[Corrected 3/7/11 10:15 a.m.] Remember shelling out big shipping and handling charges for that rotisserie oven you just had to buy from some infomercial? Small retailers sure do—and they remember it fondly.
In fact, when entrepreneurs Ron Wiener and Josh Leichtung were in the catalog business years ago, shipping and handling could actually account for your entire year’s earnings.
“You looked at your 2-to-4 percent at the end of the year, it was all the profit that you made on shipping,” Wiener said. “Amazon’s changed the game.”
Now, to compete with Amazon.com and others offering free and low-cost shipping, small- and medium-sized retailers have had to trim their old reliable revenue stream. That’s been a big win for consumers—another example of computing power and business minds disrupting an old, opaque, inefficient system that was begging to be turned upside down.
But Wiener—a serial entrepreneur and investor—says smaller retailers have been mostly left out of the positive side of that revolution. The little guys are still using the big carriers like FedEx and UPS for a lot of their shipping, but are unable to command better discounts on their own costs.
“They fight over Amazon. They fight over the big retailers,” Wiener said of the shipping giants. “And they make money on the little guy.”
That’s where Wiener and Leichtung hope to thrive with their new company, Seattle-based ShipSweet, which they’re priming to start operating sometime in the second quarter.
ShipSweet aims to aggregate the front end of package collection, customer service and payments (the “first mile” of parcel travel, in shipping parlance) for small and medium retailers. ShipSweet will take those parcels to the shipping companies—particularly the lesser-known networks of regional and local carriers—and use the economies of scale that come from pooling lots of small orders to deliver both profits for ShipSweet and better rates down the line for small businesses.
“We’ll be competitive in most cases for shippers who are under 150 packages a day,” Leichtung said. “But under 50 packages a day, no one will be able to touch us in terms of price.”
Although I know basically nothing about the mechanics of the shipping industry, I was skeptical after hearing the pitch that a small startup could quickly get in front of enough retailers
