Getting stuff delivered is a pain. And there’s a big reason behind that.
Parcel post predates the internet by many decades. It’s from a time when the likes of Fastway and TNT would mostly be couriering items from one business to another. These deliveries also take place during business hours — when most of us aren’t home. And with most warehouses all located in the middle of nowhere, it’s another time-consuming journey when we need to pick up our delivery.
This is the problem that Shippit co-founders Rob Hango-Zada and Will On are trying to solve. By creating a parcel post business model for the 21st century.
Shippit’s origins lie in two shipping failures from a few years back. On had ordered a vacuum cleaner online, and was unable to get it delivered to his home — the couriers refused to leave such a valuable item without a signature and weren’t able to provide him an accurate delivery window. Hango-Zada was trying to sell a coffee table but his prospective buyers were limited to a small geographic area thanks to sparse shipping options. The two co-founders set out to figure out why the industry was lagging so far behind.
“The logistics market is built for B2B. If you think about the last fifty years, all these logistics companies have been good at delivering from one retailer or one store to another store. During 9-5, to a fixed location,” says On.
“It’s not until the last 10 years that we’ve seen the rise of eCommerce. 20% year on year growth. Now we are trying to deliver to people, to homes. So, we are trying to retrofit an old industry onto a modern problem.”
Even worse for consumers and retailers, the shipping industry is incredibly fragmented. Big players like Australia Post, TNT and Toll only account for a small slice of the market. There are almost 15,000 registered courier businesses in Australia. According to On, around 90% of parcel postage is operated by companies in the “other” category — small businesses with maybe a couple of trucks. There’s little coordination, transparency or accountability. For example, do you have any idea who delivered your last Amazon buy? Do they have much incentive to provide you with good service, given anonymity and the lack of repeat business?
“A highly fragmented market equals a big opportunity to disrupt,” says On.
Shippit started out as little more than a branded courier service, offering three hour premium delivery. The company focused especially on providing delivery “out of hours” — when consumers would actually be home and there are less cars on the road. Partnering with a couple of retailers in Sydney, Shippit launched a trial product.
“In the first week there was like one delivery. In the second week we tried free delivery — you could get free delivery anywhere in Sydney. And we got no orders. And we were like oh ****, something is going wrong,” says On.
On and Hango-Zada quickly realised that there wasn’t much of a market for their premium product. 3 hour delivery only really works in metropolitan areas, and most customers are fine with standard delivery — it accounts for more than 90% of the market. There are only certain items you really need right now.
So the company pivoted. Rather than being a branded layer on top of couriers, it would provide a complete shipping platform. Standing at the nexus between the retailer, the courier and the customer. For retailers, Shippit plugs into their platforms and through an algorithm, chooses the best courier for the job, based on metrics like price, capacity and quality. For customers, it provides a single point for tracking, and sometimes allows for nominated delivery times. For couriers, it stops the race to the bottom, providing some differentiation and rationale to provide superior service.
On claims that some of its retailers are experiencing savings of up to 90% on shipping overheads, as well as enjoying better customer retention. Meanwhile, couriers are getting more orders and customers receive a better experience. After launching last year, and winning the pitching competition at SydStart, Shippit is seeing 50% quarter on quarter growth as it onboards more retailers.
Shippit is now working on extending its product overseas, both outbound shipments from Australians as well as replicating its domestic model in other countries. It faces some competition, particularly from American companies like Shyp. But according to On, having solved the problem in Australia gives them a leg up on their foreign competitors.
“They do really well in high density cities. But in Australia we are geographically spread, low density. If we are able to solve this issue in a geographically spread marketplace, that’s how we will start to win in more markets than just here,” says On.