[Step by Step] Why Should I Prioritize Shipping in My Business?

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

Phillip: [00:00:41] And I'm Phillip. And this is Season 6 of Step by Step. And you're listening to the very first episode. So welcome. Brian, this is six seasons. We have covered a lot of ground, and I have learned a whole lot. I just cannot believe that we're in our sixth season of Step by Step.

Brian: [00:00:59] Me too. I've learned so much. I'm super happy we decided to start this series because it just has taught me a lot along the way. Hopefully everyone else has learned a lot as well. And just thinking back to all the things we've covered. In Season 1, we covered raising capital for retail and for brands. That was incredibly fascinating to me. I learned so much there.

Phillip: [00:01:20] Yeah. Like I didn't know... I mean I knew what venture capital was. Or I thought I did. I knew what private equity was or I thought I did. But now I do know, and I learned that because of this podcast.

Brian: [00:01:32] Yeah. That was amazing. Then in Season 2 we moved on to building a tech stack, and the importance of building a tech stack, and how to build a tech stack. That's something that you and I, I mean we do it for a living. And so it was super interesting to talk to a bunch of different companies about their take on their stack. Great merchants in there. And then in Season 3, we also talked about customer support and customer experience. And the conversations that we had there, like actually touched my heart. They were incredible.

Phillip: [00:02:06] Yeah, it really did. And I just think about then, you know, how we transitioned. We shifted gears in Season 4 to talking about doing more with less by automating more of your business and how to put marketing on autopilot to allow you to focus on more one to one with the customer by providing lifecycle and automation, which was amazing. And then in Season 5, we talked about how you can compete with Amazon, no matter what size your business is, that there is a modern eCommerce operating system of partners that can work together and you can leverage to help grow your brand. We have never doubled back all along the way. We keep building on concepts that will help you grow your business. So what is this season all about, Brian?

Brian: [00:02:54] Yeah, this one's about how to transform shipping from a cost center into a growth center because honestly, like at this point, brands don't have any choice but to be online. And so with rising consumer expectations, most businesses think of shipping purely as a cost center. But in this season of Step by Step, we've partnered with Shippo to help you understand why shipping can be leveraged as a growth engine.

Phillip: [00:03:19] Yeah, and think about it, we are merging right now into the Roaring Twenties of the highest period of growth in eCommerce that we've ever seen. And that means that shipping has also increased for everybody. It has a real impact on your growth and it has an impact on customers willingness to buy online. So what if that shipping mindset could be shifted away from thinking of it as a cost center to thinking of shipping as a growth engine? And that's what I think we can all learn about in this season of Step by Step, brought to you by Shippo.

Brian: [00:03:51] So this podcast is for people who are operators in a marketplace business. If you're working for a DTC brand, if you rely on an eCommerce platform for B2C or B2B, or honestly, if you run an online retail channel, this is for you.

Phillip: [00:04:13] If you are breathing, {laughter} I think you could...

Brian: [00:04:17] {laughter} Shipping touches everything now. It's incredible.

Phillip: [00:04:19] It really does. And that's kind of where we sort of did that like, you know, patter, patter, build up to tell you that, like everything that we have been talking about up to this point is completely meaningless if you don't get a package to the door. And when you think about when we talk about loyalty a lot, we talk about tactics to build loyalty in your business and all the ways that you can incentivize people to buy more. The way that you can incentivize people to buy less is to get them a package as late as possible and as broke as possible. And the way that... If you are consistently over delivering and meeting customer expectations around logistics, logistics and shipping, you're going to be successful. You're going to build loyalty in your business, in your online channel, and you're going to grow. And that's where, you know, our partner Shippo, in this season, has created an incredible lineup of people who can tell you from their own vantage point in all the ways that shipping is consumed in our ecosystem of retail, how they're transforming in their business from a cost center to a growth center.

Brian: [00:05:30] And it really does take a network, a community of different components, different types of businesses to build this shipping platform you're going to need in order to address your customers expectations. And so in our five part series, we're going to talk to a DTC brand operator, marketplace, an eCommerce platform, and a 3PL who is super unique and super interesting.

Phillip: [00:06:01] Yeah.

Brian: [00:06:01] So I love it because in this episode, we're going to start by talking to Shippo. Shippo has got a really phenomenal perspective on what it means to actually turn what is traditionally seen as a class center into a growth center and improve your shipping processes.

Phillip: [00:06:22] And obviously, we're recording this now after the fact. We've sat down with five different people, and we've had all this perspective given to us. And you know, what I have learned this year in this season of Step by Step is that there are insane numbers of challenges and so many different levels of complication, like the way that shipping... Like getting a package to the door requires very, very a number of incredibly orchestrated processes and hands for data to travel through just to get it, just to get a package to your door.

Brian: [00:06:58] Yes.

Phillip: [00:06:59] And so those challenges are very real. The thing I would say is that if the promise of eCommerce in the aughts, in the early 2000s, was "It's cheaper to buy online because there's no middleman," then the challenge of the 2020s is "eCommerce is nothing but literally middlemen." And so having a profitable business when you have great providers and label providers and 3PLs that are all have that incrementality almost of eating away at your margin can be really tough. A challenge to meet and to overcome. And I think that we give you some of those building blocks for you to be able to overcome those challenges Step by Step.

Brian: [00:07:47] Yeah, I think those building blocks are essential because the thing is, shipping is complicated. It's complicated. That's why there's so many middle middlemen. That's why eCommerce is so complicated, because these vast logistics systems require a lot of different types of expertise. And so I think that, as I got into it, I was like, wait a minute, there's 4 and 5PL? There is 6PL? Like, whoa. This is incredible. And looking ahead. And you're going to learn about that in Episode 5, so make sure you stick around through the end of this series to hear about that.

Phillip: [00:08:34] Yeah. And these are all fascinating listens. And so let's not waste any more time. Without any further ado, I can't wait for you to hear this season's five part series. So let's jump into Episode 1 today. We're going to join Michele McNamara, who's the Senior Marketing Manager at Shippo, and she's going to teach us how you can turn shipping from a cost center into a growth center Step by Step.

Phillip: [00:09:05] We are here for our sixth season and our first episode of Step by Step, and we are going to dive deep this season into all things shipping. It's complicated. And there's a lot of sort of mystique around how you can change the conversation around shipping. I think a lot of people think of shipping as a cost center, but this season on Step by Step, we're going to talk about how we can transform it into an engine for growth for your business and whatever kind of business it is that you might be running. It's going to be a great season. And joining us here for our very first episode is Michelle McNamara, who is the Senior Marketing Manager at Shippo. Welcome to the show.

Michelle: [00:09:43] Hi, thank you,

Phillip: [00:09:44] So good to have you, and I should ask you the question that everybody is probably thinking, why is shipping such a challenge? And what are some of the frustrations that businesses face today in shipping?

Michelle: [00:09:58] Yeah, absolutely. And thanks again for having me. I'm excited to be here. So [00:10:03] shipping is a common pain point for merchants, and yet it's unavoidable for most retailers today. We've seen eCommerce accelerate tremendously in recent years, in part because of COVID and trends in consumer behavior. Now, merchants can't simply avoid doing business online and as a result, they can't simply avoid shipping either. The irony is that this shift toward online shopping has actually created an offline problem in shipping. It's the convergence of the digital and physical worlds. [00:10:35] You have to pack boxes, find a shipping provider to pick them up, interface with the delivery people. It's an incredibly complex web to navigate and a lot is at risk. And on top of all that, you have Amazon Prime. Amazon's free two day shipping has shifted consumer expectations. Every merchant struggles with inadequate technology, rising consumer expectations. But it doesn't make sense for every merchant to solve this by themselves. It makes sense for a platform to solve this for all merchants. And that's why Shippo exists. We are building the shipping platform for twenty first century eCommerce. We make sure that every eCommerce merchant gets access to best in class shipping. Merchants need to keep up with Amazon shipping speed infrastructure, consumer experience. So the goal is to set a new bar for shipping.

Phillip: [00:11:27] Yeah, oh, and I think you're doing that, and so we're so pumped to be partnered here on this season because I think the bar is being set higher for shipping. Shippo is very well known and regarded in the ecosystem. And the things I'm looking forward to learning about is really how businesses of all types and sizes, from a boutique sort of candle brand all the way to a growing like multisided marketplace, can use the same type of engine to solve their own problems. And as you said before, it's because they're all... Why? Well, because customers sort of have a lot of expectations around shipping and by the way, they want it to be free. And fast. {laughter} So, yeah, I think there's a lot to unpack here in this season of Step by Step. Brian, what's on your mind and what else are we going to cover this season of Step by Step?

Brian: [00:12:28] So I think what's really interesting about this time, and you already touched on this a little bit, Michelle, is we're coming out of one of the biggest shifts to eCommerce that we've ever seen over the past 20 years, the highest period of growth. And so give me a little bit more info about how the pandemic has impacted eCommerce.

Michelle: [00:12:54] Yeah, gosh, it's been a year of uncertainty, to say the least. I'm getting my second shot on Monday, and I'm so excited. But eCommerce has been one of the few silver linings. eCommerce sales in the US grew more in the three months of Q2 last year than the previous five years combined. One reason for this growth is the new consumers that have come online as a result of the pandemic. We surveyed consumers in Q4 and 57.6 percent said their online shopping has either slightly or significantly increased since the pandemic started. And these monumental shifts in behavior are here to stay. A recent study found 37 percent of consumers will continue to shop online more than they did before the pandemic.

Phillip: [00:13:47] So it grew by an insane amount. And customers, if you ask them, are going to to now change channel preference. There's something that is going to be said later on in this Step by Step series about people managing their own personal supply chains. Brian, did you manage... My personal supply chain is just candles, on candles, on candles. But Brian relied on shipping during COVID times for everything from what, toilet paper to mattresses?

Brian: [00:14:23] Yeah. Yeah, yeah. I mean, I actually changed my behavior quite a bit. I was saved by Cloud Paper. I couldn't get toilet paper anywhere. And a direct to consumer business that's frankly actually a change for better in my personal habits, that's actually helping protect our environment. Not only did it make me change the way that I think about, you know, my toilet paper purchases or maybe at minimum, like make me, force me, to change my behavior when it came to toilet paper purchasing. But also now I don't actually think about toilet paper at all. I am getting toilet paper on subscription.

Phillip: [00:15:15] {laughter} This is great.

Brian: [00:15:17] By the way, Cloud Paper is an awesome Seattle based company and everyone should go check them out. But I don't even know if they're a Shippo customer.

Phillip: [00:15:27] Not even being paid for that, Brian.

Brian: [00:15:28] No, I'm not.

Phillip: [00:15:28] But you should monetize that moment.

Brian: [00:15:31] I really should. I think it's like the third time I've talked about Cloud Paper. {laughter}

Phillip: [00:15:35] But what's interesting about that is that every single consumer has had that experience, right Michelle? Like this, that five years of growth. And I think when you're talking about consumers shifting normal, fast moving consumer goods purchases over to digital, that means that shipping... Like the growth of your business will not scale and will scale non linearly. And shipping can actually be an inhibitor for you to meet your customers expectations. So maybe everyone knows that shipping should be a priority, but they think of it as an operational cost center. How do we change that conversation around shipping and how can you reprioritize it in your business?

Michelle: [00:16:16] Yeah, that's a good question. Like I said earlier, [00:16:18] most eCommerce businesses have to ship. It's unavoidable. And yet, like you mentioned, it's oftentimes an afterthought. So a customer places an order. Great. Then the merchant realizes, oh, snap, I need to figure out how to package my item, how to print a shipping label, how to insert into the mail stream. It does become a hassle and like a cost center, if you will. And so rather shipping should be seen as a key differentiator, a value add for your business. You have to think about how you'll display and calculate shipping rates during the pre-purchase experience in order to attract customers and encourage them to click that buy button. Then you have the customer's experience with delivery and fulfillment. [00:17:00] Are you using packaging to delight customers? Are you choosing a carrier service level that will ensure the packages arrive on time? Are you making returns easy for your customers? Now that shipping has become a big focus for merchants, we're also seeing more eCommerce platforms in marketplaces thinking, OK, how do we enable the merchants on our platform through shipping? And so here at Shippo, we're helping these platforms offer best in class shipping to their sellers as well, because it's that critical to eCommerce.

Brian: [00:18:37] Yeah, that makes a lot of sense. I think right now, shipping has been looked at as a cost, and really shipping should be...

Phillip: [00:18:49] Have we reinforced that enough in this in this episode? It's a cost.

Brian: [00:18:52] It is a cost. It is a cost. But it is a cost that can propel your business forward. So think about this, this is something we're going to hear about a lot on this show. How can merchants use shipping to delight their customers? How can they use shipping to grow their business and use it as a growth engine as opposed to just something that they have to figure out what to do with?

Phillip: [00:19:25] Is that just free shipping and free returns, Michelle? Simple as that? How do we stretch that into five episodes? {laughter}

Michelle: [00:19:34] {laughter} Oh free shipping. Free shipping is one of those things where it feels like everyone is doing it. And as a merchant, you might feel that peer pressure to offer it yourself. I get it. First, I want to say you're not alone if you're unsure about what to do, and you're not alone if you can't feasibly offer free shipping. It's complicated, quite frankly, and there's no one size fits all answer. What your customer is expecting is unique to your industry, your brand, your values, but there are a few things you can do to mitigate shipping costs, which can help you keep shipping affordable and consider offering it for free if that suits your business. So [00:20:16] generally speaking, you want to think of ways you can increase your order value without increasing the weight of the box by too much. [00:20:25] So we're getting a little into the weeds here.

Phillip: [00:20:28] Yeah, this is good. I love this.

Michelle: [00:20:30] The size of the box plays a secondary role, but weight is number one. So what's expensive and lightweight? Maybe that's offering free shipping for bundles where you pair your most popular items with other lightweight, expensive things like jewelry or accessories. Maybe that's offering free shipping when you add a certain item to your cart, thinking like maybe you want to try to move old inventory that's also lightweight. When we polled our merchants late last year, more than two thirds had shipping costs that made up 15 percent or less of their average order value. If you're able to hit that sweet spot and I'll repeat that part, taking up 15 percent or less an average order value, then there's a better chance you might have some wiggle room to play with free shipping or other levers to improve the customer experience and then, of course, drive sales and revenue.

Phillip: [00:21:23] This is one of the many places where there's, like hidden costs, not just hidden costs to the merchant, because I think fastest, cheapest as sort of the default doesn't mean it's actually either fast or cheap. Right? But then there's these hidden costs for the customer, too, because the merchant, whether it's free shipping or not, that cost is being passed on to the consumer. And I think that when you think about the rising, again, a topic we're going to touch on later in the series, there's rising costs of logistics costs year over, year over year. And there's less predictability and less stability around that pricing every year. And it has a direct impact, and especially for businesses that aren't just the Shopify DTC type. So one of the things we'll unpack this season of Step by Step, is how that impacts things like eCommerce platforms and marketplaces. Those are things that are also areas where companies like them, they have non-linear scale as well, where you're dependent on their capability of collective bargaining almost to get better rates with carriers. So how is shipping important for them? And what is your perspective on how shipping can be important for an eCommerce platform or a marketplace?

Michelle: [00:23:07] Yeah, so for all of the reasons I've already mentioned, we know that shipping is such a critical piece of eCommerce for the seller experience and now platforms and marketplaces that enable that selling experience for merchants are realizing that shipping plays a major role in the process. And so at Shippo we see shipping as that must have functionality for all platforms and marketplaces in the future. And that's why one of our key focuses is building the best shipping for platforms' building blocks. And this really plays into our strengths because we have always been strongly connected to platforms and marketplaces. Today we power shipping for many big providers and then we also integrate with just about every top platform in marketplace.

Brian: [00:23:51] That was really a timely comment, Michelle, because I think that's reflective of what we're about to hear through the rest of this series. So we've actually kind of touched on all the different places that we're going to dive into, get into the weeds on, in the coming episodes. So that would include talking with the merchants... Decorware. Diving into marketplaces with Flyp. Hearing from eCommerce platforms, with BigCommerce. And hearing about how logistics is a bigger part of this with Whiplash. So we've got a really, really exciting lineup of guests and content ahead. I cannot wait to get into these. We're about as excited as we've ever been for a season of Step by Step here with Season 6. Before we say adieu and head over to the next episode, now is a great time also for you, Michelle, to talk about what Shippo sees as the next iteration of shipping ahead and coming out of the pandemic, going into sort of an uncertain, unknown future. What do you anticipate as happening with eCommerce and shipping this coming year?

Michelle: [00:25:16] Yeah, that's a big question on everyone's mind. What is coming next? Here are some of the things that are top of mind for us that Shippo. First and foremost, the carriers have been making investments in their infrastructure that will likely benefit eCommerce this year. For example, new tech innovations and services to support home delivery. During the pandemic, home delivery absolutely skyrocketed, which makes sense. UPS saw 65 percent increase in shipments to home addresses and FedEx Ground saw 31 percent increase in package volume. All of the major carriers are making improvements to how they support home delivery, even nontraditional carriers, like Amazon recently announced it's letting delivery drivers drop off packages in secure garages. And transit times will be faster and more reliable. So the USPS announced its 10 year plan earlier this year. Part of the plan includes enhanced delivery schedules to offer one day and two day deliveries. USPS customers selected one or two day service in 72 percent of parcel shipping instances last year, and they predict it could grow as high as 90 percent by the year 2025.

Phillip: [00:26:34] {laughter} 90 percent. Wow.

Michelle: [00:26:36] Last thing I want to mention, [00:26:38] I also believe that small businesses will thrive and play a key role in helping the US rebuild and restore post pandemic this year. Small businesses are primed for the current selling climate. They are better able to align with the values of their customers, which is something 71 percent of consumers prefer. They also can be nimble in this changing economic landscape as we find our new normal. They say that small businesses are the backbone of the economy, but they're also the heartbeat. It's their drive and passion that give life to the American economy, the American dream, if you will, and we're proud to help enable those businesses at Shippo. [00:27:16]

Phillip: [00:27:17] There's not many tech enabled companies in SaaS eCommerce infrastructure that you can start with and it can grow with you over a period of years or a decade. And we'll hear a couple of the stories about how businesses are enabling that at scale in shipping and logistics with the likes of Shippo. And they say, it's really interesting, as you grow as a business "Mo' money, mo' problems," I think is the technical term. {laughter} And the challenges scale along with your business. But it sounds like today, at least in certain areas of infrastructure for eCommerce, some areas can be a little simpler than others. And hopefully you can start thinking about how to gain some operational efficiency by not worrying about how you implement shipping so much as how you try to change the conversation around shipping. And that's what Season 6 of Step by Step is all about.

Brian: [00:28:23] Yeah, it's going to be awesome.

Michelle: [00:28:24] Yay.

Phillip: [00:28:25] So excited to have you on the show. Thank you so much, Michelle, and thank you for just imparting a little bit of wisdom and getting us ready for this whole season.

Michelle: [00:28:37] Of course. Thank you for having me.

Phillip: [00:28:39] Yeah, so glad to have had you. And thank you for listening to this first episode of the sixth season of Step by Step. We've got many more coming your way. You'll hear us on the next episode of Step by Step.

Phillip: [00:28:53] 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/Future Commerce. Thank you so much for listening to Step by Step.

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