ShipBob, an on-demand shipping fulfillment service, seeks to change the world of shipping. They are dedicated to making shipping painless for online brands by handling everything from picking, packing, and shipping orders to inventory management and returns. But how does ShipBob make money?
ShipBob makes money by charging the following fees for its order fulfillment services: a one-time implementation fee, receiving fees, warehousing fees, and shipping fees. Their pricing is based on a full-service cost of direct-to-consumer order fulfillment.
You’ve seen the ShipBob vans driving around the streets. You see their advertisements on billboards and read their catchy tagline: “We Ship. You Grow.” But what is Shipbob’s business model, is it profitable, and do they compete with any of the other shipping companies out there? Read on for answers to these questions and many more!
ShipBob is a global logistics company that handles order fulfillment for direct-to-consumer online sales. The company was founded in 2014 by Dhruv Saxena and Divey Gulati, both originally from New Delhi, India. The founders have known each other since childhood.
ShipBob is a private company and has raised a total of $330.5 million since its inception. Of that amount, Techcrunch reported BainCapital invested $200 million (June 2021), which valued the company at $1 billion+.
How Does ShipBob Make Money?
ShipBob charges its 5,000+ clients for order fulfillment and shipping logistics services. The company earned $57.9 million in 2019, according to Craft. The company is profitable and it re-invests its profits back into the business. The $200 million it raised recently in June 2021 will be used for further expansion.
ShipBob’s growth-plan pricing is based on a standard fee structure, suitable for clients that ship 1 to 400 items per month, which includes the following:
- A charge to receive inventory ($25 for the first two hours, $40 per hour thereafter).
- There is a monthly charge for warehousing products ($40 per pallet, $10 per shelf, and $5 per bin).
- A charge for each order shipped includes packaging, labor, and shipping costs (varies based on weight, size, destination, and type of shipping service used).
- Up to four picks are included for each order ($0.20 per pick thereafter).
ShipBob as an Amazon Alternative
Unlike Amazon, which charges a sales commission on each sale made through the Amazon system, ShipBob is not involved in selling the item.
For online retailers that have an active website making sales or are selling directly to the customers through popular systems such as eBay, using ShipBob for order fulfillment is one way to have the shipping efficiency of an Amazon-like system and increase the gross margins of the sales.
Amazon’s pricing is very steep for some companies and product categories. Professional vendors on Amazon pay variable closing fees plus a referral fee commission ranging from 6% to 25%. Most Amazon referral fees are 8% to 15% of the sale, averaging 13%.
In March 2021, ShipBob announced a partnership with Square. Square is an online marketplace with millions of sellers. With a few minutes of setup effort, sellers on the Square system can sync their product catalog with ShipBob and enable shipping through ShipBob. Then, ShipBob fulfills the orders through its network of global fulfillment centers.
After an order is picked, packed, and shipped, ShipBob notifies the interested parties about the tracking information. It is easy for both the seller and the customer to have full visibility of the shipping process. The package is tracked from the time the order is placed until the time the order is delivered.
ShipBob has 21 fulfillment centers located in the United States, Canada, Ireland, Australia, and the United Kingdom. The new capital raised in June 2021 will be used to more than double the number of ShipBob fulfillment centers, including adding new countries to the global list.
ShipBob’s Extraordinary Growth
ShipBob started in 2014 in Chicago. The early funding support came from Y Combinator. In terms of value, ShipBob is 37th on the list of the top 161 companies funded by Y Combinator. Other investors in ShipBob are Hyde Park Angels, Hyde Park Venture Partners, and Menlo ventures.
The company raised $5 million of Series A funding in 2016. Series B was in 2017 for $17.5 million. Series C funding came in 2018 for $40 million. Series D in 2020 was $68 million, led by Softbank Vision. Series E funding in 2021 was $200 million from Bain Capital.
The pandemic helped ShipBob grow. Revenues for 2020 are estimated to be up over 70% from the year before.
|Year||Capital Raised||Annual Revenues||Fulfillment Centers|
|2015||$1 million||$1 million|
|2016||$4.6 million||$5 million||1|
|2017||$17.5 million||$12 million||5|
|2018||$40 million||$34.2 million||10|
|2020||$68 million||$98 million (est.)||16|
|2021||$200 million||$127 million (est.)||21|
|2022 to 2028||$147 million+ (est.)||32+ (est.)|
ShipBob focuses on the online store and marketplace integration. Sellers with product catalogs for sale online on the following popular e-commerce systems, and more, are supported:
Even though ShipBob competes with Amazon on order fulfillment services, it also does work with Amazon retailers who choose to use ShipBob for order fulfillment.
Prior to ShipBob’s debut in 2014, everything for an e-commerce store could be automated except shipping and logistics. ShipBob filled an immediate need.
ShipBob’s co-founder, Gulati, estimated that a successful online business could save 20% to 25% in overhead costs by outsourcing its order fulfillment to ShipBob.
ShipBob has the following 21 fulfillment centers open and operating (as of August 2021):
- In the USA: Cicero, Yorkville, and Woodridge (IL), Edison and Budd Lake (NJ), Bethlehem 1 & 2 (PA), Moreno Valley and Rancho Dominguez (CA), Carrollton and Grapevine 1 & 2 (TX), Chattanooga (TN), St. Petersburg (FL), Twin Lakes (WI), Phoenix (AZ), and Louisville (KY)
- In Canada: Ottawa
- In Ireland: Kilkenny
- In the UK: Feltham
- In Australia: Melbourne
One of the Fastest-Growing American Companies
The Financial Times (FT) ranked ShipBob 60th among the top fastest-growing American companies in 2021. The FT says that ShipBob has experienced 1,024% growth since its inception. The compound annual growth rate (CAGR) was 124%.
Earnings in 2019 were $57+ million compared to $5 million in 2016. This represents over 10x growth in revenues during that three-year period. ShipBob had 431 employees in 2019 and now wants to hire workers to end up with more than 800 in 2021 and beyond.
For 2021, INC. ranks ShipBob 47th on the top list of the 5,000 fastest-growing companies in the Midwestern area of the United States. The median growth for this region is 110%. ShipBob is reported by Inc. as having 265% growth year-over-year.
Fast Company ranked ShipBob 8th on the list of the top ten most innovative logistics companies in 2021.
In 2020, ShipBob expanded to international fulfillment. The company released a new, free-to-use software tool that accurately estimates shipping times and costs.
It completed the integrations with eBay, Loop, Shopify, and Squarespace. An innovative integration with Google Ads allows vendors to accurately estimate shipping times that appear in Google Ads in real-time.
Vendors using ShipBob can now offer guaranteed shipping services that compete with Amazon Prime.
The main competitors for ShipBob are Amazon, Easyship, Flowspace, Oberlo, Printful, ShipHero, Shippo, ShipStation, and Spocket.
Growth of Global Logistics Market
Grand View Research estimates the market size for e-commerce global fulfillment to be $86.4 billion in 2021. The CAGR is projected to be 10% from 2021 to 2028, resulting in a market size of $168.7 billion forecasted for 2028.
The Advantages of Using ShipBob
ShipBob is designed for small to medium sized businesses that ship up to 500 packages per month, with the median being around 100 packages shipped monthly. The service specializes in next-day and two-day shipping.
It is very difficult for a small business to set up an order fulfillment system that is efficient and works fast. Consumers expect excellent customer service, immediate shipping, easy returns, and fast delivery. These logistics standards are easier for a large organization to accomplish than a small company.
Nevertheless, by using a sophisticated order fulfillment service such as ShipBob, small companies may provide the same shipping and handling service as larger enterprises.
ShipBob says some companies that outsource order fulfillment to ShipBob experience up to a 97% increase in order value, an 18% reduction in online shopping cart abandonment, and up to a 70% reduction in shipping costs. While these case studies are interesting, not everyone has the same experience.
The reason ShipBob is making money is that it solves significant pain points for its customers. The integration with popular online selling systems makes it a time-saver for those customers using that system. The integration with these major selling systems is one of the main reasons that the company’s revenues continue to grow rapidly.
ShipBob allows a small company to provide excellent customer service to handle shipping and returns like a much larger company does. The shipping rates are adjustable to a client’s specific needs. There are many locations for fulfillment warehouses that can be a part of a strategic marketing rollout plan.
In the United States, the ShipBob warehouses are located near the major metropolitan centers, including Chicago, Dallas, Los Angeles, San Francisco, and New York. This allows for next-day and two-day delivery options.
ShipBob packs and ships in either standard non-branded boxes or uses the customer’s branded boxes (an additional fee applies for customer packaging use). Amazon does not allow a company to use its own branded boxes when shipping through the Amazon fulfillment centers.
Each ShipBob customer has a dedicated manager. The software used for the entire process is controlled by ShipBob and is free for the customer to use.
ShipBob handles inventory management, warehouse management, and the entire fulfillment process. All the software operations are cloud-based, which allows for increased efficiency and real-time monitoring. This is useful for forecasting.
Conclusion: How Does ShipBob Make Money?
To sum up, ShipBob is a last-mile logistics service that helps retailers and online brands send packages through their inexpensive, quick, and reliable service from fulfillment centers to the end address. It earns revenue by charging businesses fees for providing storage spaces, picking, packing, and shipping their products.
ShipBob has enabled anyone to build their own e-commerce stores without worrying about the hassle of shipping orders through not-so-user-friendly shipping services. Their platform connects directly to your inventory and picks, packs, and ships your orders to customers on your behalf.
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