco. ShipBob uses historical data to predict the geographical dispersion of customer orders.
Prior to ShipBob, most small and medium-sized merchants were stuck doing the fulfillment by hand themselves, as they did not have the scale to economically outsource fulfillment.
For SMBs, ShipBob is even superior to the fulfillment service offered by Amazon, creatively called Fulfillment by Amazon. Firstly, Amazon ships everything out in an Amazon box, even if the consumer purchased the item through a non-Amazon source. For many merchants, using a branded box is often an important part of developing a brand and fostering loyalty. Second, during holiday seasons, Amazon’s warehouses become so space constrained that they literally have stopped allowing certain SMBs to send in new inventory.
The idea for ShipBob was born from the founders Dhruv Saxena and Divey Gulati, who lived this fulfillment pain in their previous eCommerce business.
Both Dhruv and Divey are immigrants who came to U.S. for undergraduate degrees. Dhruv at Purdue University and Divey at University of Illinois. We can only hope that Dhruv and Divey will someday be on the list of notable alumni such as University of Illinois alumni Marc Andreessen of Netscape, Steve Chen and Jawed Karim co-founders of YouTube, Max Levchin at PayPal, and Purdue graduate Keith Krach, founder of DocuSign.
Why is the eCommerce fulfillment market interesting to us? This market is huge and growing quickly. In 2016, online retail sales approached $400B, growing greater than 15% YoY. Shipping and fulfillment are estimated to be at least 10% of eCommerce costs. Shopify itself has over 350,000 online stores that are utilizing its software to sell on the web, and the majority are SMBs.
Hyde Park Venture Partners is extremely proud of ShipBob’s co-founders, Dhruv and Divey. Dhruv and Divey have guided ShipBob to achieve spectacular growth, and we are excited that Bain Capital Ventures (BCV) has led a $17.5M Series B financing round. BCV has significant experience in both eCommerce and logistics. BCV was an investor in Jet.com, acquired by Walmart for $3.3B, and also an investor in Kiva Systems which makes robotic fulfillment systems and was acquired by Amazon for $775M. Ajay Agarwal is joining the board of ShipBob.
This financing is a fortunate case of déjà vu for our fund Hyde Park Venture Partners. It was only 8 months ago that Ajay and Bain led the subsequent round of another logistics company in our portfolio, FourKites.
Prior to us leading the Series A, ShipBob had gone through Y Combinator, which has helped foster companies like DropBox, AirBnB and Stripe.
ShipBob helps other entrepreneurs realize their dreams
When I walk through the ShipBob warehouses, I see rows of products that represents someone’s dream: the fitness instructor who created a new energy bar; university students who designed a digitally connected desk elliptical; two lawyers selling collectible baseball cards; a graphic designer’s magical pins.
We are excited to continue to work with Dhruv, Divey and the ShipBob team, as they help other entrepreneurs achieve freedom and independence from the headaches of fulfillment.