Step by Step S6 E03
June 2, 2021

[Step by Step] How Can Marketplaces Leverage Shipping?

In this season of Step by Step presented by Shippo, we ask the question, “How can I leverage shipping as a growth engine for my business?” In this episode, we talk to James Kawas, Co-Founder and CEO and Dani Arnaout, Co-Founder and CTO of Flyp about how they built their unique marketplace of professional resellers and the role of shipping in building their business.

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this episode sponsored by

Brian: [00:00:40] Hello and welcome to Step by Step, apodcast by Future Commerce, presented by Shippo. I'm Brian.

Phillip: [00:00:46] And I'm Phillip. And this is Season 6of Step by Step. You're listening to Episode 3 of 5. So if you're just jumpinginto the series midway through, may I suggest you go get something called adrink, rewind and go listen from the very beginning, because this season we'reanswering the question, how do you transform shipping from a cost center into agrowth center? And today's episode is going to be amazing.

Brian: [00:01:13] It is. It's so good.

Phillip: [00:01:14] I wish we could do the uncut version,the Zack Snyder version of this episode.

Brian: [00:01:19] Oh man. Yes. The Zack Snyder cut ofthis episode. Oh man.

Phillip: [00:01:19] Would have been amazing.

Brian: [00:01:24] Our guests ahead here have somethingincredible thoughts.

Phillip: [00:01:29] Amazing ideas.

Brian: [00:01:30] Yes. Just like big idea, guys. James,who you'll hear from I just like, I can't wait to talk to that guy more.

Phillip: [00:01:39] Yeah. James and Dani are visionaries.They are. At some point we'll get them on the Future Commerce podcast properand just let them go. I think they're the kind of guests that you just point ina direction and you just get out of the way.

Brian: [00:01:55] Thinking like late night, two episodesthat are like three hours of recording. We're sweating by the end.

Phillip: [00:02:03] Yes. Yep. Brown liquids in glassesbeing consumed. We need to set the stage for these guys to really be able tolet loose. But they have some thoughts. And I think the thing that I reallyappreciate is that they are veterans for a decade now in building marketplacebusinesses. And now this is their third iteration of building marketplaces.They had a successful exit from Mercari some years ago and spent many yearsbuilding Mercari's marketplace business. Now they're building a business calledFlyp, which is like a marketplace for people who sell products to other peopleso that they can sell them on marketplaces. It's incredible and very meta.

Brian: [00:02:49] Super smart.

Phillip: [00:02:49] Oh, my gosh. And just brilliant andlike perfect kind of a product that needs to exist at exactly this moment inhistory.

Brian: [00:02:58] Yes.

Phillip: [00:02:59] And we'll let them tell their story.The thing that I took away from this interview, Brian, was that Shippo has beena partner that they have trusted for a decade. And that in not one business,but three now and not just like a small, you know, mom and pop direct consumerbusiness, but also in one of the largest marketplaces online in the wholeworld. They have been able to use the same partner and the same business inShippo, because the way that the developer APIs work is it just scalesinfinitely with their business and allows them to use as little or as much ofthe functionality as they need as the business grows. How often do you adopt technologyand you get to hold onto it for a decade? It's unheard of. And that reallyimpressed me and was the thing that I walked away from that saying, wow, liketechnology has changed a lot from when I was brand side ten years ago.{laughter}

Brian: [00:03:58] Yeah, yeah. Totally. I mean, it's stilltill death do us part, if you will.

Phillip: [00:04:02] Yeah.

Brian: [00:04:02] Yeah, we did a whole guide on thisrecently.

Phillip: [00:04:04] We did a whole piece on that. Yeah,yeah. You're getting married baby, when you pick a shipping and logisticspartner.

Brian: [00:04:13] Or you hope so. Otherwise the divorceis messy.

Phillip: [00:04:16] That's a whole other thing. But we'regoing to get into it here. And we're just setting you up for this episode. It'sgoing to be great listen. So sit back. Hey, listen, we all know you don't havea choice anymore. You have to be online. You have to sell online. And customershave rising expectations. And most businesses think of shipping purely as acost center. But that's what we're here to help reorient, because in thisseason of Step by Step, we're going to partner with Shippo to help youunderstand why shipping can be leveraged to be the growth engine that it reallycan be for your business.

Brian: [00:05:03] We're emerging in the highest period ofgrowth in eCommerce, which means shipping has increased for everyone. The costhas a real impact on your growth and your customers willingness to buy online.So if you're an operator in a marketplace business, like Flyp. If you're a DTCbrand. If you rely on eCommerce platform for B2B or B2C or in any way...

Phillip: [00:05:32] OMG.

Brian: [00:05:32] If you run an online retail channel,this series is for you.

Phillip: [00:05:37] Yep. And listen, it's. A fascinatinglisten. It's going to be great. I can't wait for you to hear it. So let's getready and let's join James Kawas, who's the Co-Founder and CEO, and DaniArnaout, who is the Co-Founder and CTO of Flyp, as they tell us how we can turnfrom this cost center mindset into making shipping a growth center for yourbusiness Step by Step.

Phillip: [00:06:08] We're back with our Step by Stepseries. Today, we were sitting down with James Kawas and Dani Arnaout, who areCo-Founders of Flyp, and Flyp is a marketplace, but it's just the most recentmarketplace that these two fine gentlemen have built. They spent a decadebuilding marketplaces. And as we're unpacking how shipping impacts the worldaround us and how we engage in commerce, I feel like there's no better group offolks for us to sit down with. Welcome to the show, you two. Thanks for joiningus, James and Dani.

James: [00:06:39] Thank you for having me.

Dani: [00:06:40] Thank you for having me. Thanks.

Phillip: [00:06:41] Yeah. James, I this is going to be whatI'm going to say is the Mr. Toad's Wild Ride of podcasts. Tell me a little bitabout Flyp.

James: [00:06:51] Absolutely. So Flyp in a very briefway, is a marketplace. It's a mobile app that allows people who have stuff thatthey want to sell, whether they're individuals or just want to declare theirclosets or if their businesses that have overstock inventory to be connectedwith professional resellers who will sell it for them. So let's say you're abusiness owner, you want to liquidate, and you have a lot of inventory. You canessentially go on this app and partner with a bunch of professional resellers.These are full time or part time resellers on marketplaces like eBay, Mercari,Poshmark and so on, and they'll sell it for you on commission. So it's kind of,Forbes calls that the Airbnb of consignment. So I like that description.

Phillip: [00:07:44] I love that, too. So you have this tenthousand foot view. I hate that phrase. I don't even know why I just used it.But you've got this huge...

Brian: [00:07:53] High level view.

Phillip: [00:07:53] Yeah. Yes. It's at a very high level.You have this perspective on shipping and perspective on small businessmarketplaces and peer to peer that no one else on this series does. So I reallywelcome your perspective. This isn't your first go around and building amarketplace. You guys spent some time at Mercari, and I think before that youhad another business that was quite successful in the same space, correct?

James: [00:08:17] Correct. So Dani and I have beenworking together for at least the last nine years, building second handmarketplaces. We first built our own marketplace very early on in 2012, Ibelieve. And it was an app for people to buy and sell used goods, which is todaythere's so many it sounds like a very uncreative idea. But at the time it was.You know, we built that. It grew to half a million users. And then we joinedMercari, which was like very much what we built but on steroids. We grew theproduct and the user base that Mercari to millions of users, IPOd, and reallysaw that from a huge, huge perspective. And Flyp is a natural continuation ofour obsession with the, you know, the resale market, so to speak.

Phillip: [00:09:09] Wow.

Brian: [00:09:09] So cool. Dani, tell me a little bitabout your journey in this process as well.

Dani: [00:09:14] So, as James mentioned, we've beenworking together for over nine years and it all started from a Hackathon, butwe were very young. And it actually it happened that the idea that we won withour latest Hackathon is the marketplace to buy and sell second hand items thatwe wanted to go with and test as a startup. And then we got sucked in into thisindustry and we started exploring a learning much more things as we go. Firstof all, we were strangers into the industry and then we became very obsessedwith it. And after nine years, we're still doing the same thing. So just abrief about us. I come from an engineering background. So as a softwareengineer, loving to go to these Hackathons and build things and create thingswith the ability to use my coding skills, meeting someone with just pure ideasand how to build a business around these ideas was a very good match. And thisis what happened at the beginning. So we started working together in ourcomplementary skill sets. And this is where we are today with Flyp.

Brian: [00:10:29] Well, today we're on our next episodeof Step by Step, and we're super excited about this topic of shipping and howto use it as a growth engine in your business. I think, as Phillip said, youhave a very unique take in that you've been around marketplaces for so long andyou've been able to experience and leverage shipping in so many different ways.Talk to us a little bit about how we can sort of change the conversation aroundshipping. Oftentimes, it's just looked at as like something that costs money.You have to do it, something you have to do. If you're going to sell online,you have to pay for shipping. But is it potentially something beyond that? Canwe transform it from a cost center to a fundamental growth driver of thebusiness? James, what do you think about that?

James: [00:11:21] Yeah, I mean, you know, there is atruth to that, right? I mean, yes, shipping is a cost centered part of thebusiness. Certainly, you know, everybody who offers shipping is obsessed withreducing that cost. And even consumers would love to either pay very littleshipping or no shipping at all. But when you really look at marketplaces, forinstance, like Amazon, Mercari, Flyp, Poshmark, all these marketplaces,shipping is truly it is kind of an acquisition channel for them, too, in thesense that offering subsidized shipping is often an acquisition tool. Byreducing the cost of pricing and offering reduced pricing on shipping, thesemarketplaces can attract more buyers and sellers. So, you know, in many ways, adollar spent on shipping is a dollar spent on user acquisition. You just wantto see it. You can see it in different ways. But certainly, you know, I completelyconsider it a marketing dollar. You still want to reduce it. But it'sabsolutely already at least the marketplace is a major competitive advantage,you know, and marketplaces are always kind of fighting who has the cheapestshipping costs for labels and so on, so forth. And historically, even when wewere at Mercari, we spent years subsidizing shipping to get people to use theproduct and to do it without friction. And so it did play a role of a growthengine there, despite still being a cost sensitive part of the business.

Brian: [00:13:06] Oh, I hear you saying something reallyinteresting here, which is actually reducing the cost of shipping is not likereducing the cost on business. It's actually more like reducing the cost ofyour marketing spend. Like should shipping subsidization come out of marketingbudget, then?

James: [00:13:27] It is.

Brian: [00:13:27] Not out of operation budget?

James: [00:13:28] It makes sense. Yeah. Yeah it is. Itabsolutely is. It's completely that. I mean why else are you subsidizingshipping? Yeah, it has to be marketing at the end. So, it is in my opinion andshipping certainly is... It's so important to think of shipping as acommunication tool, right? So shipping is so important. And when you talk aboutshipping as a growth engine, for instance,[00:13:58] shipping, of course, is a growth engine. I mean, the entire web ispossible, all eCommerce is possible because you could ship stuff. So it is. Thequestion is, how do you master that in a way that is intentional as a brand oras a marketplace [00:14:14] is something important?

Dani: [00:14:15] Yeah, I think we take it for grantedthat shipping is there and it happens magically behind the scenes. But in asense, if shipping didn't exist in the way it existed, we would just end upwith local marketplaces these days. And that's it.

Phillip: [00:14:29] And I think there's likely room for...With the growth of resale in particular in your perspective, there's likely alot of room for growth there. And so customer acquisition from the marketplaceperspective is it's such an interesting dynamic in that you're not necessarilygetting a loyal customer, are you? Like, if someone is selling resale in themarketplace, they're likely sampling among a lot of different marketplaces atonce or a lot of vertical marketplaces. There are apparel marketplaces, right?I remember last year or the year before Etsy acquired Reverb, which is a resalemarketplace for used musical equipment. Like the growth and explosion of resalemarketplaces, not just akin to like a particular type of marketplace that'seither luxury or not. It's they're likely working in a bunch of them. So theyhave this exposure to multiple pricing structures, multiple shippingstructures. And so what I sense you're saying is that marketplace competitiveadvantage can be around shipping as well, for marketplaces to acquire moreloyal customers.

James: [00:15:35] Yeah, I mean, it's even simpler thanthat. The more the field you're in is competitive, the more you're going towant to compete on any possible part of it. Even if you just look at generaleCommerce, I mean, Amazon if they did one thing right, it's the shipping. Imean, like it just like they don't have the best cataloging. They don't havethe best browsing experience. What they did really well is just to know how tosubsidize shipping in a very, very, very cutthroat business like retail. Socertainly I think the more competitive your market, the more shipping is agrowth engine.

Phillip: [00:16:18] Is there an economy of scale where thelarger you grow as a marketplace, the more competitive you can drive thoserates because the more volume you're driving the carriers?

Dani: [00:16:28] Of course. Yeah. I mean, usually withcarriers, you strike some deals specifically on your volume and the more youship, the less it will cost you. And this is where these bigger marketplacescan even provide lower pricing, which are mostly more attractive to theircustomers. This is what's happening today.

Brian: [00:16:49] So tell me a little bit more about themechanics for Flyp, because I feel like what you're doing is a little bitdifferent than what a lot of larger marketplaces are doing. And so how doesshipping play into the way that you're operating?

Phillip: [00:17:02] How dare you, Brian? They're thelargest resale marketplace that there is. I mean, don't demean them.

James: [00:17:07] It's ok.

Dani: [00:17:08] No, no, he's right. I mean, Flyp is abit of a weird marketplace. It's a new kind of marketplace in the sense thatmost marketplaces connect sellers and buyers. We actually connect owners withsellers, if that makes sense. In most marketplaces, if you're the owner of theitem or the inventory, you are bullied into becoming the seller of the item.You have to. Otherwise it's not going to sell itself. So Flyp takes that a stepback and says, you know, if you're the owner of a box of inventory or a palletof inventory or whatever, you have to be the seller. You can give it to aseller and then the seller goes and finds a buyer across all thesemarketplaces. So in many ways, the way it works is on Flyp you would ship a bigbox of stuff to a professional reseller that you partner with through the app.And the good thing about something like that is we get to benefit from volume,so to speak. I mean, shipping does get more expensive as the package is heavieror bigger, but it actually is much cheaper to ship a 30 item box versus ship aone item box. So shipping, in our case, we actually use the most out of theshipping cost structure out there. If you are just selling one t shirt onMercari or Poshmark, you're going to have to pay like seven dollars inshipping. If you're shipping an entire box on Flyp, it's going to cost youanywhere between eleven to fifteen dollars. So the cost for shipping of oneitem is much, much better. So in that sense it's a bit different. But yeah, Imean there's all the... It is different. You're sending inventory to resellersand the reseller posted across these marketplaces, then they ship it to the endconsumers. But as a marketplace, we deal with the first part mostly on our end,and this is how we leverage it.

Brian: [00:19:15] So in many ways, you're actually usingshipping, the idea of bulk shipping, as a way to diversify the type of customerthat would engage with the marketplace.

James: [00:19:26] Yeah, I mean certainly. Actually one ofthe biggest friction points in selling is shipping. I mean, you know, peopledon't want to box things and ship them out one by one. Right? So I think a lotof our innovation in this in this model is around reducing the friction toship. Instead of having to ship 30 items individually, like 30 packages, you'reshipping one box. So in many ways, shipping in our business is the model, like thelogistics of shipping is what makes our model attractive.

Phillip: [00:20:05] Hmm, there's likely a challenge youhave in your business that I think a lot of direct to consumer businesses wouldhave, a lot of tools to be able to enact that would give them some greaterinsight into like funnel metrics or analytics around conversion dynamics. Whatare some of the things that you track at the marketplace level to try to getcustomers to... Is there a sweet spot around shipping? Is that something thatyou test frequently? I'm just curious about how the marketplace might differfrom, say, just like a traditional direct to consumer business and theanalytics stack that you would use to test hypotheses around pricing and priceelasticity.

James: [00:20:51] Yeah, you mean. You mean particularlyregarding shipping prices?

Phillip: [00:20:55] Yeah. Or other conversion metrics thatare around the bottom of the funnel where decision points are being made aroundcommitting to a sale.

James: [00:21:06] Yeah, absolutely. So so I would say wehave more analytics than the average, you know, direct to consumer business.And that's just very true about marketplaces because you're handling supply,you're handling demand and so naturally, and then the relationship betweenthese two, so actually, our analytics stack is much more complex than a directto consumer. I wish we were a direct to consumer when it comes to analytics.And, you know, regarding shipping pricing, we haven't really experimented alot. We just try to keep it hovering around the same value and kind of averageit out, so some people end up paying a little bit more than they would have.But then a lot of people end up paying less than they would have. And weaverage it out between these thousands of users. This is what all marketplacesdo to offer essentially flat rate shipping for their customers. Not ones thatthat change a lot. Like eBay makes it so that it's dynamic. So each shipment isa different price and so on. So that's one way we do it. But [00:22:06] analytics wise, we focus a lot onperformance, on pro seller performance. How much are our pro sellers sellingfor their customers? How much is the price accuracy? How fast are they sellingstuff? And we optimize for that. We have an entire matching system that isdesigned to essentially to incentivize pro sellers to behave and to performbetter with their customers. So a lot of our analytics are done aroundefficiency of distribution that our resellers are offering to their customerson Flyp. [00:22:43]

Phillip: [00:23:43] So there's this really interestingthing that I had not thought of until you were answering that, James, which isin a B2B scenario, you're sort of creating a moat around a person's businessoperations, and the way that they see Flyp is potentially this customeracquisition channel. So because it is an owner to a seller operation, there isthis interesting dynamic that's very different to direct consumer. Direct toconsumer is indexed from a convenience price sensitivity. Over time, the moreloyal you are, the expectation as a customer is the more efficient andinexpensive it gets. Whereas I think that there's an opportunity for you tobecome the more a power user becomes the less sensitive around price. And theyare, the more you've developed this critical part of their businessinfrastructure, the more you could actually test price elasticity and raiserates over time. And they're happy to pay it because they see us such a vital,fundamental channel. So is that correct?

Dani: [00:24:58] It's absolutely true. Not that we areplanning to, like, leverage that to overcharge customers.

Phillip: [00:25:07] No for sure. But you were saying itaverages itself out across the entire customer base. So small minute changesactually lead to you being able to grow the whole customer base by furthersubsidizing new customer acquisition.

Dani: [00:25:21] Yeah, I just wanted to say that this issomething we noticed from our analytics and numbers. We give kind of scorings.We have a scoring system to see who is performing well and who needs some helpas well. And what we realized from our numbers, the higher volume you sell as areseller, the less you care about the smaller and smaller issues. And then youjust focus on getting more inventory to sell it, because once you make muchmore money, your cost is just... You ignore the small cost of, for example,shipping or fees, marketplace fees because you are making a lot of money. Andusually the people on the lower end of the spectrum are the ones that are moresensitive about the pricing.

James: [00:26:12] Yeah, that's very true. And that's trueon the pro seller's side. And it's also true on the client side, which is theowner of the inventory, the one that hires the pro seller, so to speak. We lookat the biggest clients that we have, which are predominantly small businessowners who just want to liquidate their inventories. And we notice that we playsuch a role in their liquidation process that most small numbers of shippingand so on don't really matter, because if you are a small business or aboutique or even you name it, and you have thousands of items you want to move,on the market today, if you go to liquidation as an option, you're literallygoing to get pennies on the dollar. When you come to Flyp, you're earning 50,60 percent of the actual resale value of the item on these marketplaces. Somost people are willing to get past that and like just focus on integratingthis as part of their cycle of inventory. So what you said is true on bothlevels, the pro seller and the client as well.

Brian: [00:27:23] That's really interesting. So how doesShippo play into this process? What's the sort of the value that it provides toyou in that cycle?

Dani: [00:27:32] That that feels like a technical question.So I'm going to take it.

Phillip: [00:27:36] Sure can be. Yeah.

Dani: [00:27:37] I mean, yeah, we've been using Shippowith our previous startup as well. And I think if anyone has tried to use or totalk directly to carriers, you would see how hard it is just to integrate withone carrier. [00:27:58] The value for us as astartup that is executing fast and building fast is with Shippo we were simplyable, within just a couple hours, to have a fully ready, label generationmachine that integrates with all the big carriers. And for us, one of thebenefits to have Shippo is they've got this really cool feature where you givethe information that you need... Who are you shipping from where to where? Thesize of your package and the weight. And they provide you with the differentprices and the different rates from different carriers. And then you can pickthe one that works for you. We can leverage that in two ways. We eitherdirectly show our customer the, for example, the lowest price shipping label orthe additional bonus is you can give the options to your customer. Hey, this isUSPS, FedEx, UPS, you pick whatever works for you. For example, some customerswould be willing to pay the extra money. They wouldn't be sensitive for theextra dollar, for example, increase just because it's more convenient for themto ship with USPS because they have the blue box right next to where they live.So this is what we saw with Shippo, the ease of just generating labels andshowing different rates. [00:29:24]

James: [00:29:24] Yeah. And so I think to add on whatDani said, Shippo is basically this aggregator of an otherwise very fragmentedprocess. If you want to source prices and options from different carriers, itwould take us months to kind of build something that barely works and that willlikely break often. And Shippo kind of takes that heat in the middle and kindof offers it as a simple, straightforward API that just, you know, when you useto put to general labels, if you didn't understand how hard it is to work withcarriers, you would think that this is a very easy process and everything isbeautiful and nice. But in reality, in the back, it's much more kind of messy,and Shippo kinds of shields the startup from that. The other thing that Shippodoes, which is most certainly one of the biggest selling points for Shippo, isthe pricing. The price competitiveness that they offer. I mean, with Shippo wecan get labels much cheaper than anywhere else, essentially, which is again,goes back to one of the core points about shipping is you want to do it and youwant to do it cheaply. So Shippo really helps with that. They have a hugevolume. So they have this kind of ability to negotiate with carriers and passon this negotiation benefits to you as a customer of theirs, which I think is avery smart thing to do. Because they negotiate on the behalf of all of theircustomers at once, which makes one big customer that can get the best rates.And so that is certainly I mean, if we didn't use Shippo's API, we would easilybe paying twice as much for shipping on average, at least. So these are a fewways that Shippo has been essential in the three businesses that we've built sofar, the marketplaces.

Phillip: [00:31:28] It's so funny how often, you know, Dani,I come from an engineering background and before Stripe came around, those werethe dark ages. You know, you wanted to implement payments, you had there were20 gateways and they were all ancient and you had to directly integrate to eachone of them. Then you had to build an analytics pipeline and you had to managereconciliation and reporting financials all yourself. There were certainlyno... I remember I spent years building a subscription management platform inthe first direct to consumer business I worked in.

Dani: [00:32:10] I'm so sorry to hear that. {laughter}

Phillip: [00:32:12] Oh, and it was painful, right? APIfirst businesses have really democratized access to software companies who areactually creating brand new paradigms, and the fact that you all can achievethe scale by not having to be experts in shipping and negotiating directly withcarriers, but by working with what is effectively the Stripe of shipping, itallows you to focus on your core business, which is the thing I'm trying tosay. You're allowing product owners and pro sellers to focus on their businessand Shippo is allowing you to focus on yours.

Dani: [00:32:51] Yeah, this is a very good example. Alot of things that we do are within the same concept. So nowadays we don'tthink about payments. It's just Stripe or any other similar service. Same thingwith email, sending emails to your clients, sending SMS, all these kinds ofservices are very similar and Shippo plays a huge role with shipping. Just toput it in perspective, imagine a world without a payment processor and you haveto do everything yourself. This is exactly what Shippo is doing today toshipping labels.

James: [00:33:32] The way I like to say it in a verysimple way. And as a software company, we don't love atoms as much as we lovebits, so to speak. We are much more comfortable with bits than atoms. Atomsmake us uncomfortable and Shippo kind of shields this atoms world of shippingand kind of translates into the world of bits, so that we can just deal with itmuch easier. So that's kind of what they do in many ways.

Brian: [00:34:04] How does this work as you scale? LikeFlyp's got a really interesting business model. I expect big things out of youand to see a lot of success ahead. And so as you grow, how do you expect therole of shipping to change and how you go about going through the process ofgetting rates and so on? What do you expect to be different and what challengesyou might have to face and what opportunities are there as you grow?

James: [00:34:34] You know, the immediate thing I thinkabout is at scale... Scale is when the small amounts of money add up and theybecome big amounts of money. So what I think shipping is going to start playinga role in, and look, we've seen that at Mercari. We've gotten big to the pointwhere shipping was something, you know, saving a half a dollar there is notjust half a dollar. It's much, much, much more. And I think that and that'salso where I think Shippo is going to be helpful, and they're already kind ofhelpful with that is allowing us to actually keep getting better rates as webecome bigger volume customers. I think scaling shipping is about being able tokeep the cost of shipping at the lowest possible bracket that you can imagine.Because at that point, we would have completely understood where shipping sitsin terms of the growth engine, like, OK, how much money are we spending onshipping to subsidize to actually get marketing returns on it? And then itbecomes at scale things become much more boring. At scale you just want to getthe basics. You already know what you're doing. You just want it to be cheaper.And eventually scale means more profitability and so on, so forth. So I thinkwhat we would look forward to is being able to efficiently negotiate betterterms. And we know that Shippo kind of facilitates that. They already havetheir own internal structure as how you can get cheaper rates as you growbigger, which already saves us a lot of, you know, ad hoc negotiations we wouldhave had to do it like UPS and USPS, which we once tried to do. It was anightmare. So I think that's what I envision for shipping at scale. We're goingto have a guy who's head of shipping who just deals with this. Yeah.

Phillip: [00:36:43] And you can, right? So it's interestingthe maturation of that cycle, which is at this scale of your business rightnow, especially in early stage, you get the efficiencies of this API as aservice sort of business. But as you grow and your needs grow and you becomemuch more formidable, that business allows you to well, now this is an area ofoptimization and an area of potential transformation for us. If we save moneythere, it actually translates to massive amounts of operational efficiency. Andso it's funny that while this business that works for small startups can alsowork for giant enterprises, which is not a thing that I think we had seen inprior eras of SaaS based eCommerce infrastructure. That's the thing that wasextremely fragmented to only cover a certain market segment. But this new breedcertainly is allowing you to have continuity as your business grows, which is Idon't know if you all have witnessed this. Changing business infrastructure isincredibly distracting. {laughter}

Dani: [00:38:05] Absolutely.

Phillip: [00:38:06] Right?

James: [00:38:07] Yeah. And again, this is also where Ithink Shippo already understands this very well. I mean, you look at theirservice, you know, when you're a small company, you go there for theconvenience. And as you grow, you immediately have all those discounted ratesat scale and so on that kind of keep you using Shippo. And this is whyimmensely huge companies use Shippo. I mean, they did not leave Shippo anddecide, oh, we're going to do this thing on our own. Clearly they didn'tbecause Shippo knows when to kind of switch that focus from just theconvenience of integration to the optimization of of cost to the best of theirability. So the best of what you can do, given the current carrier system andthe current cost of shipping and the current methods of shipping. Yeah.

Phillip: [00:39:01] Wow.

Dani: [00:39:03] Yeah, I want to just add one thingalso. I think you feel, [00:39:07] you knowthe value of something when you forget that it exists and it's essential toyour business and otherwise you cannot go without it. [00:39:16] I wouldsay that me and James probably talked about when we were starting Flyp, wetalked about Shippo for ten minutes when we wanted to integrate it. We werelike, so we need shipping. Shippo. Yeah? OK, go. That's it. And we haven'ttalked about it ever since. The reason is because[00:39:36] it just runs smoothly, and we don't have to think about, oh, so nowin the future we want to go and build our own solution. No, it is scaling withus as we go, and we don't have to think about it. [00:39:50]

Phillip: [00:39:55] Well, I would never say things are onautopilot, but I think things... Certain services in your business, especiallywhen you're creating a brand new type of a marketplace, you have to be focusedvery intently on creating an excellent customer experience and delivering onyour promise to your customer. I hear that from direct to consumer businessesall the time. It seems like it's very true for you, too. And these are thetypes of things that could be incredible distractions for operations teams. Whynot just focus on your business? I love it. Any last words, James? I'd love toget... I'll give you the last word. How's that?

James: [00:40:36] That's a lot of pressure. Look, I thinkshipping is an area that we overall as a society completely underestimate. Andwe don't put too much thought into it. And given how important it is and givenhow much it touches everybody's lives, like this is not a distant concept. Thisis something that we see every single day. And I think the only thing I thinkwe ought to do is to think of shipping more often in terms of innovating inshipping, in terms of creating new ways to ship and making it so that we cancommunicate physical goods better than we are today. And companies like Shippoare doing a lot of the work on bridging the gap between carriers and users ofthose carriers, businesses that use them. But I think when I think of shipping,I think that one of the biggest frontiers there is being able to create newtechnologies as to how we ship stuff in the first place, not just the cars thatmove them and the airplanes. What's next? And in a serious way, what's next?Not just like let's fly some drones. I think that's kind of what I think isvery interesting about shipping. And whatever it is, I'm pretty sure Shippowill support it as an API.

Phillip: [00:42:07] There it is. Brian, take us home. Thankyou guys so much. This has been so great to have you on the show. Reallyappreciate all your thoughts. And I thank you all for listening to Step byStep. Brian...

Brian: [00:42:17] Thank you so much for listening toFuture Commerce. We appreciate your voice as well. So please reach out to usand let us know what you thought of this conversation. Also, if you have a sec,head on over to Apple Podcasts and leave us the five star. We would love anyfeedback you have. And we're looking forward to having you join us for the nextepisode of Step by Step. Thank you so much.

Phillip: [00:42:44] Thank you so much for listening to thisepisode of Step by Step. Remember, we have five other seasons available and youcan get all of those at FutureCommerce.fm/StepbyStep. And thank you so much toShippo for sponsoring this season of Step by Step. Remember that Shippo has everythingthat 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 goingto goShippo.com/FutureCommerce. Thank you so much for listening to Step byStep.

 

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