On today’s episode, Kunle is joined by Dhruv Saxena, co-founder and CEO of ShipBob, a market-leading warehouse management that provides warehouses as a service, or 3PL to largely Shopify, BigCommerce, and direct-to-consumer eCommerce space.
Experimenting with side projects such as eCommerce startup while being a full-time software engineer, Dhruv, with his business partner and friend, Divey had to endure long lines at post offices during lunch breaks to mail customers’ orders. Faced with the difficulty in mailing orders and being too small a business for 3PLs, Dhruv utilized his knowledge as a software engineer and started working on the automation of mailing their products which birthed the idea of ShipBob.
Building ShipBob from the ground and starting with a 10,000-square feet warehouse, Dhruv shares ShipBob’s aim to help small local eCommerce businesses access ShipBob’s network and wide-range fulfillment services. Being part SaaS and part warehouse, he offers new innovations such as Merchant Plus, a software that small businesses can use to manage their own warehouse while being able to access ShipBob’s network.
This episode is especially inspiring as you’d hear Kunle and Dhruv talk about how eCommerce businesses are doing despite facing macroeconomic headwinds. You will also get to learn about the early years of ShipBob, their work culture, and how customers and merchants were always at the forefront in making the decisions and direction for ShipBob. Take advantage of the golden nuggets dropped in this episode, especially if you’re a small business owner looking to level up your logistics.
Here is a summary of some of the most important points made:
On today’s interview, Kunle and Dhruv discuss:
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On this episode, we talk about eCommerce tech, supply chain, warehouses, and real estate. It’s a great episode you do not want to miss.
Welcome to the 2X eCommerce podcast show. This is the podcast dedicated to digital commerce insights for retail and eCommerce teams. Each week, on this podcast, we interview a commerce expert, a founder of a direct-to-consumer native brand, or a representative of a best-in-class commerce SaaS product.
We give them a tight remit to give you ideas you can test right away on your brand or your stores so you can improve growth metrics such as your conversions, your average order value, repeat customers, your audience size, and ultimately your gross merchant value or sales. We are here to help you sell more sustainably.
This episode is an interview I had with the Co-founder and the CEO of ShipBob, Dhruv Saxena. They were sponsors of this podcast. They’re market-leading warehouse management, warehouses as a service, or 3PL to largely Shopify, BigCommerce, and direct-to-consumer eCommerce space. I quizzed him on his backstory, his thoughts on logistics, his thoughts on an ideal eCommerce stack both for domestic and international shipments, and what in time means.
He tells me about their enterprise offering, which I didn’t know about. Big companies such as ShipBob big have privy or access to so many eCommerce accounts. I wanted to gauge a temperature as to how eCommerce businesses are doing given all of the macroeconomic headwinds. If you’re looking to find out more about supply chain, warehousing, the story of ShipBob, and what to do moving forward in Q4, this is a great episode for you. I would leave you to have this great read to the episode.
I haven’t made this announcement on the podcast yet but our Commerce Accel conference is kicking off on the 22nd and 23rd of September 2022. Now’s the time to go and get your tickets. There are free tickets and premium tickets. Free tickets allows you to attend completely free on both days. You get to watch the sessions live. As usual, we have a very strong lineup to help you deliver strong Q4 Black Friday and Cyber Monday results for your team. There are about ten content streams. It’s amazing.
Go over to CommerceAccel.com. If you’re interested in either speaking or partnering, reach out to our team, reach out to me directly and I will point you in the right direction. The partnership’s email is Partners@2XEcommerce.com. You could reach out to me directly at Kunle@2XEcommerce.com to discuss potential speaker or partnership opportunities. I shall let you catch up with this episode I had with Dhruv Saxena, Co-founder, and CEO of ShipBob.
Dhruv, welcome to the 2X eCommerce podcast show. It’s been a long time coming. We’re friends with ShipBob. I’m excited to have you on the 2X eCommerce podcast.
Thank you so much for having me. I’m excited about our conversation.
In the D2C Shopify space, you cannot talk about 3PL without the mention of ShipBob. It’s very synonymous with fulfillment, 3PL, or third-party logistics. You’re a dominant brand in the direct-to-consumer community. I’d like to know the people behind ShipBob. Who’s your co-founder?
My co-founder is Divey. We started the business in 2014.
You do not realize it’s been that long. It feels like you’re a younger company. It’s incredible. I want to go down to your back story. Let’s go real far, before 2007. Where did you grow up? Let’s start with your formative years.
Both me and Divey have a common history here. We both grew up in Delhi, India. Our parents were family friends in India. We spent our childhood together in Delhi. After we graduated high school, we both came to the US to pursue engineering. I chose a school in the US in the Midwest called Purdue and Divey went to the University of Illinois, Urbana-Champaign. Our family is still very much in India.
You’re still in the state of Illinois.
Indiana. It’s close, it’s three hours.
You are engineers by training. How do you have warehouses? I’m trying to connect those dots. It’s wild. Do you want to explain that? One of you was like the supply chain, DHL, FedEx, or something. You’re both software engineers with pretty much a tech-driven supply chain company.
It is not a natural fit. I don’t think we grew up thinking that we will open up a supply chain company. Our backstory on why we are doing this is after we both graduated, we were in Chicago pursuing our full-time jobs as software engineers like what we were trained for. Divey was doing supply chain consulting for Deloitte.
On the nights and weekends, we had a lot of side projects that we would experiment with. We would work under the impression that we would build it. Being a software engineer, the advantage is you can build things. You will build it and then people would come and start using your product. One of our startup ideas was around eCommerce. We started an eCommerce business.
Being engineers, we were trying to not have to do a lot of work and trying to automate everything in that eCommerce business. We were fairly successful in doing that, except for the part around shipping and logistics. Every time we would get orders when we were in Chicago, we would have to run to the post office at the Willis Tower, which is the tallest building in Chicago. It’s a landmark building. Their basement has a post office.
During lunch hours, we would have to rush to the post office to mail out our eCommerce orders. There would always be a long line. It was never a very pleasant experience. Nobody likes standing in lines and interacting with the post office crew. We were trying to automate this for ourselves. We made a bunch of calls to 3PLs in this space and most of the 3PLs people said no because we were too small for them. We knew from this eCommerce community that there are so many other eCommerce businesses much like ours who are not that big of a company.
That got us thinking, how do we solve it for ourselves but also solve it for other eCommerce businesses who don’t, by themselves, have the same scale that these existing 3PLs want? That got us into ShipBob. I remember we would stand outside these post offices where we would go to ship out our orders and we will ask people standing in line at the post office saying, “If there was a company like ShipBob, would you pay us for using us?” That allowed us to validate our idea of ShipBob before we built anything at all.
Did you continue the eCommerce business to get more data in for ShipBob? When was the handover? I guess you’re not running the eCommerce business today.
Once we got some market validation about ShipBob, we quickly transitioned from the eCommerce business to doing ShipBob full time. We got into this incubator called Y Combinator out in California. It has funded companies like Dropbox, Airbnb, Reddit, and several other high-profile startups where they coach and mentor young entrepreneurs. They also give you $120,000 at that time. That got us the initial capital to quit our full-time jobs and go all in on ShipBob, which is what we did.
How long were you on the Y Combinator campus? You moved from Chicago to California.
No. That’s another story by itself. Y Combinator is based out of California in Mountain View. It’s a three-month program. Usually, companies move with their co-founders and their team to California. That’s why maybe a lot of startups are in California because there’s a network effect of being surrounded by people in the startup world. We decided to continue operating out of Chicago. Every Tuesday, they would have a group meeting. We would fly to California and then fly back at night back to Chicago.
Our initial customers were here. We wanted to be close to where our customers were. We knew all the post offices were located in Chicago. Our sales strategy, in the beginning, was to stand outside the post office and convince other eCommerce businesses to give us their packages. Our pitch to YC was, “We don’t know where the post offices in San Francisco are but we know where they are in Chicago. We want to be close to the customers and be close to the post office so that we can acquire more customers.” We never really moved. In hindsight, it worked out.
That makes a lot of sense. That direct-to-access to your customers was there. You were pretty much on the ground trying to acquire customers in person before even buying any media or creating a community. When you pitched it to YC, was it how you envisioned it? Was it purely a software solution when you pitched it to YC? Was it software with warehouses? How was that received if it was software with warehouses?
It was closer to the latter, software and warehouses coming together. To give YC and a lot of early investors credit, they believed in our ability to execute on this business. To your point, it’s not a pure SaaS business that most investors are more comfortable investing in. Our premise was that if we are just a software company, our customers are paying us to help them ship their packages out. They want a great experience on the fulfillment side.
If we don’t operate our fulfillment centers, especially at the beginning, we won’t know where the bottlenecks and the pain points are. Let’s take the first few years building and operating our own warehouses and understand how fulfillment works. Once we have it down to a certain high confidence level, then let’s partner with existing warehouses and take a more of an asset-light approach.
The sequencing of owning your own infrastructure, understanding, and then moving towards an asset-light future was one of the hardest calls that people had to get around on day one because that would have meant CapEx investments, massive capital outlays, and rent, and so on. It’s not an easy answer for investors who are predominantly investing in SaaS. We got a lot of noes. Also, logistics is a different margin profile business. It’s not a SaaS 80% margin business. It requires a different skillset both from an operator’s perspective and also from an investor’s perspective.
Going back to Chicago, when you were in front of all the post offices in Chicago looking for eCommerce entrepreneurs in person and convincing them to come in to use ShipBob, how did that process take place? What was the success there? Were you established? Did you have your own warehouse? What was the first year of running ShipBob like?
In the beginning, it was all about doing everything possible to make sure that we can have a real business and that meant customer acquisition during the daytime. My co-founder, Divey, and our early team members were all involved in sales. We were convincing merchants to use us to involve in warehouse operations and making sure when they send us their products, they get shipped out on time.
During the night, some of the early engineers and me were programming to deliver on the features that we had promised to the merchants in the morning. It was constantly making sure you can continue to ship more packages on behalf of the merchants. You can acquire new merchants and you can continue to get better on the warehouse side and get better on the missing features that the merchants need to trust their inventory with a new company.
For the first couple of years, every day was a battle, all hands on deck to deliver on behalf of the merchants. We have the merchants’ inventory. That’s the piece. Merchants have to trust you with their inventory, which they have spent a lot of dollars on manufacturing. You can’t let them down because you’re such an intangible part of the business.
What was the size of your initial facility, your initial warehouse?
10,000 square feet, maybe in that ballpark.
How many on-ground handlers did you have? By now, it’s a lot more automated.
We have maybe 10 to 12 people in a warehouse, people doing inbound. If you look at the warehouse operations, it’s inbound, which is receiving inventory that merchants send you. You need a couple of people to do that part, get the product, and put it on a shelf. You need a couple of more people to pick it. Once the orders come in, you need somebody to go to that physical location, pick the items from the shelf, and take it to the back station. The third operation is physically packaging the order up in the box.
The final step is labeling which is putting the shipping label on the package and getting it ready for FedEx, UPS, and courier companies’ trucks to come in. We had to staff each part of that business operation, receiving, picking, packaging, and labeling, on day one. You need somebody to do each part of it. You have to get good at filling up the capacity and making sure that each one of these people has enough work to do and so that means doing customer acquisition etc. to make sure that you’re not overstaffed to run a building profitable.
Speaking of acquisitions, after the feet-on-the-ground, sales in the afternoon or morning, and seeing people face to face, when did you start to say, “This is not scaling. How are we going to find alternative ways of acquiring new customers?” When did you outgrow that 10,000-square-foot warehouse?
We outgrew that 10,000-square-foot warehouse pretty quickly, which meant getting a larger square footage warehouse and scaling out from there. On the sales side, maybe I’ll give you a slightly different nuanced answer. If you think of ShipBob having two sides of the equation, the demand side, which is customer acquisition, which is integral to any company’s success. On the other side of the equation for ShipBob is the supply side, which is having, to your point, warehouse space or capacity to service that demand side.
There’s always this tension between demand and supply because if you grow any part of the equation too aggressively, the other part will start to suffer. You have to always balance the demand and supply carefully. At ShipBob, generally speaking, between demand and supply, we have a phenomenal demand side. We have a great team of salespeople and a phenomenal marketing leader. For us, it’s always been making sure we can scale the supply side, the space side, commensurate with what we are seeing on the demand side so that we are not out of capacity in any given quarter or a year.
A lot of our early time was making sure we can scale the space equation as quickly as we are scaling the demand equation. There is enough of a demand in the market for outsourcing logistics. eCommerce entrepreneurs don’t want to spend their time doing the packaging and the shipping, they’d rather spend the time doing their branding, marketing, and building new products. There’s a need for a company like ours.
If you can’t deliver on what the customer is signing up for, which is, “Can you take care of my inventory? Can you ship my products on time?” All of that stuff goes on the supply side. That’s where companies have a harder time scaling. At ShipBob, we had to get the sequencing of running our own warehouses, building the right software, going and seeking out additional partners or warehouses who have an incremental capacity, and bringing them onto a network. Getting the timing of the supply side right, that’s where we spent a lot of our time.
When you say partnering with other warehouses, did you rent their space off them? What did pattering look like?
That evolution happened almost over three years ago. What that meant was there’s enough warehouse capacity across the globe. However, not all of that capacity is operating at least by ShipBob’s standards. Our initial assumption was that if we get a chance to build the supply side from the ground up, we build the right warehouse management software, which makes eCommerce operations of picking, packing, labeling, etc. a lot more efficient. We take the decision-making, which happens inside the four walls of the warehouse, and bring them into the software layer.
We can then scale the supply side lot more quickly because we’ve automated a lot of the manual decision-making, which happens at the fulfillment center associates level. Once we have enough of a system built out, we went to existing warehouses and said, “We have access to a great demand side. We know merchants who love our product but we don’t have enough space. If you have unused capacity, we will bring in the software. We will train you on everything that we’ve learned over the last four years. Now, you can be up to standards on how to be the best in class in the eCommerce logistics space. We will pay you for every single order that you ship on our behalf.”
It’s almost like a franchisee concept with tight control on quality because it’s ShipBob’s software and training. That allowed us to then scale the supply side at a pretty steep cliff versus trying to add all of the capacity on our own because that would have meant years and years of construction and making sure that the building is up to spec. We found a way to scale supply and that’s been an unlock in helping us grow.
It reminds me of Uber.
The difference between us and Uber is Uber transactional. You may not like one driver and it doesn’t matter because the next driver could be very different. At ShipBob, merchants need to trust the network because it’s much more of a partnership relationship. We are much closer to a Domino’s or McDonald’s franchisee network. All of the business operations, no matter whether you walk into a McDonald’s in New York, London, or Oxford, it’s should exactly be the same.
I never realized that. I thought that ShipBob was acquiring facilities and then rolling out with your staff and tooling. You guys started in 2015. There was a huge boom in commerce. Let’s not talk about the 2020 Boom as a result of the pandemic. It was great timing. What tailwind did you ride off the back? I’m thinking it was Shopify. Where did you start to say, “There’s a lot of merchants activity here and these platforms will give us that exposure and scale to get off in the races.”
You nailed it. At a macro level, it became so much easier for designers, creators, and entrepreneurs to go direct to the consumer thanks to platforms like Shopify, BigCommerce, WooCommerce, WIX, Square, etc. In 2015, if you were a creator and you wanted to build a brand, you would have to hire engineers. You would have to build the entire infrastructure of creating your own website, etc.
It was ten times harder for you to do that. These platforms took away all that friction from a front-end perspective. That was one big change, which made it possible for thousands of entrepreneurs who had always dreamed of creating an online business. It made it possible for them to do that. That was a big change.
Big change number two was all of the social media like Instagram, Facebook, Snapchat, Pinterest, etc, they started growing and their advertising platforms became sophisticated enough for brands of any size to be able to find an audience or a niche audience for their products. In the absence of social media or tools to market your products online, these brands or entrepreneurs would have had a tough time finding an audience for their products. The big shift number two is brands started finding customers for their niche products, which would not have happened if social media did not exist.
The third big change is Amazon, in shoppers’ minds, it made two-day delivery accessible. When customers buy something online, they demand that their products get delivered to them in a two-day time frame. Brands then said, “If I’m a small business and I only have one warehouse, which is my garage, how do I provide my shoppers the same experience that they get on Amazon.com as a prime customer?”
The confluence of all of those three big changes, a large number of entrepreneurs coming online for the very first time, these entrepreneurs being able to find an audience for their products, and that audience demanding them access to a cheap, affordable, two-day shipping option. That allows a company like ShipBob to exist because there was finally a demand for a product like ours.
The perfect storm. Great timing. Was your original eCommerce store running on Shopify?
No. We built it on our own. It wasn’t on Shopify. We built the entire stack, which we probably should not have.
I wondered how you figured out the Shopify app ecosystem and how all of this would have fitted into it. ShipBob now is a huge company. Looking at your CrunchBase, you’ve raised $330 million at least according to CrunchBase. On LinkedIn, you have over 700 employees. How is the day-to-day at the moment running ShipBob?
It’s quite evolved since we started the business. We have strong leaders in each section of the business. We have a revenue leader and a marketing leader. We have a product, engineering, and operation. These folks are experts because they’ve done scale before. The advantage of hiring people like our senior leaders is that they’ve gone through this journey of scaling before so they’re not learning it right alongside us. They can teach us based on what their experience has been at their previous organization.
If I look at all of those functions, we have a strong leader helping and guiding us to make sure that we can take full advantage of the market opportunity in front of us. Now, it’s more around sharing the business context with these leaders making sure we have a good handle on the culture of the place and giving them the freedom to be able to operate on their own while continuing to provide them enough context as to why it’s done in a certain way so that they have the full context on ShipBob. It’s less about going into detail. It’s more about maybe going a little more broad now.
I can attest to your CMO, Casey Armstrong. I personally know him. He’s a very strong leader.
He knows everyone. I’m not surprised.
Speaking to fulfillment in the 2022 supply chain, what do you think are the fundamental pillars for a commerce business given the economy? There are lots of challenges and a lot of merchants are now thinking, “Is D2C ideal? We need to do wholesaling. We need to go to marketplaces.” Do you want to paint us a picture from a ShipBob perspective? You have access to a lot of data on the state of commerce from a ShipBob perspective.
I can give you at least what we are seeing based on the data that we have access to. The first part of ShipBob’s journey was speaking to merchants who are going direct to the customer base through their own website. Most of these merchants had a very strong perspective that we don’t want to do any other channel but our website is the right answer. That is where is the mind-shift perspective.
What has fundamentally changed is the rising cost of acquisition because all of these brands are targeting the customers on Facebook, Snapchat, social media, etc. These rising costs of acquisition, to some extent, take away the benefits of going direct because they’re eating up your margins. The marketing costs are now exceeding the cost of going through a third-party retailer, etc.
A lot of these eCommerce brands are now starting to pivot and say, “Maybe going direct to the customer to my website is one of the many channels that have access to. Maybe going through marketplaces is channel number two. Maybe going into retail either as a dropship vendor or being a third-party vendor in Macy’s, Nordstrom, Petsmart, Target, maybe that’s channel number three.”
The shift that we have seen in our own business is that merchants are no longer confined to one channel, which might be the one channel that they started off with, which was their website. Now, they are coming to us because they want a multi-channel solution and they’re more omnichannel as well. Multi-channel means selling on multiple online channels, my website, my marketplaces, etc.
With omnichannel, I’m also doing wholesale and retail to brick and mortar or my own storefront if that’s the case. I want a fulfillment platform to be able to take my inventory and make it fungible across all of the different channels that I might choose to sell on. The bet that our brand is taking is that once I get a customer to use my product, they will like it and they will then engage with me on social media or multiple channels. Eventually, I will be able to build this loyal customer base who will come back and maybe make repeat purchases from my website in the future. It’s still very much like I want to build a connection with my customer but it might take different forms.
Almost like a distribution strategy in that sense. Are there any brands that are seeing this success from this strategy or is it too early to see?
We have quite a few brands who have executed this pretty successfully. There are several examples of it on our website as well where brands directly started off only on the website but have now scaled out to several different channels including B2B and retail. You might be an exception if you are not doing that. I can look up the data but most brands are now starting to do that.
Also, these retailers like Target, Macy’s, Nordstrom, etc., if you had talked to them five years ago, they would have said, “We’re not interested in speaking to local small brands because nobody’s heard of them.” Now, they’re taking a different approach. They’re saying, “Our shoppers want us to carry these brands. They want to buy from local brands.” There’s a little bit of a change from a retailer’s perspective as well as to what catalogs are they carrying in their stores. That’s also useful.
Some eCommerce brands prefer to have their own facilities as against a 3PL. My question is, how long do brands stay with 3PL providers such as ShipBob? Do they mature out of it or do they say, “We’re going to do a hybrid where we should have our own facilities. However, working with ShipBob will be excellent for our wholesale strategy as a hub-and-spoke to make it more fungible.” What trends are you seeing as eCommerce brands grow? 3PLs are perfect for startups. As you continue to go further off the chain, your requirements may change.
On one hand, there are brands who started off outsourcing their fulfillment right from day one and they’ve continued to grow into multi-hundred million dollar brands who have said, like, “I’ve never owned and operated my own buildings. I see no reason to do that. My provider, whether that’s ShipBob, is doing a good job in helping me scale. As a brand, by itself, I don’t have scale. Because ShipBob aggregates scale and we have so many different merchants, there are benefits to that.”
For those businesses, it’s unlikely that they would ever choose to insource their operations because it’s a tall order, hiring all of the laborers, renting a warehouse over the long term, etc. That’s real dollars. If you’re generally used to running a variable cost business where you pay per usage transitioning from a variable cost business to a fixed cost business where you have leases and hourly employees that you have to pay, that’s a very hard ask for a business to do. I don’t see that happen.
However, there are several large businesses that run their own warehouses. For them to now outsource 100% of the fulfillment on day one to ShipBob is also a tall order because it’s unlikely that they can cancel the leases and let go of their hourly associates at their warehouse. They still want to take advantage of our growing network, especially a global network or B2B business, etc. For those merchants, we have a program that’s pretty interesting called Merchant Plus where you can run your own building on our WMS using our software but you can still take advantage of our overall network.
You get the benefit of seeing all of your inventory and all of your orders under one software platform. You can take advantage of all ShipBob’s warehouse management system, which has been built for 450-plus sites that ShipBob is already operating. You get all of those capabilities. You also get the ability to run your building under that software. It’s the best of both of those worlds. We are seeing larger businesses that have their own buildings take advantage of that Merchant Plus program.
That unifies your entire stocktake in your supply chain.
Instead of running two different software solutions and two different process files, one for you outsource and one for your in-house, you’re aggregating all of that under one umbrella. With ShipBob, because we are also using the exact same software, we are constantly making updates and upgrades. You get the advantage of consistently getting a better and improved WMS every other week. ShipBob pushes out new changes.
I was going to speak to international shipping. I spoke with the CEO of Global-E. You must know them. In terms of international shipping, they’ve enabled the payments layer stack in international shipping. In the ShipBob ecosystem, you’re thinking about localizing your supply chain with expansion. Let’s say you’ve localized your payments with a solution such as Global-E and you’re seeing traction from particular geo and you want to localize. ShipBob would be a very good solution to localize that because you’ve already got your data from a transactional volume. Is that a trend when it comes to international expansion working with yourselves?
We have warehouses now in the UK, Europe, Canada, and Australia. If I look at the merchant base that is taking advantage of localizing the supply chain, these brands are generally very early in the lifecycle. It’s not like they’ve been around for ten-plus years. They’re generally in maybe year 2 or 3, maybe sometimes even sooner. You asked, why are these brands starting to go global a lot sooner.
My question is what you’re seeing, whether there’s rapid adoption of localization of the supply chain, especially when it is easy now to sell internationally. Once you’ve worked out the online experience and you’re shipping with DHL, sometimes you’re going to start asking yourself, “Should we localize the supply chain to make things more straightforward?”
We are seeing that pretty aggressively in our data. The reason why is that the cost of acquisition for US brands has skyrocketed. They’re trying to find other cheaper ways for me to acquire customers where there is some interest in the products. The cost of acquisition, if it’s cheaper in international markets like Canada, the UK, Europe, or even Australia, it makes sense for me to target my marketing dollars in those areas.
When I target those customers, those customers don’t want to wait 2 or 3 weeks before they can get their orders. They want to make sure that they can get their orders in a 2-day or 3-day timeframe consistently with what they get when they buy from a local eCommerce brand. For merchants, localizing the supply chain to position their inventory close to the end shopper no matter where that shopper might be.
It becomes pretty irrelevant if they’re trying to build a global brand and they’re trying to attract an audience in different geography than the US. The success of Global-E, ShipBob, and several other companies made this possible. My point is the entire ecosystem of applications and companies made it easy enough for brands to take advantage of a global yet localized supply chain. It’s not just ShipBob but companies like Global-E, Avalara, and many others made it possible.
Speaking of international markets, you do have facilities in Australia.
Any takeaways from expanding to Australia? Any trends you can share, please?
The Australian eCommerce market is booming. There are a lot of these entrepreneurs based out of Australia who is using Australian fulfillment centers but they’re also using the US or a global footprint. Australia, by itself, might not be a massive market. These merchants are interested in experimenting in Australia and, once they get to some scale, expand into the US pretty quickly. The reason why we went to Australia is that if we can bring those merchants into the US sooner than later, that’s a net positive for their businesses as well. In Australia, overall, we are super bullish on our ability to execute that.
All of us learned a lot about the supply chain. The big takeaway for us was, pre-COVID, the world was focused a whole lot more on efficiency. Now, the keyword is resilience. You can build resilience by having a multi-strategy where not all of your inventory is in one location. You don’t have a single point of failure. If your one warehouse gets shut down because of COVID or any other natural calamities, you can at least continue operating as a business from the rest of the network. Our strategy of having a pretty diversified network across the globe is something a lot of merchants are taking advantage of.
On the inventory side, we’re seeing cycles. This goes back to resiliency. If all of your manufacturing happens from one manufacturing hub and that manufacturing hub gets shut down, now you don’t have inventory to sell. Merchants are realizing on the manufacturing side, “Does a diversified set of manufacturers make sense for me?”
The other side of the equation here is if you’re too diversified, you don’t have any scale. You lose out on all of the efficiency gains that come out of consolidating operations under one roof. There’s a little bit of a balance that merchants’ businesses need to do based on what is right for them on how much efficiency should they seek versus how much resilience they want to operate with. It’s not one answer for anyone but this notion of resiliency has come up a lot.
You echo a lot of sentiments. In 2021, there was an SAP on what you said during a consolidation versus that resilience and re-using efficiency of skills. They’re more towards resilience and decentralization but it’s still a challenge from a scalability standpoint. We can go on and on. I have thoroughly enjoyed this conversation, particularly the backstory of ShipBob. I’ve never heard it anywhere else. Thank you for sharing the early days of ShipBob. Before I let you go, you’re a special guest so I’d like to take you through our evergreen rapid-fire question session. I’m going to ask you about six or maybe seven questions. If you could, use a single sentence to answer each of these questions.
Let’s do it.
What does your morning routine look like?
I get up pretty early around 5:00. I have my coffee. I still get a physical newspaper in the mail. I read my newspaper. By 6:00, my dog wakes up and so I have to take him out for the morning walk and morning food. By 7:00, I’m at work.
What are two things can’t you live without?
My iPad and my phone. The book that I was reading was When Breath Becomes Air. It’s a beautiful story about a neurosurgeon who gets diagnosed with terminal cancer.
Fiction or nonfiction?
It’s nonfiction. It’s his biography.
What’s been your best mistake to date? By that, I mean a setback that’s given you the biggest feedback.
In our business, especially in the early days, you had to sign these warehouse leases, which were anywhere from 3 to 5 years long. If you got that wrong, that means you under forecasted the business and that means you’re stuck with that space, which can no longer accommodate new customers, which would set the sales back.
That forced in us the ability or the muscle to think a little more long term because you’re signing up for these long-term contracts, which can hamper your business if you get it wrong in any direction. We’ve made a lot of those mistakes. Those real estate mistakes stay by you for a long time or at least as long as the duration of the leases.
Dhruv Saxena, it’s been an absolute pleasure having you. This is the intersection of tech, warehousing, real estate, and supply chain. Incredible stuff. Thank you for coming to the 2X eCommerce podcast.
Absolutely. Brilliant questions. Thank you for asking me and having me on your show.