Commerce Logistics | Mike Duboe, Casey Armstrong and Aaron Schwartz

Hey everyone, I'm Mike Dubeau, partner at Greylock. Welcome to our podcast, Grey Matter and our miniseries on commerce where we've been exploring different aspects of the quickly evolving e commerce landscape. So today we have two friends on Casey Armstrong, CMO at shipbob, which is a leading fulfillment solution for e commerce businesses. Casey was also formerly VP Marketing at BigCommerce and Aaron Schwartz, co founder of Passport Shipping, a cross border fulfillment solution, and former chief business officer at Returnly, a reverse logistics player for commerce. Great to have you here, guys.

Thanks for having us.

Yeah, thanks.

So you two have been operating in various angles in the e commerce world for a long time now, and the last year, to say the least, has been an interesting one for the broader ecosystem. We've done episodes in the past year on Gray Matter, talking about the brand side on growth and marketing on headless commerce. For this one, I wanted to do a deeper dive into the underlying logistics infrastructure on modern commerce. It's something that as consumers, you know, we all experience the front ends and getting our stuff at the end, but there's a whole bunch of complexity that happens in between that. You know, you two are experts on Kasey. Your two most recent gigs have been at Shipbob and BigCommerce, but you've been operating around Commerce for a long while now. Why don't you tell us a little bit about Shipbob and how you eventually found your way there.

Yes. So at shipbob, we're trying to bring Amazon level logistics to direct to consumer brands. And so whether you're shipping a couple hundred orders a month or a hundred thousand orders a month, you know, your customers still expect you to deliver to them in a couple days and to do it rather cost effectively. So that is what we're focusing on. We've got about 15 fulfillment centers around the world. We're launching three more next month. Actually we're in February right now for depending on when people are listening. They're all in the U.S. except for one in Canada, one in Ireland, and then another launching in the uk. So except exciting to get those out there. And a big bet there is. You know, we're trying to have it so our customers can have their inventory closer to the end consumer again for both time and speed. And then for joining Shipbob. Yeah, let's see. I was very happy at BigCommerce. We're doing some cool things. This was pre IPO, so hats off to the team and all the success that they've had since that. But shipbob Reached out and to be honest, I deleted the email. And then I was like, wait, that night I'm like, who is that company with that funny name that's allegedly growing that fast into solving a pain point that like, I felt firsthand? I used to help run a company called Watchmaster and I think we did a lot of things really well. One of the things we did rather poorly was inventory management and shipping and fulfillment. And so again, I felt that pain firsthand and for a lot of reasons, you know, decided to take the jump over there.

Yeah, well, it's an interesting segue into Aaron because I think Aaron also ran his own watch company. You two definitely have that in common. And so, yeah, Aaron, you know, when you were building Passport, we first met back then when you were building, you know, cross border shipping play. But I know you keep yourself busy on multiple fronts. Tell us a little bit about your background and you know, what you're up to today.

Yep, very much a generalist history major, mba, management consultant. And then I kind of stumbled into starting also a watch company, though much lower quality than Casey's. The business was called Modify. We started it in 2010. I mean, it was effectively like one of the earlier digitally native vertical brands. We ended up being a print on demand merchandise company, but primarily watches. So corporate gifting, sports licensing, people would put photos of their kids on watches, kind of anything and everything. And ran that business for about seven years full time. We ended up selling it in 2019, not for a great return or anything, but the brand still exists to Custom Ink, which is a great kind of print on demand merchandise company. And then in 2017, I was talking to a buddy, Alex Yancher, who had some experience doing cross Border. And one of the pain points that I felt at Modify was we had a lot of traffic and a lot of interest from folks overseas. We never spent to acquire those visitors, but there's a lot of interest in buying our products. But it stunk to ship to them. And we tried DHL and FedEx and kind of every single USPS, you name it, UPS. And we always had a really rough experience shipping. And so the idea of Passport was how do you make cross border shipping easy? Because like if you look at kind of any good DTC brand, right, if they're on Instagram or Snapper, whatever channel you're on, you definitionally will have fans from, you know, international consumers. Like whether it's Canada or India, it doesn't matter who are interested. And so it's kind of like this latent demand that exists. But no brand really likes shipping because it's a pain in the butt. And then there's a question from the customer and the customer goes, where's my package? And then the brand doesn't know how to deal with it. And so passport kind of steps in there. And so that was kind of the insight behind that company.

Cool.

Well, there's a lot I want to get into there. And I mean, I think most consumers by now have some experience shopping on the storefronts or marketplaces and then also obviously like receiving the product, but understanding how the sausage is made. I think there's probably a fairly low understanding from most people on that. And so, Kasey, maybe for you to start, Shipbob is known as a tech enabled 3PL. Maybe could you break down to listeners who might be new to this space, what is a 3PL? And perhaps what makes Shipbob more tech enabled than other incumbent 3PLs?

Yeah, so we can get nerdy on this real quick. Our mission at Shipbob is to really democratize e commerce fulfillment for again, brands of all sizes across the world. And the only way we can do that is with technology. We want to be the AWS for fulfillment. And what a3PL is, it's a third party logistics solution. And they will receive your inventory, they will store your inventory, and then as orders come in, they will pick and pack those orders and they will work with the last mile carriers to ship out those products to the end consumer. On the technology side, you can run a 3PL with minimal technology, but you can't run a 3PL at scale along with distributed fulfillment centers without technology. Because a lot of times, especially early on when I join Shipbob, they're like, is it really tech enabled or is it like lipstick on a pig? And the answer is it's definitely not lipstick on a pig. And so one of our bets at Shipbob is it's really the full technology stack approach that's going to allow us to create this unified customer experience both for our sellers and the end consumers as we scale this not just within the US but around the world. And so at Shipbob, we built the technology that our merchants use. That way they can see just clear line of sight of what is happening in their fulfillment solution. Orders coming in, the orders that they've sent in, what's been received, what's been picked, packed, handed off to the carrier, they have timestamps throughout their entire supply chain. They'll have more insights into their business than if they were doing it themselves. Then so again that's a merchant application. There's the fulfillment engine, which is the kind of the brains and the logic in the middle. And then that connects to the shipbob warehouse management system or wms. And the WMS again is technology that shipbob built and that controls everything that happens within the fulfillment centers. And that way we can identify where their breaking points are during COVID or during peak season when we're seeing a massive influx in orders or all of a sudden a carrier says, hey, we're limiting the amount of items that we can pick up from a facility for a certain day, which happened to brands of all sizes during peak season last year. That way we can quickly modify the technology, roll that out across for all of our customers and just, you know, keep the train on the tracks, running full speed.

One of the concepts that comes up as I talk with founders and entrepreneurs in this space is the importance of being full stack, I. E. Like owning your own fulfillment centers and operating them as well versus Kind of having a software only play, which kind of sounds nice to software based investors but perhaps is difficult to deliver a great end consumer experience for if you're just pure software running on existing kind of archaic physical infrastructure. Shipov clearly has a point of view there. Maybe you could speak more broadly on the importance of being full stack here.

I think it's such a differentiator for us. I honestly don't know how you can build what we're trying to do at scale and globally without owning the entire stack. We've all been in the software space for quite a while. We know the imperfections and then we know when you're starting to receive data from multiple inputs or even if the softwares are supposed to be similar, if they're different, you know, the data is all going to be slightly different. And so if you're connecting, let's say to a bunch of different warehouse management systems or wmss, which also can be customized, how are you receiving the same data every single time? And then if you're splitting inventory across multiple fulfillment centers that are using different warehouse management systems, again, how are you going to have that unified customer experience to just even how we receive goods to the packaging that we use, we do batch picking, which allows us to nearly or actually over 10x the amount of orders per hour that we can pick. And then we roll out that technology across every single fulfillment center. And so if you don't have the same processes and the same technology across all of them, I don't really know how they can actually provide that level of service.

Yeah. Aaron, maybe shifting gears to you. I want to talk about the international side which I think is a really fascinating space. Instead of problems, it's a problem near and dear to me. Having run marketing budgets and you see kind of unintentional international demand start to hit your site that you just can't convert and you see the impact on if you could just convert that what it does to your CAC line. So I think the thesis around Passport and international fulfillment in general has always resonated.

Yeah, I think you'll hear me talk about experience a lot across Passport. What I did at Modify what we were trying to do returnly and I think like most of the companies I advise or invest in, like that's a core thesis but it's more about how do you deliver that great experience. Right. And so having it be unified understanding like as the market moves, how do you make sure that your product or your business keeps up. Right. Which is saying that Chip Hop does very well I think is actually hyper relevant. And so the same thing kind of happened with Passport which is like if you look at kind of what I mentioned before that there's latent demand for brands just from folks cross border. And so it's not like you know, the initial instinct of a brand is I don't want to deal with international because I'm going to have to, it's going to be complex. I'm going to have to convert everything to a different language or do different currencies or open up a facility. And the reality is like at some point when you're at some scale, sure you can go take advantage of a cross border three plus but on day one you don't need to even spend like put money in Facebook or Google or wherever to go acquire those customers. They're finding you right now again if you're doing your job and building a brand that people want. And so the bigger issue, like if I think about all the things that increase your conversion rate like going overseas, the number one issue is just making the shipping work.

Right.

And that sounds so simple and so obvious but like if you go and you work with I think it's DHL or DHL E Commerce which is kind of their like slow boat, more affordable and DHL Express which is, you know, the Express next day which is a beautiful product but very expensive. Like those are two different divisions. And so if you're a brand that wants to work with DHL as your international carrier, you're buying from two different companies. Effectively, right. And if you kind of think about what ends up happening on a cross border shipment is you have like amazing logistics companies, right? Like FedEx, DHL, UPS are obviously brilliant businesses and you don't get to be worth tens of billions of dollars by luck, right? Like it's incredible infrastructure and then you have amazing technology companies. And I think the spirit of password was like what's in the middle? Which is like good logistics, good technology brought together. So it just works, right? So you get your landed cost, right? So somebody doesn't get hit with a tax bill that they weren't expecting. If there's a delay, the customer is notified proactively. It's not just sorry, we don't know where your package is, right. Which ends up having downstream effects on the brand and a lot of customer service costs. And then you know, the VP of marketing or the head of girls just saying like forget it, we're not going to go international. It's such a small part of our business anyways. And so I think like actually the unifying thing is like accountability and saying this will just work. And I think again like similar to like even chipbob which is like look, this is a complex business and if you ship out 10,000 packages, it's really like 100,000 activities that are going into those 10,000 packages going out. And so if 100 activities out of 100,000 go wrong, you'll feel 1% of your shipments go wrong. But it's really like a very small amount of issues can lead to a lot of pain for the brand. And so like when I look at just in general in the space, the companies that tend to win are the ones who are deeply, deeply focused on experience and being accountable for that and apologizing and then working quickly to fix that so that same mistake doesn't happen again.

Yeah, that's a great overview and I think there's two follow up questions to that, like why is International a standalone play? So you have a bunch of kind of domestic logistics fulfillment players, people in this space and yet you're also seeing standalone companies that are getting quite big just around International. Why is that the case?

Yeah, I mean I think you can do kind of like the very souped up version, right? So again there are these incredible technology companies like Global E OR flow or eShop world that are like look, we're not only going to help you bring your product overseas, but we're going to help you choose which carrier to use. We're going to change it from dollars into euros. You know, 74, 99 might look good in the U.S. but 54, 99 Euro doesn't look good. So we're going to call it 5450, right? And then, oh by the way, we're going to translate. And, and, and, and I think all of that, I don't want to say on the margin, like to minimize it, but like truly on the margin it will make the, you know, increase your conversion rate, make it feel more, oh, this brand is actually talking to me in my language and semantically not just like a translation.

Right.

And like the phrasing actually resonates with me as somebody who's a native French speaker, for example. And so there's a lot of opportunity for that. And when you're serving brands where, you know, maybe their 5% of sales is really 5 million bucks or 50 million bucks internationally, moving it up a percent starts to matter, right? Moving up your conversion rate 2%, 5%, whatever starts to matter. I think for the vast majority of direct to consumer brands, think like US based, right, kind of Shopify plus 1 to 100 or 5 to $100 million top line brands, like most of that is unnecessary. It's great if you can do it, but it can be crazy expensive as well. You can instead just go use a zonos or somebody who is hyper focused on giving you the right tax calculation so that you don't hit a customer in Canada or France with a surprise notice from the post office like hey, please pick up your shoes. By the way, you owe us 50 Euro, right? Or 50 Canadian dollar. And so long story short, I think it's like if you think about the growth of commerce or kind of like online commerce in general and the fact that there are so many like so many desirable brands that are not in your native country no matter which country you're in, like cross border obviously is like a big opportunity. And then it's kind of like there are enough options for you to kind of create the brand experience that is best for your client.

It's always been a really exciting opportunity for brands at scale. I think part of what is so exciting about what Passport and others are enabling is democratizing access to global markets for brands that are kind of subscale. And you kind of just, just hinted at this. But there is a point at which like you're already seeing demand from overseas, so you might as well just flip on the switch and start selling it. But I would imagine there's also probably a level at which like, you know, when you're so Subscale. It's actually distracting to start thinking about this stuff that early. And so what do you think is that like if I'm a brand or if I'm listening to this and I'm kind of starting to build a Shopify store, like when should I think about going international? Like what are your rules of thumb there?

I think the spirit that I would have is like think about who you are as a brand. Right. So the way I picture brands growing in the next five or 10 years is a very, very lean team that outsources everything. So like the best example I know is cuts clothing which is this just killer brand. And I don't know exactly what the revenue is but it's pretty substantial. And it was like a 10 person team. It might be 20 now, but it's an extraordinarily lean team relative to the revenue. And if you think about a business or if you and I were going to start a backpack company or candle company or something like we should probably find a better designer than us and then we should probably find a better ad agency and actually probably a better like web design agency and a, you know, probably somebody who's better at sourcing than we are. And, and, and right. And like maybe we are great at defining the brand and having the brand voice or writing the content or like you know, a web Smith linear commerce type of approach where like this is all about great content related to our audience. But then everything else we probably shouldn't be thinking about because there are people who are better than us to go execute on those parts of the business. Like I wouldn't have us do fulfillment, I would have us go to ship up. Right. And you can think about that for every single part of the stack. And so if that's the case, if we were starting a brand and we are not great acquisition marketers, I would not spend a cent or a second thinking about international. I would wait until 10% of my traffic comes from an international audience. Right. Because you know if you're maybe your conversion rate from an international audience will be less than. But like once you get a point where there is a lot of engagement you can truly just allow them to buy your product, just not prevent them from buying your product. Because the secret is they're probably buying your product, they're just shipping it to a different address in the US who's freight forwarding it international. And so like you might as well capture that revenue. But I would probably start there which is just like are people finding me and like banging on my doors to buy the product, and if so, let them, and then worry about optimizations after that.

You know, you have experience in returns and reverse logistics, and this is actually a topic for both you guys. But clearly returns are a massive problem and byproduct of e commerce adoption. In layman's terms, what is reverse logistics and why is it different than just logistics?

You can kind of think about the economics of outbound logistics being a very, very large pallet. Whether you're shipping from Chicago to the west coast or you're shipping from Chicago to Toronto or Paris, you have like a very big pallet of goods go out shipbob's front door, Right. And then eventually it gets broken down into a single parcel that goes to a consumer. Right. And if you think about that as like multiple steps of a logistics journey, the last mile is very expensive. The problem with reverse logistics for the most part is the first mile is also very expensive because you're not picking up a thousand packages at a time from ship Observer House or 10,000. You're picking up one package from Mike's house, or Mike is dropping it off at a FedEx store, who's distributing it to a bunch of different locations. And so the reverse logistics piece in my mind is all about, like, if somebody really doesn't want the product, how do we get it back as quickly as cheaply as possible so we can resell it to somebody else? But ideally is how do we prevent reverse logistics so that we figure out a way to make sure that the customer is happy with the product or, like, get her to keep it, even if we have to beg, borrow, and steal to do that, so we don't have to take it back so we don't have to ship it to shipbob, who then has to unbox one single box and put it back on the shelf, which is just much more expensive than unboxing a thousand boxes at the same time and putting them on the shelf. I'll stop there in Casey. You can. You can make that sound smarter.

No, I'm glad you took the reins there. The only thing I'd maybe add is, I mean, you think of all the complexity and how you're dealing with, like, eaches versus things that are more in bulk. And then I'd say another level of complexity or just like the rules that you're going to layer on top of versus if you're shipping it outbound, it's pick, pack, throw it in a polymailer, throw it in a box, kit it, and throw in a Custom box depending on what it is. And like you said, you're shipping these things out, you're filling up a truck and you're shipping it out, whereas you're dealing with each is on the reverse side. And do you dispose of this like in some situations with apparel, like do you need to wash this? What is like the quality control? How do you restock it? Do you need to have somebody else that's checking it on the brand side? And so again there's just based off the rules, there's just a whole nother layer of complexity.

Yeah, maybe while we're on this, like what innovation are you both seeing around returns? Because I hear you that like prevention is, it's nice but to some extent, like as more and more, you know, purchases and different types of purchases actually move online, like it's going to be unavoidable to some extent that we're actually seeing, you know, like returns spike. And so you know, if you zoom out five years maybe versus today, what innovation do you see? Just to pick on a couple examples like you know, happy returns is doing some interesting kind of work around like enabling you to just bring your stuff to a drop off center almost like you know, UPS has but for everyone else without a box, without any stuff and they just take it from there. Yeah, I guess. Like what strikes you both as most interesting and how do you think like the whole fundamental process around returns will look different in several years?

I think you nailed it there with what happyreturns is doing and I think everybody else is going to have to follow very quickly or get left behind. I think what they're doing and how aggressive they're going after the returns bar solutions. Innovation is important and people should consistently think outside the box. But also you don't always need to recreate the wheel. And so what I mean by that is Amazon is training e commerce consumers at scale to get used to this returns bar process. They have their partnerships with Kohl's, they have their partnerships with others. I remember this is like a year and a half ago pre Covid I walked by this Kohl's. It's close to where I live and the entire front of the building was plastered in Amazon signage. And I was like, is this like a mini Amazon, like reverse logistics warehouse or is this a Kohl's?

I think that was your most popular tweet of all time if I'm not mistaken.

That tells you how witty I am. Anyways, they're training consumers at scale, millions and millions of people to get used to this. And so what happy returns is rolling out and then allowing these small brands to offer that. Like I personally do not like to print out the label, find a box, send it out. Like I end up just holding on to it, but I would much rather go to a place and actually drop it off. And so what they did with their FedEx partnership and being within whatever, 10 miles, 70% of the US that's huge. I think the exchange option that a lot of people are rolling out, it's interesting. But again, there's still a component of having to like, you know, print the label, throw it in a box. I guess you could argue is it a bug or a feature? Meaning like you'd rather have people not return stuff. And so maybe actually having to print it out and throw it in a box is a feature for them versus a bug. But again, at the end of the day, you're, you're thinking of creating a customer for life. And I think giving them, you know, a favorable brand experience throughout the entire journey is a must have.

I think in the short term we are talking a lot about reverse logistics as a call center. And the reality is something like 80% of customers will look at the return policy before they'll make a purchase upfront. And you can just think about it. If two companies are selling a similar item and one has a $10 restocking fee and one doesn't, the conversion rate for the one without a restocking fee is going to be a lot higher upfront. I think the innovation isn't just being pulled because, oh, let's go lower the cost, but it's how do we create a great experience and then make that affordable for brands? Because brands are like dying to differentiate and to increase their conversion rate. And this is kind of one of the last places where you can really do it. The thing that I always focus on is net conversion rate. So like if you talk to an ad agency, they're trying to get, look, we're going to spend, you know, a million dollars, we're going to have this many conversions. Here's our conversion rate. But the reality is, is like most companies, like obviously sophisticated companies, but I think when you will do this, but when you're just getting started or if you're in the business of selling like ads, you probably aren't thinking about net conversion rate, which is like conversions minus returns. And then there's a component of save sales.

Right.

So if you think about the innovation, like what loop does, what returnly does is like you kind of mentioned this right, like buy that second item or exchange for that second item before you return the first one. Right. And there's like some, some magic behind how they do that. What happyreturns is doing is different though. They're moving in that way on the software side and so is Narvar. But making it easier, like meeting the customer. Where they're at to enable that return, I think is really, really important. The other innovation that I think is going to be interesting and one of the companies just raised a decent chunk recently, it's called Black Cart and another one is Try now which is like Try before you buy. We're kind of like return is built into the model. I mean you obviously know this from Stitch fix, but like ultimately it'd be, you know, like you could see a future where a brand sends you stuff with the return package already ready and if you don't want it, you just send it back like even before you ordered it. Right. They came out with a new product that they assumed you would like it. They make it that easy for you to do. So I could see some innovation that way. There's already stuff like packaging, right? Like Amazon and everybody. I'm trying to think who else, like public rec, Mack Walden are starting to make it easier to just like immediately do a return because they, you know, just make that packaging, returnable packaging. Right. And that's kind of another place as well where it's going to.

I like the fact that you mentioned those two names and I definitely, as an investor, I think about if you want to bring these higher consideration purchases online in particular or bring kind of more of the skeptical later adopters onto e commerce in general, whether it be higher consideration purchases or not. It's interesting in the circles we all run in, it's increasingly likely that most merchants of any scale are running on Shopify. Casey Shopify back, Geez, it was a couple years now announced they're working on their own fulfillment solution. If I'm a Shopify plus merchant evaluating my options, like how should I think about sfn, the Shopify's fulfillment network versus Shipbob?

Like I don't know how Shopify is positioning it today in regards to like their pricing, which locations and what they're disclosing. We view them as a really close partner and a compliment to shipbob. We have a lot of customers, we're shipping millions of orders a month or items per month through alongside with Shopify. I'd say for us is what do we focus on all day, every day, starting with our CEO and all the way down and that's fulfillment. And so that's what we focus on. That's all we're going to focus on. And we want to bring again like world class logistics to these brands. And we're moving at a very rapid pace. We exited 2019 with four fulfillment centers, we exited 2020 with 14 fulfillment centers. And we're going to exit Q1 with like 18 or 19 fulfillment centers. And so you just think of the pace of innovation, the integrations that we have from all the platforms, all the channels. Something I really like that Aaron called out was reviewing not just reverse logistics, but logistics in general as a revenue driver versus a cost center. And like there's innovation there but it's being created by companies like Shipbob and then it's which D2C brands are realizing this innovation and, and how are they partnering in the right way so that they can start showcasing that two day free shipping on Facebook, on Google, on Amazon, on their own site and then have that, that differentiator and that arbitrage window from the rest of the companies out there. And I love nothing more than talking with our merchants and they are, there's always so much smaller than you expect. There's this woman that's been with us since 2018. She did about like $200,000 in sales her first year when she moved over last year she did $1.3 million and she's still a solopreneur. Two and a half years ago she knew nothing about E commerce and she's doing over a million a year by herself. And then with E commerce enablement technology like Shipob, like Shopify, like Facebook and Instagram. There's another customer of ours that they've been with us for I think almost five years. They were Kickstarter, an indiegogo project. It's now a team of three and a half. They say the half is their mother in law who does their bookkeeping. And they did $20 million last year. Three and a half people and they're, you know, they're using all of our international locations. They're running a multimillion dollar brand from their spare bedroom in Chicago and It's doing almost 20 million GMV.

You're hitting on a point that's like really key to thesis and a reason I've been spending so much time around this space which is like because of this dynamic you described on really Shopify and others having lowered much of the friction on kind of getting your own either side project or full time e Commerce business up and running. It's really created a lot of opportunity around the enablement layer. And I also see many brands who are hitting, you know, upwards of 10 million still with like two or three people full time, even if they're working with other, you know, agencies or you know, a bunch of third party partners like, like yourselves. And so the topics and investor that falls out of that is like there's opportunities kind of investing on in software and products that are rising on these platforms but there's also potential risk there around platform risk. And I think I have to think about it. You certainly have had to think about it as well. And so I think Kasey, you in particular have a really interesting perspective here. Having been a part of BigCommerce and now are building something that's pretty tightly coupled to the Shopify platform. How do you think about navigating platform risk? Maybe in a generalized way.

There's definitely a lot of large platforms out there. Squarespace has been teasing that they're going to go public this year. Wix Square, they're out there as well. So there's a lot of platforms out there. For us again it's how can we be agnostic of the platform, how can we be agnostic of the channel? And so the sellers across all of these platforms are able to utilize us or use a combination of those channels and platforms together and then utilize us to get it to the end consumer and then how can we stay ahead of the curve and what the consumers are expecting and what the merchants are expecting. So B2B is picking up a lot and so our focus and what allowed us to excel so well last year was that our focus from the founders from when they got it started was direct to consumer. And so we view ourselves as the number one direct to consumer fulfillment provider in the world. But then B2B is continuing to pick up and so how can we continue to open the box and what we're able to do from a B2B perspective? Again, Aaron talked about reverse logistics and I'll say forward logistics as area to differentiate as an arbitrage opportunity. Another is the unboxing experience. What gets, you know, as close to 100% open rate as anything. It's people actually opening your package and so how can you create the most enjoyable unboxing experience with the packaging? And so for us it's continuing to open the box on like the customization and the kidding experience. And so I know that these are a lot of like hyper specific examples to ship off but it's Something to think through whether you're entering the Shopify space, the BigCommerce space, if you're in B2B SaaS and you're entering the Salesforce space or the Google space, and it's always like, well, what if they eat you? But again, that's not their core focus every day. And so how can you continue to like, open the box of like, things that you can do for your customers?

Mike, if I can just chime in for a second to the Shopify fulfillment network, because I think this kind of like dovetails with what Kasey is saying. What it's doing is it's making the people who start a T shirt company move from their office into fulfillment faster, which is fine because they're doing it and they're making it easier. And it's almost like they're training people to understand that fulfillment by a third party is a thing. And then you can graduate to the people who are deeply, deeply focused on fulfillment. Right. But I think Q4, 2020, Shopify still didn't have returns as like a core part of their fulfillment stack. And like, it's fine, but that's not fine if you're a, you know, a fast growing brand and they'll catch up right there. It's like obviously an incredible team, incredible company, but I think having somebody of that scale dip into your space actually just helps everybody else understand your space and gives kind of ship Bob and its peer set an opportunity to talk about why fulfillment matters, why smart companies do fulfillment, why you outsource it, and then kind of differentiate accordingly.

Yeah, I mean, I think Shopify, to their credit, they're so mission driven and big part of the stated mission is enabling, arming the rebels, enabling the longer tail of entrepreneurship and kind of building the 80% good enough solution for them and allowing other third party partners to build the rest. Shopify's third party developer ecosystem has been so critical and important and just like increasingly interesting to watch. BigCommerce has its own set of partners as well. And I know you were like responsible for overseeing a good chunk of that. What differences do you notice between kind of these two ecosystems and kind of the, you know, the dynamic between platform and partners. There's.

So what Shopify has done similar to Salesforce, I'm trying to think if there's any better examples than what the two of them have done from a just a app ecosystem and a partner perspective. Like both of those companies just knocked it out of the park. So there's definitely a lot to emulate. There, I'd say the biggest difference is between Shopify and BigCommerce. And you know, we can argue whether it was the right bet or not. But Shopify has done such a great job of getting people online, like Aaron said, for the first time, and finding a lot of these partners, let's say on the E commerce, marketing or design and development perspective and then also on like the tech enablement side of helping get people get started and grow from 0 to 11 to 1010 to 100. Where BigCommerce is focused is they have some partners, let's say, that are in more of the long tail space, but they're definitely focusing more upmarket. And you can see that with some of their tech partnerships, some of the larger ERP solutions or IMS solutions, and then also the agencies. I'd say their focus has been peeling systems integrators over from Magento to come join the BigCommerce ecosystem versus necessarily taking them from Shopify. And obviously there's a lot on both the tech and the agency side that support both Shopify and BigCommerce. But I'd say it's, you know, if you listen to anything that Brent Vellum, the BigCommerce CEO, talks about, it's really owning mid market and helping push mid market to the enterprise. And so that's definitely their focus on the partner ecosystem.

Yeah.

Right.

So we're talking about these two platforms. I think I want to shift gears slightly and talk about Headless briefly and get your points of view on that because it's definitely been a little bit buzzy. We had a podcast on Headless with Jordan Gall and Steve from Builder, and I am quite bullish on it. And so given the bear cases here, I'll say one angle that I think is potentially the bear case, which is merchants who are subscale, like too small to really be thinking about this, are going to go at it too early and they give up a lot of the benefits of having this whole enablement layer that's really integrated in one place if you go and call it a Shopify. Right. And so it ends up being for speed and flexibility benefits that really only matter when you're doing a significant amount of traffic. You've actually given up probably speed of actually getting a business up and running and probably like optimize on something, you know, before you need to. I guess that would be the bear case, which is why I'm more interested in headless players that are focused a little bit more on market. So, you know, what are Your thoughts on potential shift to headless architecture, the platform's role in enabling this. Do you have points of view on this?

My question, and I'm sure Aaron's got a point of view on this from running a very customizable E commerce brand himself, is how big is the use case? And again, we're not going to get in an argument of like TAM because everybody's under guessed like what the true TAM is. And so maybe it's huge even though like everybody into the sun seems to be rolling out like a headless solution. But you know who's also innovating on their platform is Shopify and BigCommerce and Square and everybody else. Their goal is to have it so you can customize anything that you want. So it's really like that open SaaS platform push. It's the Magento flexibility but in a SaaS tool. So it's keeping some type of like guardrails on there. And so who can build and innovate faster? Is it the platforms that are opening up all of this or is it these additional tools you're gonna have to layer on top of your platform? And then even things like are you gonna have to outsource this? Like one of the many pros of using a solution like Shopify or BigCommerce is a non technical person could get started today very inexpensively. And yeah, you're eventually going to want to like custom build your own solution, but you can do it rather cost effectively. And if you start having to add another layer of complexity in regards to that solution and start outsourcing that now you're beholden to your systems integrator or your website developer and you're almost going backwards. And now you're back in like the magento space where you're running a dev shop versus an E Commerce brand.

I don't have much to add other than I think the headless players who intrigue me are the ones who are additive to the existing platform. So builder, forget the like big builder vision down the road, which like at some point, sure. But right now it's making like a Shopify instance much faster and much more easier to update.

Right.

Without needing a ton of developers. And that in and of itself is useful because people are already bought into Shopify as the platform. But I'm definitely bullish on the Shopify and other platforms case to continue to innovate. And so I think Headless is a nice to have but eventually gets squeezed on some level.

Yeah. And I do think it's possible to be bullish on Shopify and Headless at the same time. I've had to go through my own internal dialogue on that. And I think it's just a question of defining who it's best for, which actually kind of. Casey, your point? It kind of dovetails into one area I wanted to spend some time discussing because I think it's useful for listeners is around go to market and actually building go to market functions as E Comm Infrastructure plan layers. Shipbob, I think, is a great example of one who seems to have navigated the integration and partnership angle very well. We've seen other notable names do this as well. If you look at Klaviyo, Postscript or kind of examples, but there's many others. Explain to us how this has worked specifically on the partnerships angle. And I guess tips you have to newer vendors who are just getting started on this channel.

At the end of the day, it all comes down to the customers, both your current customers and future customers. And so my very short answer, often around go to market, it's customer voice and talk to your customers more and then tell their stories. And obviously there's a lot that goes behind that. And how are you using your team and data most effectively to drive the right demand and then how do you nurture them and turn it into revenue and so forth. In regards to the partner setup, I think it's. It's similar where it comes back down to customers and data. And so what are your customers using today and then using that data to identify the partners or the integrations that you should build and then what do they want in the future and then how can you find those right partners, integrate and build there. And so that's part of like, who are the most important partners from a customer perspective. And then also you have to think of again, go to market and so of these partners who actually is good at sales and marketing because it's not all of them. And so who can be a good partner for you and help provide brand lift and vice versa. And so like I know when, when Aaron was at Passport, they were good at that. And I think that we're pretty good at that. And so it made for like a fruitful partnership. But if they were extremely good at, if they were a great tangential or complementary solution to what we're doing at shipbob, which they are, but they were not good at that. You know, it would weigh into how we're prioritizing partnerships. So you always have to think of the customer first, but after that you do need to think of, you know, how are we going to effectively drive the right demand and then do it scalably and repeatably. And so you need to find the right partners that can do it alongside you.

And how about on the agency side? Agencies actually are key decision makers or influencers to the stocks of a lot of these merchants. How have you navigated that and what tips would you have to people who are thinking about either striking agreements or just getting distribution through agencies?

I think it's being honest with yourself on which agency partners are actually helping influence the decision. And so we've had success here. I'd be lying if I said it didn't take longer than I was hoping for. It was very helpful for us. At BigCommerce, you called out the Shopify ecosystem before, but having taking your platform and let's say your E commerce platform and then finding design development marketing agencies to help promote or refer you, that's just a natural conversation for fulfillment. There was this chasm that we had to cross and again through us and then others in the space, we've been able to chip away and highlight the value of fulfillment. But your marketing agency was often not referring. And there's so many marketing agencies out there and some very good ones, but they were often were not answering your questions on fulfillment. But I also think the competition in the agency space has ramped up so greatly that these, these agencies and their customers are expecting them to understand like the entire landscape. And so fulfillment might get brought up more often. I got an intro today from a company and like all they do is that sounds like I'm minimizing it. What they focus on is E commerce design. And he sent us, you know, the third lead we've gotten from them this month, or not this month, this quarter, because I forget that it just turned February. And so again, I think it's just being honest with yourself and like who actually is making the decision and who's closest to you, like in the tech stack or for us in the supply.

Chain, bringing it home here. I think Aaron, Casey, both you guys, you come across a lot of emerging tech solutions and players in this space and I think are also working with merchants who are trying to figure out what their stack should be, which is always dynamic. What are some names that come up as most interesting maybe to both you guys who you've come across recently?

Yeah, so I mean we see a lot and actually Casey and I will share a lot of companies back and forth with each other. More like a lot will be good partners for Ship Bob or just like Kira sir has take on it based on his background. There are a couple that come to mind. One we've already talked about is Builder right in the headless space. Another one kind of and I think actually all three of these that I would bring up are aligned with the experience theme. One is Malomo which is kind of like post purchase experience and making sure that your brand kind of lives all the way through until your consumer gets your package. There's something like I think the stat is a consumer checks the tracking page four and a half times on average right before they get their product. And if you've ever done it even if you're buying a laptop from Apple and you go and you click and then it's like a FedEx or UPS tracking page. It says like your order is not. Nothing's happened. It's like a missed opportunity to kind of capture the magic. Get somebody to take an action, give them an FAQ about the product, get them to, you know, go to your Instagram or whatever. So Malomo is one, Swim is another which is kind of this understated company that's like actually the CEO Arvin was the first person who really turned me on to the power of agencies in the space because they're very big partners in big commerce and Shopify and elsewhere. Swim helps a lot with personalization. So they've got the Wishlist app and they're doing a lot more. So I think those guys are interesting. And then the last one is actually kind of in Casey's neck of the woods and more partnering with a bunch of kind of top three pls is called Channel Ape. So they're kind of like mission control for fulfillment for operations. So like your brand with a complex set of instructions for how you want to fulfill. You sell the different channels you want different experiences, different shipping that can become very hard for a 3 PL to fulfill and kind of meet your needs. And channel kind of serves as kind of that. That traffic copper or like the mission control. Right to do that.

Actually before I give a shout out to anybody I'd say what's interesting in the E commerce space is both entrepreneurs and investors are realizing the size. I think we're just scratching the surface. There is seeing these outsized winners in the B2B SaaS space and then how do you carve off and own that niche for purely E commerce? And so an example there and who I'm going to give a shout out to would be Sarah and Greg, the founders over at Alloy who just announced Their seed round, they're building the Zapier for E commerce. And so Zapier, which all of us who have built anything have definitely used Zapier. And Zapier has been one of the most probably undercover, well run, efficient companies out there. Another is you look at upwork and you can just see how their trajectory has been. And so I think of a company like Marketer hire and a lot of people are like, well, is marketer hire big enough? Is that like a VC business or not? And like always it's tbd, but it's building the upwork for E commerce. You know, we can see how Fiverr is doing. Is somebody going to build the Fiverr for E Commerce? Because there are a lot of these repeatable tasks that should be five to $25 a piece of. And so I don't know who's going to build that, but I think that will be an interesting marketplace. Managing a marketplace is also a pain and so hats off to whoever dives into that space and cracks it. I think Honeycomb and these companies that are trying to bridge multiple solutions and like checkout experiences together, Facebook and Instagram and Google are just getting more and more expensive and so allowing brands to be able to partner much more effectively and own the data and own the checkout experience and own the fulfillment. Fulfillment experience is very important and that's not an easy thing to build. And then who's going to build, let's say like the CRM of E commerce. HubSpot's been actually just doing, I think a lot better in the B2B space in general. And we'll continue to enter maybe E commerce more. And then lastly, I got to give a shout out to postscript. You called them out earlier as well. I think that the way that they're attacking SMS and you know, entering that space should be interesting. And then who's going to get into SMS payments? Shopify has got a stranglehold on the payment space, at least in their ecosystem, but the payment space is huge and so SMS for payments is massive internationally and so we'll see who can crack the nut there.

Well guys, this has been great. I guess as a follow up, you know, where could our listeners find you and any other final plugs you want to make.

Shipbob.com, carmstronghipbob.com, drop me an email. As Aaron alluded to earlier, you can find my non Witty tweets @aca there. I'll throw it over to Aaron.

I have Casey's phone number. If anybody wants me to send that, they can send him texts. Also, I think probably the best place is Twitter's Aaron Schwartz, 35. And then. Which is like a number from when I was 10, but it follows me forever. And then I'm writing some checks out of a syndicate on Angellist called nps. So it's a double entendre for new picks and shovels and Net promoter score.

Yeah. Thank you both for doing this. This is great. And, yeah, we will talk soon.

Thank you. Thank you.