Logistics, the largest industry in the world, is surely a sector craving for disruption. We have seen a number of startups in the region giving it a try, like Shipitwise of Estonia, but lately, we have also seen one of the first victims.
Shipbeat, which worked on solving the logistics challenge for e-commerce companies, has shipped its last parcel. Co-founder Kenneth Svenningsen went through the details in his post-mortem blog.
It’s a major problem: some 8–15 percent of online retailers’ revenue goes to cover logistics cost, at the same time its one of the most conservative, in-transparent and ineffective services.
“Shipbeat aimed at changing all of that by creating a platform to automate and acquire logistic services for online retailers. We made it possible for online retailers to save time and money on shipping by using our service. We solved a problem,” Svenningsen writes. Automating and acquiring logistics services sounds very much what Shipitwise has been planning.
Clients want cheaper
When a logistics startup claims they are selling the service and not the price they are ignoring most of the demand, Svenningsen admits the key reason any logistics customer turns to a startup is money.
“Building the software required hard work. A lot of it, but still doable. Achieving competitive rates from the carriers, though — that was a key problem we could not solve,” Svenningsen said.
For the Danish startup to launch in Denmark they needed local largest carrier PostNord in their offering. Signing them up took more than a year, and even then PostNord tried to prevent re-sale their services. “This was unexpected as PostNord paradoxically is required by law to sell some of their key services to anyone,” Svenningsen said.
“Our plan was to build internally a broker/marketplace business for logistics. That required hiring entrepreneurial minded people with logistics experience and network to build relations at C-level with the carriers. That proved impossible for us to find at our stage.”
In the logistics business, you start with almost zero volume in every new market, and you have to integrate a new set of carriers.
“Shipbeat existed largely because not a single carrier can fulfil customer needs and preferences globally and even global carriers (like DHL) require new integrations when moving into new markets. Thus in order to have a competitive offering in a new market you need to offer the most important carriers,” Svenningsen wrote.
Due to the interlinked nature of the business, making any changes to a business critical process happens with extreme caution.
“It is far more than a simple software update done by a tech team. In many cases, it requires changes for the carrier (manual change of account setup etc), the customer (tech, warehouse, customer service) and maybe even an external warehouse (3rd party logistics),” Svenningsen wrote.
The founders were looking for a shipping broker to joining the firm as an investor or acquirer. That could have solved the challenge in the logistics, and powered the Shipbeat software. But this did not happen.