Jan Bednar: How Shipmonk Handles Third Party Logistics

Nathan: Hey! What’s up it’s Nathan Resnick today we have another amazing episode of e-Commerce On Tap by Sourcify and Jan how are you today? And how’s it going?

Jan: It’s going pretty good Nathan, how are you?

Nathan: I’m doing great, thanks so much for taking the time to be on.

Jan: Of Course, it’s a pleasure.

Nathan: And so tell us where you were you are today in the world?

Jan: So right at this point, I’m in the sunny Florida; you know enjoying the March weather like 850 can’t complain.

Nathan: That’s incredible and for those who don’t know, Jan is the founder of Shipmonk, they are revolutionizing the way e-Commerce fulfillment is done and before we dive into e-Commerce fulfilment and the automation you guys are providing, I always like to learn about an entrepreneur’s background.

How did you get started in entrepreneurship? Did you always know you’re going to start your own company?

Jan: Great question! So, you know I have always going to lean towards entrepreneurship, I started my first business when I was like 12; I was actually a DJ at like different events. And so, that’s you know that’s kind of where my entrepreneurship career took off. You know I don’t really make much money doing it; you know a lot of fun and it was just kind of learned the basic principles of business and then I kind of continued on and you know when I moved to the states about 10 years ago.

Now, I really got my feet into logistics was basically through some of my friends back in Europe wanted me to buy products for them in the states and ship it internationally back to back and so you know I was kind of like let’s you know let’s do that and let’s see if some other people want it too.

So, I started doing it for friends and I created a basic website and basically just described like, “Hey! You know, I’m a guy that lives and states and if you want to buy something here, just let me know what it is and I’ll buy it for you and ship it over wherever in the world you are”

And so, that’s you know, that was my very first business that I started you know when I was at Sophomore in college and I was doing that business throughout college and then right before I graduated, I won a couple of business competitions, got some cash from these competitions and really kind of you know officially started paying attention to this full time.

And that’s what eventually basically turned into Shipmonk and you know really doing the fulfilment and logistics for companies but that you know basically when I got into logistics and into entrepreneurship.

Nathan: That’s amazing, I mean I love entrepreneurs that are really out there, face a problem, solve the problem that they face themselves and I think that’s one of the best way to get it in e-Commerce and getting in entrepreneurship.

What kind of like what is the turning point because I feel like starting a fulfillment company; you know if it involves some upfront capital to have a warehouse right?

Jan: Yeah you know so it’s kind of a funny story so our first year of actually doing this full time, I was part of an accelerated program that was just getting started at my local university and they had about 30,000sft facility that was completely empty that was basically nothing there and they were trying to raise money to build like this collaboration workspace.

And because I was the first, one of the first companies that went through that program, just part of the program to give me a couple thousand square feet of warehouse space for free. It was kind of like a dream deal where you know they got me some cash to be part of the program but they also got me free warehouse space which was amazing.

So, for the first 12 months, I didn’t really have to worry about paying rent and that definitely helped a lot you know in the early beginnings; the way you know we kind of pivot, almost kind of funny because I had a local company that raised $5m and they were trying to revolutionize the home automation space and they read about me somewhere in the newspaper and the CEO calls me and he’s like, “Hey! I love working with local entrepreneur and startups and you know we’re starting up company and we’re going to ship our products”

And I was like, “Well, you know I don’t think you really understand what we do because we don’t we ship stuff internationally for people around the world, we don’t really do this kind of thing” and he’s like you know but I mean you’re a start up, you have a warehouse, you should be able to do this for us.

So, I was going like internally wondering like why doesn’t this guy go to an establishment from a company that created one that actually doesn’t. You know and so I was like, “Well, you know their volume was promising, the brand, their company, everything was amazing. You know, they know what they’re doing. So, I was like, “Well, you know I mean it sounds interesting, we can make money doing it, so why not try?”

Nathan: Was that what inspired a bit of a pivot then?

Jan: That’s yeah, exactly so well; so originally we were like yes just an additional piece of business that we can do it so you know I sort of did a lot of research in that space and that’s I guess where I kind of had this moment in my life where I looked at the industry and I saw like there’s really no like competition.

Like you know, there’s a lot of companies that offer Fulfillment Services but there’s really nobody that offers fulfillment services that me as an e-Commerce guy want to use. They’re all very old school, kind of like 20th century, you know like 1990 website and you know no tech, you know all people everywhere, like it was it was very like you know very old school.

And so, I figured well, why don’t we just create this new brand for this emerging you know millennial generation of e-Commerce owners and so we kind of set up on that journey and that’s what you know when from the first trade show, got our first customers and started building the platform and really that’s what you know got us going.

Nathan: That’s amazing, walk us through that process just kind of building out your product because you know I mean you know logistics is such a complicated area of e-Commerce where you know number one, you’ve got a manufacturer products and number two, you got to import them and number three, you’ve got to get those products to your end customers. Logistics you know the right fulfilment opportunity here really focuses on that kind of third part of the table and so you know walk us through the process of actually building out that product that you know now hundreds of different companies use to Shipmonk.

Jan: Yeah absolutely, so it’s been an interesting journey for sure and you know I’ve had to learn a lot of things about the space and you know it is a space where things are you know fairly complicated and they change a lot and so it’s you know it wasn’t always easy and especially you know coming into the space as a small startup with really no volume you know, we couldn’t really get good discounts from the carriers, you know we don’t have any leverage to be really hard to get our first ten customers can just like you know they ask you for reference and you’re really don’t have anybody to send them to because you just don’t have the customers.

So, you know the beginnings were pretty hard but you know we released all in the beginning like we were really selling kind of personalized custom service and you know subscription boxes just starting booming around that time and so we started focusing on that market and got about three or four large customers and that kind of really helped us kind of you know get to that next stage and you know build the kind of the basis of you know having the leverage to negotiate better deals and you know just being really able to compete with the bigger guys.

Nathan: Run through that process because I liked when I got on e-Commerce world, I used to think going to USPS or DHL directly was singular and when I was getting well you know especially you on the inside, you know that people are getting different shipping rates based on the volumes that they’re sending you know was that dynamic like with these different companies like USPS and DHL and FedEx?

Jan: So, you know I think a lot of the times, it really depends on who you’re dealing with; so some you know somebody like FedEx and UPS are a lot more rigid where they basically have their tiers and you know nobody like– you can know you know whoever you want and in FedEx, like you’re not going to be able to get better rates than somebody who’s spending $10million a year with FedEx.

So, it’s kind of with FedEx and UPS, a little more rigid where you basically are within a certain tier and that’s the price they give you; you know you can obviously negotiate and you can bring in different people to help you negotiate and so you know it definitely there’s definitely a certain component but you know it’s harder to have leverage unless you have volume.

So, it’s really difficult for startups to you know get good pricing from FedEx and UPS. You obviously can go the route of somebody like USPS which basically is the exact opposite you know everybody can get a pretty good discount through USPS if you sign up for any of the postage providers online and you do it yourself and then DHL is not a bit of a you know kind of a different animal you know they basically resell USPS services and then they deliver it to the final destination and deliver it to USPS for the last man delivery but they’re also pretty high minimum so you know unless you do say a hundred couple a day, you know these is not going to work with you so that’s also not really for everybody.

Nathan: Interesting! From a customer standpoint, like if I’m buying from one of the e-Commerce companies that you’re fulfilling for, walk me through that process where you know if I buy on Amazon expect a shipment to come in 2 days or less and you have that providers that go through Shipmonk general the fulfilment and we’re like ten 3PL now compete with Amazon FBA

Jan: Yes, so there’s you know there’s definitely a huge pressure in the conquest for fast delivery times and reduce cost and you know people have been really spoiled by you know what Amazon brings to the table in terms of delivery times and the shipping costs but there’s kind of like two sides of that story right; I think you know from our standpoint, I mean we can definitely do it you know like based on our phone centers, we can get the product the customer in two days or three days you know it’s not always going to be the most economical option to get it to the customer.

And I think you know what we really finding is that a lot of grants that we work with you know they typically have a fairly unique product that they strictly push through their website and you know people don’t really mind waiting action day to get the products to them and support the local business or a smaller business.

Jan: From typically what we see, Amazon is great at selling kind of more you know I will say, off-the-shelf like typical products that there’s a lot of but brands don’t really do that well in Amazon you know not the other, I guess scandals that kind of surround that whole you know Amazon stealing somebody’s products and stuff and it’s more scary for brands to go on Amazon.

Nathan: If you’re sure what I like walk me through the experience basically; so at what point do you think you know in an e-Commerce companies life should they start using a 3PL?

We have listeners that are just starting out; we have listeners that are doing 7-8figures in sales. You know, walk me through the experience of deciding all right, I think it’s time I should start using a 3PL.

Jan: Great question, I think typically you know the way when you see people switching over to do a 3PL is about 25-50 orders pre-date Mark; you know there’s really it like whether specifically, we’ve set up our guidelines and processes so that we can work with customers or even smaller.

So, anybody that does more than 100 or 50 orders a month we can work with but typically you know, I would say for an average to start outsourcing is about you know 30 orders a day or so.

But it you know it really depends I think people really have to think about is like OK how much time I spend in doing this? As you know how much I mean in my garage, do I have some friends coming over to get some boxes or am I actually personally doing it and you know not doing something or into my business.

Yeah, I think as long as you know once you start feeling like you spent too much time on your boxes, I think it’s time to outsource.

Nathan: Yeah, I mean I remember for myself as an e-Commerce entrepreneur what used to fulfill all my products in the house like it came to point where I was like, “This is not worth my time” you know and it’s kind of the same with every aspect of your business as you grow, you have to figure out what is worthwhile to outsource and 3PL, Logistics is definitely one of those first steps I think you outsource as you grow.

Jan: You know, it’s a scary decision I mean I think there’s a lot of people that you know they kind of like it’s their baby and they don’t really want to give it away and they’re afraid of losing control and you know but I think typically like you know, I mean it’s really important you obviously work with a good company that can maintain your brand and do some personalization you know really help you keep that brand identity but at the same time, like you know there needs to be, there’s  always going to be a point where you know you’re going to stop packing those boxes and somebody else is going to do a 3PL

I don’t know whether it’s going to be something that you give a job two or 3PL you know. So, it’s important to look at it from more of a bigger picture standpoint and you know kind of like try to keep it and do it yourself.

Nathan: Sure, walk me through the process right now let’s see how many e-Commerce entrepreneurs right now “I just started to do 150-200 orders a month and it started to take too much time to ship out these products myself and how should I go about deciding what to 3PL to work with?

Jan: So, I think you know the number one thing is to you know really kind of understand what 3PL and what the fulfilment specializes that you know and what’s important to you; so you know typically you will want to look at you know– location is somewhat important but for a lot of companies of that size, you know it doesn’t really make a difference to I mean it doesn’t really matter it’s you know you don’t want to split inventory into four different locations that you’ve lost because typically it’s better to just stay focused and you know focus on selling a product instead of being completely 100% logistically optimized.

So, you know I would say, find a decent location so it’s not kind of in the middle of nowhere you know it’s like it’s close to your customer base which typically is the East Coast you know 80% of all e-Commerce or all sales to retail sales are on the East Coast it’s going to be close to the East Coast and you know find a partner that can help accommodate what you’re looking for so you know if you need custom packaging, if need fragile handling or if you need to integrate with different channels you know I think that’s a big deal especially in the last couple of years where you know people need to be on the integrate with not just their website but you know if you sell a lot Amazon for example or e-Bay or you know and other market places that it’s important to look for a partner that can do all of that.

It’s also important to look for and you know what is it? What is my day to day going to look like with this 3PL? I’m I going to have to export a file and drop into their FTP server or am I going to just be emailing orders or I’m I just going to be managing it on the platform? What does the platform look like? What can it do? You know can I manage my inventories and sit back? You know is my life going to be easier? Because the last thing that you want to do is outsource your fulfilment to a 3PL and a couple days later, you find out you’re spending more time managing a 3PL than just shipping the orders yourself.

So, that automated component is a super important element of finding the right partner and you know you could also be like when go back to location obviously depending on where you suppliers are, you know this is more of your area but you know if you have products domestically and you’re probably pretty happy, you might try to find location that’s closer to your suppliers so you’re not shipping across the country and then paying a lot on freight.

You know those are some of the things I mean there’s obviously a lot more that goes into finding the right partner but I think overall it’s also trying to look for somebody that maybe works with companies in the same industry.

You know for a company that has a little bit of experience and in you know selling jewelry you know it’s a good idea to find someone that ships a lot of jewelry because it means that they’re likely going to have experience with the same kind of product.

Nathan: Right! Do you think it’s interesting that you know you kind of mentioned earlier that some companies that go out like many create their own fulfilment teams in the house, you think that really makes sense  when you go out trying to actually like hire someone to handle your fulfilment in-house?

Jan: Yeah, I think I mean there’s definitely scenarios where that makes sense, I think you know there’s people that love operations and if you own any house company and you know you’re good at marketing but you also love operations and you just you know you would actually enjoy shipping your own product or having your own team shipping your product I think at that point it makes sense despite typically what happens.

You know a lot of I guess the other example might be if there is certain customization element that you know nobody is going to be able to do so you know if you are embroidering shirts  in a special way, you know you need people to literally hand write notes or you know there’s certain customization element that can be performed by fulfillment center and you know I mean I think there’s a phone and says it can be pretty flexible but on the other hand like there’s always a need for you know that there’s a limit to what we as a company can do for a customer you know which makes sense not only financial sense but also a process sense because obviously we’re trying to optimize all the processes to be able to work for all of our customers so you know at that point, like if you have kind of a unique process, it makes sense to  keep it in-house.

But you know what we’re finding a lot is that you know you don’t really get to manage the shipping rates of the discounted shipping rates especially if they have you practiced and you have to learn everything so unless you have experience in operations that you’re learning everything from the ground up like you have a system to use what you know right hiring people, training people you know it’s a lot of liability, a lot of overhead.

So, I would say I mean you know unless you research the really good at operations fulfilments, it’s a good idea to outsource.

Nathan: Got it, that’s a good answer. Can you walk me through– I mean I remember when I was starting my you know watch and sunglass brand, like 3-4 years ago now, as I looked in the fulfilment company to work with, one of the most confusing part was actually understanding the pricing; like how much is it going to cost me to get started and how much is it going to cost me on a monthly basis to actually outsource my you know logistics and work with a 3PL?

Can you walk me through your typical pricing tier? Or specifically the Shipmonk like what’s you guys best pricing and the most 3PL set up and their pricing?

Jan: So, I think like when I first kind of started doing the research and really looking into this whole industry, that’s exactly what I found out you know like people once send a three page PDF with like Okay, this is what you know is going to be a charge for touch and this is receiving fees and this is what you know and it gets so confusing that like you need like a Ph.D. person to really tell you what you really pay.

And you know the worst part of the whole thing is that you really never get to know what you will be paying until you get that bill. So, when we came into the game, we kind of let’s simplify it, let’s you know let’s really only charge for things that people can calculate in advance and so we streamline the pricing and we really give a customer you know a price per peck.

So, basically there’s no receiving fees, there’s no like manipulation fees or anything like I say why don’t they order fee which includes the peck. And then you pay the postage and you pay packaging and you know whatever one of those [inaudible 21:33] I mean you know obviously different price. So, you know that’s packaging and that storage and that’s putting it you know the so there’s only a really four components of pricing that we charge.

You know I think typically companies are learning to be more like that you know they’re trying to simplify their pricing; trying to make it easier to understand and you know that’s going to I think where the industry is going towards. But you know it really varies per company so it’s really hard to compare different fulfilment centers because you get like you know somebody charging, somebody is not.

And so, it obviously is like too little hard to compare but basically, I think the easier you know the way we approach it was like let’s make it as simple as possible so that anybody can easily calculate the cost of what is going to be.

Nathan: Yeah, I’m on your pricing page right now, honestly it’s probably one of the best praising pages I’ve seen for a fulfilment company about how much you want it and I think that’s super important for an e-Commerce company to understand to figure out what their cost is going to be to work with a 3PL, that’s awesome.

One of the kind of questions a lot of listeners always bring up are what kind of products you see being successful for an e-Commerce company and you know we talk about products a lot of time, we talk about you know the complexity if you’re producing a product, yes you will actually invest on your product you know maybe you’re investing $3,000 in a product before you can get a sample, you’re talking about margin, you’re talking about interest, you know what are some of the products that you see being most successful in the e-Commerce world right now?

Jan: Yes, so it’s funny so I think the one thing I want to say before I kind of get into the product category, I think what we’ve learned or what I’ve learned and what I’ve seen over the years I think that you know the best performing companies are always ran by amazing marketing people so you know in other words I think that the key to e-Commerce is amazing marketing whether that’s social or you know PPC or whatever you’re doing. I think that’s the first you know thing that we’ve seen like a lot of the times even before we see the product like we you know, we can tell when the person is going to be successful or not. And the product you know obviously is– comes right after this, right?

So, if you have an amazing product that you can sell it, you know it’s you it’s really hard to make it. And so, that’s kind of like you know in general, I think you know marketing is definitely an important component of e-Commerce obviously. But you know going back to the categories, I think we have customers and pretty much any industry you can think of, I think from beauty, apparel and I think you know I don’t think there’s like any specific trend like you always have like a trending thing where I see them as the fit is better is that it’s like you know different beauty products, brushes.

And so, I think really what we see people have most success with is when they’re trying to build a brand and they’re trying to build you know their own product so you know when you buy something and I think that’s going to– I think I’m sure you see this a lot too late when you help people source products like you know as long as the product as you need like you creating it, you know you’re really building a brand with a unique product where people basically can buy anywhere else brings the most value.

Nathan: And that’s necessary protection I mean I love that you dive in kind of diving into the dynamics behind selling a brand and selling a product because you can sell any product but what’s going to increase your margin and create retention in longer lifetime value is a branded product like looking at the brand like look at you know ‘Movement Watches’ one of the fastest growing watch companies in the world, those guys are marketing guys that sell watches and a watch company, they’re a marketing company that sells watches and now they sell sunglasses and a bunch of other different products to be able to put out there because they’re so good at branding and marketing.

Jan: Absolutely, those are my thoughts exactly, you know like those guys can source any other product and they’re going to be able to sell it because I mean obviously it has to be a good product, a marketable product. But like once you build a brand, you’ve built a good following and you deliver a good product you know goes a long way.

Nathan: What do you think about the dynamics behind you know drop shipping and actually labelling or creating your own products in drop shipping? Should remember mostly relating to you know overseas dropshipping where you’re going throughout the Ali Express in the customer experience; it’s like to see is a lot of listeners that drop and entrepreneurs, some of them looking to transition in between all brands and there are you looking for advice on how to make that transition or just in general you know what do you think about drop shipping dynamics?

Jan: Yes! I think the drop shipping world is changing a little bit because you know especially with kind of what we talked about in the beginning is consumers expect their products you know within 2 days with Amazon and even if they really want the product and let’s just say it’s super cheap, you know they’re willing to wait a little more but I don’t think anybody wants to wait 30 days for products to arrive.

So, you know I go back to the whole brand experience and the customer experience like if I ordered a product and I don’t you know in 30 days I don’t even remember that I ordered anything. So, I think that is the first big kind of issue with drop shipping right because unless you drop shipping domestically which could easily work but you know if you’re sourcing your products overseas and just basically sending orders to your suppliers, you know shipping in China package or e-package you know which [inaudible 27:32]

I think that creates a really bad experience and it’s very hard to build retention and have returned customers. You know I’m sure has some businesses where it works phenomenally well and you know you’re selling basically—that’s the other issue; you’re selling a product that you know a lot of other people are selling as well, you can have a different competition.

Nathan: Do you know about the dynamics of impact is behind you know the China Postal Service as a service like from what you’ve heard, the USPS, this is about over a dollar per shipment on e-Packets and within the next 5 years, that shipping method behind this shipping companies isn’t going to exist anymore because it started to boost international trade and you know trade is obviously already been boosted.

Jan: Yes, I know– I mean I’ve heard some rumors where that apparently the Chinese government is subsidizing a lot of the postage costs, you know shipping, it’s going to mean USPS is doing the same thing cause they’ve been losing money for I guess forever.

So, you know which is something that FedEx and UPS doesn’t like because then they can offer a lot of crazy pricing, a lot of different services. So, I don’t know exactly what’s going to happen with that I think you know going back to that question what I do see with some companies that do have a decent volume but maybe they let’s just say they sourced custom products you know so they do some you know they do they sell a lot of customization and it wouldn’t be financially feasible for them to do it here domestically.

What we’ve done it for a lot of different companies is that if the margin is there, I think if you can’t do this on a $4 product but if you some like $30-$40 product, you know what we’ve done is, we’ve basically airfreight it let’s say on once or twice or three times we group some companies through you know every day; we would airfreight the finished inventory for that day or week and then we would basically just re-label it and ship domestically.

So, we’ve done for a couple companies as they would basically have individual orders ready to go in China, we would air freight it over and then just ship the customers domestically which you know basically eliminates the packets service, you’re getting a great cost, you know you’re looking at maybe 7 days delivery time.

Nathan: That’s awesome; I haven’t heard that there’s not a lot of people do that so it’s pretty cool method.

Jan: Not that you really are advertise it but we’ve had some interest in it lately.

Nathan: I think that’s great for a lot of these drop shipping entrepreneurs. One last question the man is you know we see this trend especially in sourcing, in manufacturing sectors where a lot of factories are trying to go direct to consumer and you’re They are manufacturing these products, they’re making a lower margin than these brands that are you know contracting these factories. And they want to go directly to consumers and they want to sell through Amazon, they want to sell through Shopify stores, have you seen that trend? Well, are you working with any international sellers that you know are basically looking to get that direct to consumer access that are you know actually more wholesale or factory oriented?

Jan: So, I don’t think we currently work with anybody that would be a direct manufacturer and then they would be selling a product as well; you know I think typically that’s not what they’re good at, so it’s very similar to I guess we’ve talked about you know, if you’re good at selling a product, you’re probably not going to you know shipping our logistics.

A lot of these manufacturers, they did love to sell it directly but they just they just don’t know how to when they can do so. And I came across recently a couple people that you know it and overheard started as e-Commerce entrepreneurs, they started seeing that trend but we haven’t really come across it, so I don’t know if they’re drop shipping themselves directly from manufacturers or what their strategy is; but I definitely came across it.

Nathan: Interesting, that’s amazing. To the last question here just wrapping up, where do you see the future of you know e-Commerce going in, you can take this question wherever you think it should head, you know we see this trend towards retailers going more direct, we see you know obviously the growth in e-Commerce.

You know the next 5-10 years more people are going to shop online than in retail stores and how is that going to affect the global economy?

Jan: Yeah for sure, so I think you know I don’t want to get too macro economically here but I think overall, the retail you know everything is shifting from retail to e-Commerce it’s getting to– You know people are by nature lazy and so they it’s a lot easier for them to just shop online than go into a retail store, I mean obviously you know that’s nothing new, everybody knows that.

But I think with modern technology, like augmented reality and even virtual reality, you know you’re going to be able to bring the retail experience to the consumers to their homes and then basically be able to bring that product over to just basically order it right there in and get it delivered within you know ideally the pentagon where you live and you know max 2 days, ideally same day or maybe next day you know it’s obviously creating a lot of pressure on the infrastructure of the logistics world because to get a product delivered to the customer next day you know you need to have warehouses in those areas and you know it’s got to be really interesting to see how companies like FedEx and DHL and Amazon in this case specifically are going to be able to balance.

So, you know I think I think we’re all you know and the other players in the e-Commerce role are super excited about what the future holds because there’s only good things coming; I think it’s actually exciting to see how e-Commerce has grown. So you know who knows but it’s you know definitely really exciting I don’t know if you come across I just want to share this with you because I came across an app recently where because I’m actually getting married this June.

Nathan: Congratulations.

Jan: And I was having a custom suit made for the wedding and so I went to a tailor and they measured me and all that stuff in that order of the suit and then a week later my buddy tells me about this app, it’s called ‘Tailor me’.

Basically you download the app and basically you can have a custom made body and it works super good. So, you order the shirt and it fits perfectly. And I think that’s like that’s where it does it’s had it you know it’s this custom shopping experience where you know you can really have like the skin your body and you have it made.

Nathan: Now it’s amazing, that’s incredible. Well, Jan thank you so much for coming on, if people want to learn more about you and find out more about Shipmonk, where can they find you?

Jan: So, you know the easiest thing it’s through just go to www.shipmonk.com and surf through the contact form; we’re always available at sales@shipmonk.com we will be happy to see if you fill the form, we could help out.

Nathan: Awesome that’s amazing, well there you have it all, thanks again for tuning into e-Commerce On Tap, look out for the next episode we’re always trying to provide as much value as we can here at Sourcify and thanks again for tuning in.