Step by Step S6 E5
June 4, 2021

[Step by Step] How Can I Leverage 3PL And xMS To Increase Revenue?

In this season of Step by Step presented by Shippo, we ask the question, “How can leverage shipping as a growth engine for my business?” eCommerce isn’t so simple anymore. Merchants can’t just sit at home, slap a shipping label on a box and call it a day. It is much more complex than that. In this episode, Ryan Powell, SVP of eCommerce at Whiplash joins the show to chat about the details of how to increase revenue through shipping. We’ll give you practical tips, step by step.

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this episode sponsored by

“It’s like shipping inception”

  • Are we in a Shipping Inception or are 3PLs and 4PLs really that complicated? 
  • Identifying where your customers are is key in choosing the right 3PL solution for warehousing and shipping. 
  • “Despite the Amazon narrative, not everyone needs everything in 30 seconds… I think it's critically important for brands to manage customer expectations, meaning if you don't have the infrastructure to do two day delivery, then don't promise to do delivery.” - Nima
  • Having a 3PL like Whiplash can help smaller businesses scale and keep shipping costs lower.
  • “I really am confident that retail is going to see a rebirth... We're getting a lot more brands asking how can you support these smaller shops, maybe two or three per quarter over the next year?” - Ryan

Associated Links:

Have any questions or comments about the show? Contact us at Futurecommerce.fm, or reach out to us on Twitter, Facebook, Instagram, or LinkedIn.

Brian: [00:00:37] Hello and welcome to Step by Step, a podcast by Future Commerce, presented by Shippo. I'm Brian

Phillip: [00:00:44] And I'm Phillip. And this is Season 6 of Step by Step. And you are listening to Episode 5 of 5. This is the last one.

Brian: [00:00:51] You made it.

Phillip: [00:00:52] Yeah, you did it. And we saved the best for last. This is easily my favorite. I mean, I shouldn't have favorites, should I? This was the episode wherein I learned the most.

Brian: [00:01:08] You said it already. You can't take it back.

Phillip: [00:01:08] Oh, I know. I can't take it back. I'd like to have taken it back. Does that count for anything. So listen, if you're just jumping into the series at the very end, hey, there's four other episodes just before this one. Might I suggest, go back and listen from the very beginning. I think you're really going to enjoy it. This season we're answering the question, how do you transform shipping from a cost center into a growth center?

Brian: [00:01:34] That's a big question.

Phillip: [00:01:36] It is.

Brian: [00:01:36] And we've spent a lot of time talking about this now, and I really hope that you're like, "Man, I can't wait to get this last episode because they've already teased it out a bunch of times."

Phillip: [00:01:46] Yeah.

Brian: [00:01:47] Because this is also my favorite.

Phillip: [00:01:49] You're not allowed to say that.

Brian: [00:01:49] I mean, the episode I've learned the most from.

Phillip: [00:01:53] I learned...

Brian: [00:01:54] Wait. What are you talking about? In the pre show, I was the one that said this is my favorite before you did.

Phillip: [00:01:59] Learn from my past mistakes, Brian, not to say what's in your head out loud all the time.

Brian: [00:02:07] Oh man.

Phillip: [00:02:07] Here's the thing, and we talked about this, I think, in the intro of Episode 1 of this 6th season of Step by Step, it used to be that eCommerce was seen as a value channel because there was this idea that there were fewer middlemen. You didn't have to have real estate with frontage and provide, you know, all the amenities that you have with, like physical brick and mortar and employ the staff and, you know, deal with all of that stuff. No, you just ship products from a distribution center. How hard can that possibly be? You put up a website, people buy from it. And Bob's your uncle, right?

Brian: [00:02:51] Yeah. All your inventory is sitting right next to you. You just pull it off, you know, the side of your desk and...

Phillip: [00:02:59] You're in a swivel chair anyway. You spin around.

Brian: [00:03:01] Yeah. And then tape it up.

Phillip: [00:03:02] Slap a label on that sucker. Bang.

Brian: [00:03:04] Hand write the label with your pen that you have on your desk. {laughter}

Phillip: [00:03:08] Not anymore. And that's the amazing thing, is that maybe that was the promise of eCommerce 20 some years ago. That's not how eCommerce works today. And there are so many hands and so many like systems that data has to travel through in order for a package to get to the door. It's kind of amazing. And I've never learned more about how many hands there truly are in providing the logistics capabilities as I did during this interview. So buckle up.

Brian: [00:03:37] Well many hands make light work, but they do some money. {laughter}

Phillip: [00:03:43] Yeah, many hands makes small margin. And so I think that's where, you know, there's a lot to be said here about how you can leverage 3PLs and apparently 4PLs and 5PLs. I mean, there's so many PLs. I didn't know.

Brian: [00:04:02] 12PLs.

Phillip: [00:04:02] {laughter} My kids would say eleventy million, sixty thousand forty PLs. It's kind of incredible. And so, yeah, we're going to dive deep into it here in this last episode of Step by Step. You know it, and I know. We're emerging from the highest period of growth in eCommerce ever into the roaring 20s. That means shipping has increased for everybody, and the cost of shipping has a real impact on your growth and your customers willingness to buy online. If you are in eCommerce at all, this series is for you. And it's a fascinating listen. So, hey, Brian, who are we talking to?

Brian: [00:04:42] Yeah, today we've got. Ryan Powell, Senior Vice President of eCommerce at Whiplash. He's going to teach us a little bit about how you can turn shipping from a cost center into a growth center Step by Step.

Phillip: [00:05:02] Today, we continue our series, we have Nima Elyassi-Rad, who is from Shippo and apparently knows everything about shipping. Can you say hello to the people, Nima?

Nima: [00:05:13] Hey folks. Hey people.

Phillip: [00:05:16] Thank you for joining us. I'm really eager and very excited to learn from you and hear more about shipping today. And you've brought a friend along for the ride. Ryan, can you introduce yourself?

Ryan: [00:05:31] Yeah. Hi, everybody. It's Ryan Powell, Senior Vice President of eCommerce at Whiplash.

Phillip: [00:05:38] Whiplash. And we hope to not give you whiplash today talking about all things shipping. Brian, we have a really interesting agenda today. I think it's going to be really informative. We're talking about fulfillment services. And I know there's like the land of acronyms in the world of shipping. There's 3PL and WMS and is there 4PL and 5PL, too? I don't know, but we're going to learn all about this sort of stuff here today. And in this series, we've been diving deep, getting into the weeds about how you can leverage shipping to grow your business, that shipping can be a growth engine for your business. Ryan, how does Whiplash enable growth in the shipping side for a merchant?

Ryan: [00:06:27] Yeah, so it's interesting you said 4PL and 5PL. It definitely exists.

Phillip: [00:06:33] No.

Ryan: [00:06:34] It's wild. 6PL. So basically what Whiplash does, we recently rebranded, we used to be Port Logistics Group who acquired Whiplash, which was a 4PL at the time. So we really are focused on leveraging our 18 facilities that we lease and own and operate, as well as a partner network, which is that 4PL model for our startup brands to help them grow and get their order volume up to where it makes sense to transition into more of a large scale operation.

Brian: [00:07:08] So with that, tell us the difference between WMS, 3PL...

Phillip: [00:07:13] Yeah. Explain like I'm five.

Brian: [00:07:14] Yeah. Yes. {laughter}

Ryan: [00:07:18] Yeah. So basically a 3PL is you as a merchant have direct relationship with a third party logistics provider for storage, picking, packing, shipping, transportation. 4PL is you would have connection with a party, usually that's going to be a software, and then that software is managing your warehouse, which is then outsourced to a 3PL. So you have this kind of central layer before the actual storage labor pick pack and all of that job. And then you have the 5PL, which is traditionally like a brand house. So they're saying we're going to do all the fulfillment for you and we're going to do all this storage for you. And then they outsource it to their 4PL who then outsources it to their 3PL. And the game of telephone gets pretty wild.

Nima: [00:08:15] To scale it down. A 1PL is effectively the brand, a 2PL is effectively the carrier. And then all the things that Ryan said.

Brian: [00:08:25] Yep, it feels like Inception.

Phillip: [00:08:28] It is. The deeper you go the more that time slows down. It's true. {laughter} When you're thinking about business and you're thinking about how important... You really can't do eCommerce without shipping. Right? It's integral. It is the whole thing. In most of our minds, especially in the world of eCommerce and shows like this, I think a lot of people hyper focus on things that happen up to the buy button, but to the customer, it really only begins after they've committed. Like after the purchase. That's when the relationship begins. And so I'm curious, maybe, Nima, you can give us a little bit of insight into how you partner with folks like Whiplash and how that ecosystem works to provide growth for a merchant.

Nima: [00:09:22] Definitely. Shippo is in many ways the 4PL that Ryan referenced, meaning were the software infrastructure. We don't actually physically touch the packages. We don't physically own the warehouses or the trucks or the planes. So from a merchant perspective, there's two ways you can fulfill an order. You can self fulfill it, or if you run into a physics problem, meaning your orders have grown so much that you can no longer fulfill out of your second bedroom or your garage. Now you need a third party logistics  professional to actually fulfill that volume of orders for you, and depending on the SLAs that you have. So if you're promising your customers two day shipping or three day shipping, you need a partner like Whiplash that actually has the physical footprint, you know, 18 warehouses around the country where they can house your merchandise and they can actually get it to your customers on time with the SLA that you promised them. So, Shipoo as a shipping API, as an infrastructure, we're agnostic to how a merchant fulfills, we merely serve as Switzerland. We say if you want to self fulfill, God bless you. You can leverage our API to manage several different carriers at once. If you're running a more scaled and sophisticated operation, then you need a partner like Whiplash because then you're actually optimizing on a per package basis. And this is literally what Ryan and his team do, right? They leverage various carriers on a per shipment basis, whereas on the long tail of eCommerce, a smaller business like I have a very, very small brand myself. I only use USPS. I don't have the need for multiple carriers. But if that business were to grow, then I definitely need someone like Whiplash.

Phillip: [00:11:16] So there's so much that could be optimized. Ryan, what are some of those things? I'm going to guess there's sort of regional optimization and sort of routing within your network and then there's a carrier selection. What else is there that merchants might need to be thinking about?

Ryan: [00:11:31] Yeah, I think something that's commonly not thought about and a lot of merchants want to be near their inventory. I was actually speaking with the brand yesterday, and they have their headquarters out here in California. And we were getting into where are your customers? And they're currently fulfilling out of California. And they said, well, you know, "65 percent are in New York and Florida." I said, "Wow, why are you fulfilling out of California?" And, you know, "It's what we've been doing. We've been doing it for six years and we're here." And so the conversation around really trying to identify where your customers are, the consumer is, you know, potentially paying for that shipping. And if 65 percent of your shipments are going out in the most expensive manner... I listened to an episode previously when you guys were talking about zones one through eight, and from California to New York or Florida, that's a zone eight. Most expensive cost that there is with the longest lead time. And so if you're trying to do two day delivery, you need to start thinking about where your facility is or if you want to do a multi node approach. Have a facility maybe in Ohio and Columbus or something like that and one in LA, so you can service all of your customers within one, two, three, four with two day ground delivery time. So there's a lot of conversation around routing. So if a customer is purchasing from California, send it from our LA warehouse. If they're in New York, we want to go ahead and leverage our Ohio facility. And so routing based off of the location and then also the carriers. So doing rate shopping through the Shippo API and understanding what the cheapest option that's available, that'll get it there in two days, and leveraging that service.

Phillip: [00:13:20] And that's good for customers. Right? Like the customer expects that. But does that lead directly back to growth for the merchant?

Ryan: [00:13:30] Yeah, absolutely. So if you can service, let's say for this particular instance, your New York customer base with two day rather than five, six day delivery, repeat customers want things now. Thank you to all the companies that have allowed for same day, next day, and two day shipping. And one of the things that we're really looking into and expanding on is the same day infrastructure. Just because of the breadth of locations that we have, we have customers that want to deliver that same day in LA and New York, for instance. So we can leverage our New Jersey facilities and our LA facilities to make that happen. And that's becoming more of an interesting topic. Talking about what Amazon is doing. But at least getting it there the next day. And if you do spread your inventory across, if you have the buying power to allow yourself to have that kind of extensive inventory, it just creates a better buying experience and better buying, better NPS, better returning.

Brian: [00:14:32] Nima, I feel like Shippo plays a big part in this, and how do you feel like customer expectations have been changing in where shipping fits into how customers are thinking about making their purchases along the way?

Nima: [00:14:53] You know, I think that's a great question. I fall into the camp that I think it's critically important for brands to manage customer expectations, meaning if you don't have the infrastructure to do two day delivery, then don't promise two do delivery. More often than not, people don't... [00:15:16] Despite the Amazon narrative, not everyone needs everything in 30 seconds. The time it takes to buy the thing online, that matters, but the delivery, it's just how you manage someone's expectation. I mean, on a personal note, I've waited two weeks for products that I've loved, but it's not toilet paper, cigarets and whiskey. Right? More often than not, we don't need things right now. So the customer expectation management, I think, is critical. Especially [00:15:50] for smaller brands. As you get to scale, now you're competing with people at scale, so now your SLAs have to match those SLAs. And again, this is where folks like Whiplash come into play. So if you're Allbirds and you're competing in a space where there's a lot of people buying at that price point nice sneakers, and you're competing with the Nike's of the world and Adidas of the world and the Pumas of the world, you have to meet those SLAs. And that's where, again, to Ryan's point, I think, knowing where your customers are and where you how's your Skus, and also having an operation... And Ryan can speak to this more. But he and I have nerded about this in the past, which is if your brand, actually if you have too many SKUs, you need almost a different kind of 3PL because not every 3PL can handle the plethora of SKUs that you might have. So actually, Ryan, do you want to get into that? Because I think that's a super important thing.

Phillip: [00:16:54] Oh, this I'm super excited for this Ryan, having dealt with this myself. I spent 10 years building direct to consumer businesses in the wellness space, and part of the way that those companies grow is to have constant expansion of category. And so you find yourself with four hundred and fifty SKUs and two thousand if you count kits and bundles. That sounds like a real distinct challenge.

Ryan: [00:17:25] Yeah. One of the biggest areas of our growth are these merchants that have just crushed it. And they're doing, they went from four years ago they were doing a couple of thousand orders a month and they had maybe 50 SKUs. And now they're at 40, 50 thousand orders a month and up, and they have a thousand, two thousand, thirty thousand SKUs. And being able to manage that infrastructure is really complex. So we have clients ranging from one SKU, a couple of hundred orders a month, all the way up to one hundred thousand SKUs, five hundred thousand orders a month. And we were doing some site tours with a prospect yesterday, and we were showing the different requirements of scale ranging from if you have five hundred to a thousand SKUs. For us that's really straightforward and it's straight pick, pack, go get it. You have 30 pack stations and you have X number of square feet and pick locations. And it's really, it's complicated, but from a architecture perspective and when we're putting up the engineering and the processes behind it, it's not too complex. But then you get into a customer that's doing, you know, maybe three hundred thousand orders a month, but they have thirty thousand SKUs. You now need automation, robotics. We work with Locus, and we're exploring all kinds of different technologies that allow us to continue to improve efficiencies there. But when you're dealing with that SKU breadth, you're going to need a much larger square footprint because you have so many different things to get. And a lot of times these brands that have tens of thousands of SKUs are also fast fashion. So they're coming in and out all the time with new SkUs. And so, you know, when you're looking at working with a partner in a 3PL space, one thing that merchants don't think about is I'm going to be very successful and I need some sort of scale. And really our growth has been for those brands that didn't think like that. And they're now at a point where my partner is just unable. It's impossible for them to get the volume out effectively and correctly, and they're just screaming for help. And so that's one of the things I'm really excited about with Whiplash, is just the ability to manage the growth. If you become a massive brand, doing hundreds of thousands of orders with tens of thousands of SKUs, and you want to go into retail and wholesale and open your own shops and the complexity most providers can't manage. And that's one thing that we do very well. It's insanely complex and you can nerd out on it for hours and hours.

Brian: [00:20:16] Basically what I hear you saying is that if you have a complex business, if you don't get shipping right, you actually won't be able to serve your customers. You will literally fall down if you don't have the right systems in place.

Phillip: [00:20:29] Literally fall down?

Brian: [00:20:30] Literally fall down.

Phillip: [00:20:31] You will literally fall down. Literally {Chris Traeger impression}...

Brian: [00:20:35] Literally {laughter}

Phillip: [00:20:35] Fall down.

Nima: [00:20:38] I mean, things even as small as, I mean what might seem to an outsider as small, but even where you put things for a particular customer in a warehouse, meaning I know this sounds simple, but the time it takes for somebody to walk to the back of the warehouse... If that customer is your highest volume or whatever, top 10 highest volume customers, you don't want their stuff to be at the back of the warehouse because now that's 45 seconds wasted for somebody to actually go to the back of the warehouse and actually get that bin.

Ryan: [00:21:12] That's a small warehouse.

Nima: [00:21:16] {laughter}

Ryan: [00:21:17] Back of our warehouse is about 15 minute walk.

Phillip: [00:21:19] Yeah wow.

Brian: [00:21:20] And if you add that up per your highest volume customer, or customer groups or whatever, then all of a sudden you're looking at hours upon hours every day wasted.

Phillip: [00:21:36] Yeah. No wonder. No wonder certain warehouse workers aren't being given bathroom breaks. But I digress.

Brian: [00:21:43] {laughter} Ooh.

Phillip: [00:21:43] I think optimization is really tough when you think about the scale of the logistics infrastructure required to deliver eCommerce these days. And we're still growing. It's not like eCommerce is plateauing. We're in a high growth industry. There are stories we've covered extensively on the main show has been the amount of capital that's being redistributed to industrial space to just provide infrastructure services like what you're doing at Whiplash. How's growth been for you? And how do you keep up with the demand? Like how are you planning out the growth of the business? You mentioned the acquisition. Give me a little bit of the idea of how you have to scale in order for your customers to scale.

Ryan: [00:22:33] Yeah, it's an interesting issue, actually. So we're continuously looking at additional warehouse space. We open a secondary facility out in Columbus, Ohio, and we were making the decision, we didn't really have what's called an anchor customer. That's really the first one that can go in and we know that we're going to cover a certain percentage of our costs. But we took the risk. We said, OK, you know, eCommerce is growing. Within three months, we 80 percent full. And so now it's really making sure that we're working with the right merchants where we can have impact. We're really trying to identify, and we're looking at starting an incubator program where we can help the startups become a brand it can contend with, as well as working with our current enterprise clients that need to continue to grow. That one client that has tens of thousands of SKUs, they have doubled and then tripled over the last nine months in space and volume. So think about trying to maintain a customer that has that type of rapid growth. It can be very difficult for a lot of facility managers. And that's where you need twenty two buildings. You need over six million square feet. You need to have the architecture specifically around shipping in place to ensure you can get over a million labels produced every month. And you think about that scale, you're talking 50, 60, 70 thousand labels every day. If your label provider has an issue, that's a problem.

Phillip: [00:24:11] That never happens. {laughter}.

Ryan: [00:24:13] And really, that's where we're looking at working with a company like Shippo. There's a lot more confidence in the architecture that they've been investing in heavily. And so just a simple thing like printing a shipping label can have massive effect on our capability to continue to produce those 40, 50, 60 thousand labels and shipments every day. So we're really, really excited to be working with Shippo and their architecture and their team.

Nima: [00:24:40] On that note, we were talking about walking to the back of the warehouse. [00:24:43] One of the things that honestly keeps all of us a Shippo up at night is we're in many ways like your Internet service provider, right? Imagine if your Internet went down. For regular work you do. Now when it comes to eCommerce fulfillment, if our API is not reliable, we're directly impacting our partners and ultimately their brands and then down the line to consumers. So we take that tremendously seriously. [00:25:16] And I've been lucky enough to be around Shippo almost from days zero. And that's the number one thing we take pride in, is our reliability and investing in the infrastructure. Because if our partners and their customers don't win flat out, we don't win. And, you know, no one's trying to be Comcast, so we just want to be as reliable as we can be.

Phillip: [00:26:47] We're in an era... I recently had Stephan Ango of Lumi, who has a really interesting... I mean, that business is amazing. We had him on the show. Fellow podcaster. He was telling me his take away from the timing of the pandemic coming at a time where had it been five years sooner or even 10 years, I mean 10 years sooner for sure, maybe even five years sooner, that companies like Zoom would not have been able to transparently scale in the way that they did. Because this AWS model of infinite scale at your fingertips is not a thing that anyone could have aspired to, to have a profitable business and aspire to at the software stack especially. But now we're seeing physical product businesses adopt those software models of having this resiliency and load balancing. And if you are in a physical products business, you can have a very similar... Like the capability of a Whiplash and Shippo gives you a physical stack that emulates that sort of load balancing and resiliency that you would have in the software space now. So with that as the sort of long form setup, I'm curious how the pandemic proved whether that's true or not for businesses that you guys service and were they able to avoid some of the bigger challenges? I mean, supply chains certainly was a recurrent discussion of like failings of supply chain. The global supply chain in particular from China. Getting product into warehouse was a problem. But having product move around the country seemed to flow mostly smoothly for most brands. And these were brands that were experiencing three, four or five X growth that they weren't planning on having to anticipate. So I'm curious, maybe you could both take a stab at that. Ryan, I'll direct it at you first.

Ryan: [00:28:55] Yeah, I mean, because of the breadth of customers we work with, some of our larger customers that saw much larger growth than expected, they were able to transition to air inbound, which is obviously a significant cost difference then getting it on the water. But they had the scale and they had the finances to allow them to be able to continue to get a supply chain, obviously a much more expensive supply chain. But, yeah, the inbound ocean shipping is I mean, if you just look at any of the ports, any of the trackers, there's countless container ships just sitting, waiting to get into Long Beach and all the rest of the ports, to be honest. And so they've just been a transition of if a brand is committed and understands that their growth is they're getting back to the story that Nima was saying around being transparent and communicating to your customers. Maybe you used to have two day shipping. Now you'll see a lot of the brands that understand that communication is key, really voicing "Items will be shipping, leaving the facility in 10 days, 15 days." And so just making sure that they're communicating that based off of their supply chain, I think that's the key. And then also, obviously, when you have that kind of growth, you need a partner that you're working with, or even if you're doing your own fulfillment, you need to be able to scale that. And that means additional people. That means additional shelving, potentially additional technology around your WMS, warehouse management system. And so with growth, both supply chain as well as just the actual logistics of getting that product off the container into a warehouse and then getting it out the door just exponentially increases. So, you know, I think some providers in the space have had some issues with it and others have done really well. We've been really lucky to have the space and the team to be able to scale with the customers. But that's basically the experience that we've been seeing. I don't know, Nima, if you're seeing anything a little bit different on the shipping side.

Nima: [00:31:06] No, I think one thing that definitely caused concern was the question you mentioned in your previous conversation around had this happened five years ago? Honestly, even if having happened last year, we know all the main carriers basically stopped accepting customers around October. One of the big four just closed their doors in October and said "We're not accepting new customers." That immediately puts strain on UPS and FedEx, which then immediately put the strain on postal. And postal gets a bad rep sometimes. But honestly, they were the savior because they were the shipper of last resort, if you will. In that same way, there was an opportunity and we're seeing more and more of this for regional carriers. Now, regional carriers, by and large, are not a fit for the long tail of SMBs, meaning your average Shopify store that's doing 30 orders a month can't leverage a regional carrier. Many regional carriers require somewhere around two hundred fifty, five hundred or even thousand pick ups a day. So at that scale you're talking about something else. But those brands now are thinking about, "Well, how do I balance my capacity? Should I have a risk management in place in the form of yes, my primary carrier is FedEx, and my secondary is the DHL eCommerce, and my tertiary is USPS?" But what if all those three fail come September, October or November of this year? Do I need a fourth one? Do I need a fifth one in place, especially by regions? So again, if you're working with a partner like Whiplash, you really do have those capabilities. And I know brands, and Ryan, maybe... Not maybe. You definitely know more. I know brands that are negotiating capacity with carriers now for Q4 and have been since March.

Ryan: [00:33:21] Yeah, it's 100 percent true. So along with not accepting new customers they're asking for committed volume, which means the merchants that a 3PL is working with or a merchant themselves really needs to understand their forecasts. And what will happen in Q4 is if you're your managing your own carrier accounts, and you're managing on fulfillment and you do have 2X growth over your forecast, they're just not going to take it. So for us, that means containers every day of parcels that would be sitting. One of the good things is with the volume that we have, we have the ability to have great account managers, really good service with the carriers that we work with. And we still, though, I think it's really imperative, and our Head of Global Shipping continuously lets the business development team know that we're really excited to bring on new brands, and we just need to make sure that if there is a new merchant moving into one of our facilities, we need to know now, because if we don't and they're coming in and they're doing 30, 50, 60 thousand orders a month and that's non peak, they won't be able to get their stuff out the door potentially. And so the carriers are becoming really stretched right now just because if you think about capacity. I think, you know, during Q4, it's like 17 million passengers a day. I'm throwing spit balling numbers out. But it was some ridiculous numbers there, kind of max capacity. And they were getting like forty seven, fifty million packages a day. So way over their ability to maintain their max daily output and they were still able to get some of it out. But it is a serious thing to consider, to Nima's point.

Nima: [00:35:11] I actually think one interesting thing I saw at the tail end of Q4 last year, and Ryan, I'd love to get your feedback on this one, too, and I think we'll see more of it this year is going back to our conversation about SLAs. I do think because of the capacity constraints that got put on the network, altogether we will see brands that will offer a longer time horizon shipments for free shipping, quote unquote. There's no such thing as free shipping. Even Amazon. But we'll see extra paid shipping if you want things expedited. So if you want to get something in Q4 in two to three days, you're going to have to pay whatever fifteen, twenty, twenty five bucks more. But if you're OK getting it and you know, seven to 14 days shipping, then it's "free." I do think we'll see more of that this year. We started seeing a little bit of it at the tail end of last year. I'm even seeing it now with some brands, even though there isn't that much strain on the networks. But you see the extra shipping options now, and the reality in the marginal cost of shipping can't go to zero. As long as there are planes and trucks and humans and all that involved, it can't go to zero. So there's always the marginal cost. But I like the fact that the market is sort of self-regulating in a way of saying, "Look, there's going to be different tiers. And if you really need this now, how bad do you need it? Are you willing to pay an additional X dollars to receive it faster?"

Brian: [00:36:51] Yeah, you said free shipping is never free. I think even we saw that last Black Friday. We saw the Black Friday fee with Adidas included that. They had free shipping, but they had like the holiday shipping fee, which cracked me up. There's so many interesting things about what happened this past Black Friday. Looking ahead to this coming Black Friday, actually really looking ahead to 2022. And I think we're going to be a little more prepared for this coming holiday season than we were four last holiday season. But the question is, the behaviors that we saw this past holiday season, how are those going to carry ahead to this holiday season and how is that going to set the tone for going into next year? I mean, we've talked about a lot of things today. How shipping is a growth engine, because you can increase complexity and change your assortment. You can decrease costs if you have the right systems, you can increase speed and and customer expectations if you have the right systems. And, you know, across many different places in your business from the front end all the way through to the end to end shipping experience. So shipping plays a huge part in being able to actually grow your business and make net new sales. So going into 2022 we've had this blip of a year, although it was a little more than a year, what do you expect that shipping is going to have to become in order to meet where we're headed? So I guess where are we headed and what does shipping need to become in order to continue to power that growth?

Ryan: [00:38:53] Yeah, I mean, from where we're heading, I'll let Nima talk a little bit about the shipping side. So I think, you know, retail has taken a hit. We have a large portion of our business, which is like traditional, large, big box at Macy's and so forth that we work with. And now we're starting to see these digitally native brands really take hold of the experience kind of retail shops. And so I think when you look at what's going to happen in 2022, everyone's, like "Oh retail is done." It's not done, it's changing. It's going to be a different thing. You know, I went shopping for the first time in a year about a week ago, and it was really interesting to see there's more experience being pushed at these different shops. And they're wanting you to interact with the brand. And I think when I look at 2022, you're still going to have heavy eCom growth. And the carriers are going to have to learn to support that. At the same time, these really successful merchants that are really thinking ahead are starting to have conversations with us around, "Hey, we're going to open up a couple shops. We're going to do these pop ups. We're going to have these experience locations where we're not going to be selling anything necessarily, but they can place orders and ship from our facilities." So [00:40:12] I really am confident that retail is going to see a rebirth, if you will, maybe a little bit of a different experience. But there is a lot of location, commercial space in cities that are kind of having... They're banking. And there's a low cost of entry right now in those different real estate markets. And so we're getting a lot more brands asking how can you support these smaller shops, maybe two or three per quarter over the next year? [00:40:41]

Nima: [00:40:42] I agree. I agree with everything Ryan said. I think there's going to be a bigger shift towards retail and experience. I mean, actually, one thing that did significantly change this last year was the larger CPG brands being forced to go DTC, right? DTC as just a channel. That was a channel that they hadn't really implored. So now you do have the largest brands competing with the long tail of eCommerce for the same channel, which means now the long tail of eCommerce needs to find new ways to compete with those folks, which then means they have to think about their wholesale strategy. They can't just remain DTC. And a wholesale strategy often means omnichannel means physical retail. And now it's the question of how they actually go about that. You know, with anything retail density is priority number one through ten thousand, so pick your location, pick your top one, two, three location. To Ryan's much earlier point, know where your customers are. If 51 plus percent of your orders come from one or two particular regions, then you ought to be looking at those physical geos as potential retail hotspots for you. And again, there's so many different. avenues now than there were available years ago, where there are these sort of hybrid showrooms. I know there's a company called Batch here in San Francisco, they house a number of different DTC brands, which actually provides a great consumer experience. It's kind of like a mini Barneys or mini Saks, if you will, except it's not all Dolce & Gabbana and Gucci, but it's your favorite DTC brands. I'm super keen to see how that plays out. I don't know what I don't know. If I knew the future and you know, we'd all be trillionaires, but super keen to see how that plays out.

Phillip: [00:42:48] Wow, what an amazing conversation. As long as we've been doing this, I still learn something new in every single episode. And if it sounds like I should have known something, then that was me playing dumb to try to get the right kind of answers out of you. What an awesome thing. And, you know, we do index toward the future because I think while we don't know what the future is, we definitely have a trajectory wherein we're heading. And I think for us to be prepared for a future, we have to understand that maybe, hey, we have the power to shape that future, and we have the power to help meet this new expectation and demand if we have the right systems in place and if we have the right partners along for the ride. And I think that that is a great way to sum up what this Step by Step series is all about, which is helping us all to understand that nobody delivers eCommerce in a silo. It takes a network of technology partners. It takes a network of physical logistics partners. It takes a network of retailers for us to be successful in the modern era. Nima, great to have you. Thank you so much, Ryan. Both of you, for all your wisdom. And thank you to everybody for listening to this series. We're so glad that you tuned in and stay tuned for the next episode of Step by Step.

Nima: [00:44:05] Thank you so much, you guys.

Ryan: [00:44:06] Thank you.

Phillip: [00:44:08] Thank you so much for listening to this episode of Step by Step. Remember, we have five other seasons available, and you can get all of those at FutureCommerce.fm/StepbyStep. And thank you so much to Shippo for sponsoring this season of Step by Step. Remember, that Shippo has everything that your business needs to manage customer delivery experience. You can click, print, and ship and that's it for free. And you can get started today by going to goShippo.com/FutureCommerce. Thank you so much for listening to Step by Step.

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