How Does ShopRunner Make Money? Business Model of ShopRunner


How Does ShopRunner Make Money

ShopRunner is a popular expedited shipping service that connects retailers with customers. It provides free two-day shipping and returns.

ShopRunner makes money by charging partner retailers a commission on orders placed by ShopRunner members and from subscriptions to its membership program costing $79 per year.

Founded in 2010 by Lucille Logan and Rick Fawcett, ShopRunner was created to provide customers with a reliable expedited shipping service on orders from their favorite retailers. ShopRunner aimed to provide small and intermediary retailers with a means to compete with global giants such as eBay and Amazon.

Over time, the company also got into the business of providing data. In 2018, ShopRunner acquired Spring, an ecommerce startup.[1] ShopRunner used this acquisition to improve its online store interface.

What is ShopRunner & How Does It Work?

ShopRunner is a membership-based expedited shipping service that allows customers to get free two-day shipping from partner retail stores. Members also get free return shipping. In addition to free shipping, ShopRunner members also get access to exclusive offers on partner stores.

Some ShopRunner partners also support an Express checkout system. It uses customer data stored on ShopRunner’s servers to streamline the process of filling out forms during checkout. Instead of manually filling out their address and payment information, customers simply click one button to place their order. During Express checkouts, ShopRunner will use the default delivery and billing address provided by the customer.

The ShopRunner website also has its own ecommerce section that includes item showcases, pricing, and links to partnered stores. Customers can browse through categories and select an item they are interested in. When they are ready to place the order, ShopRunner takes them to the page for that item on the partner’s website.

New retailers join ShopRunner’s expedited delivery program but not all retail partners will support ShopRunner’s entire suite of services. Some might support Express checkout but not have options for free two-day deliveries.

Membership costs $79 per year, but certain users might get free access. PayPal members are eligible for a free one-year trial. American Express card owners also get free access to ShopRunner.

To start using ShopRunner, users must first create an account. This can be done by visiting the ShopRunner website and filling in a few basic details. ShopRunner also offers free trials, which can be redeemed without entering any payment information.

ShopRunner asks for an email, name, and password during signup. After that, users can fill in their payment and address details for Express checkout. The site also asks users which retailers they use most frequently, to craft personalized offers for them.

Retailers who are partnered with ShopRunner get access to the platform’s logistics network and software ecosystem. ShopRunner collects data on a user’s location, spending patterns, purchase history, and retailer preferences. Then, it automatically decides which items on the store are eligible for free two-day shipping, and displays a ShopRunner logo next to those items.

Currently, ShopRunner is partnered with over 150 retailers and brands, many of which are international. Some of the popular brands include Eddie Bauer, Neiman Marcus, UnderArmor, NBA Store, Hugo Boss, Brahmin, and Jimmy Choo. Special offers include percentage-based discounts, flat cash discounts, complimentary gifts, and limited-time sales.

Many partnered stores don’t have a minimum order value requirement for two-day free delivery, but some do. During checkout, customers need to select the delivery option with the ShopRunner logo on it. ShopRunner itself isn’t responsible for packaging or shipping the order.

Instead, it acts as a data and logistics partner for stores. It provides them with the software framework and financial incentives to offer a two-day free shipping option. ShopRunner uses its marketing and item recommendation algorithm to drive sales, increase traffic, and boost revenues for retail partners.

Shipping companies like FedEx, UPS, and OnTrac handle the movement of goods from a retail partner’s warehouse to the customer’s doorstep. They coordinate with ShopRunner. It acts as an intermediary between these shipping companies and the store.

Certain customers might even be eligible for same-day delivery, depending on their location and distance from the store. The cutoff time for same-day delivery is 1:00 pm, so any orders placed before this time are delivered on the same day. ShopRunner generally doesn’t deliver on holidays and weekends because delivery windows are decided by the shipping partner.

Returning an item is a very simple process. All a customer needs to do is log into their account on the ShopRunner website and print out a shipping label for the item they wish to return. They select a reason for returning the item and get a return label.

Sometimes, return labels are available only through the retailer’s website. If this is the case, ShopRunner will still waive all return shipping fees. Similar to deliveries, ShopRunner itself does not fulfill the returns, it relies on shipping partners.

 

Business Model of ShopRunner

ShopRunner uses a Business to Business to Consumer (B2B2C) model. It connects businesses with shipping and logistics companies such as FedEx. The company also acts as a bridge between consumers and retail partners by providing value-added services such as express checkout and exclusive offers.

At its core, ShopRunner is a data analytics company. It gathers massive amounts of data on customer spending patterns, retailer preferences, and location. Then, it uses this data to generate product recommendations.

Once a partner store integrates ShopRunner into its platform, they provide access to their inventory information. ShopRunner combines this with customer data to decide which items should be eligible for free two-day shipping, or same-day delivery. It also comes up with exclusive offers that can only be accessed by ShopRunner members.

Stores pay a commission that is based on a percentage of the order value. There is no recent data on the actual percentage value, but it was between 3 to 5% in 2013.[2] ShopRunner convinces retailers that its service is worth the commission by bringing in more traffic and generating higher turnover.

Using its massive data network, ShopRunner is able to craft unique marketing campaigns. This drives traffic to ShopRunner’s website, where people register for $79 a year to get free shipping from their favorite stores. ShopRunner then utilizes its store search and item showcase functionality to redirect traffic toward partner sites.

If a customer shops for certain item categories or brands on ShopRunner, they can see photos, specifications, and pricing for that item on the ShopRunner website. But, during checkout, they are redirected to the partner site where they finalize the order and make payment. This helps retail partners grow their traffic, revenue, and brand awareness.

In a way, ShopRunner’s business model resembles that of Visa and MasterCard. These payment processors aren’t credit providers nor do they issue the cards. Instead, they help bring in customers by attracting them with their convenient, safe, and fast electronic payment network.

As a result, stores are willing to pay an interchange fee on every transaction made through Visa or MasterCard. Payment providers also have massive amounts of data on customer spending patterns — just like ShopRunner. They then use it to craft marketing campaigns to draw in even more users.

The more users there are on ShopRunner, the more profitable it is for retailers to partner with the company. And ShopRunner gains money every time a user places an order using their two-day delivery option. Stores also don’t have to deal with the hassle of logistics since ShopRunner acts as an intermediary between them and shipping companies such as FedEx.

Small and intermediate retailers don’t have the volume or revenue to create and maintain an inhouse shipping network. By using ShopRunner’s services, they can simplify revenue generation and provide customers with free two-day shipping. That can do this while not spending any money on shipping, other than the fee they pay to ShopRunner.

As more stores partner with ShopRunner, the company becomes more attractive to customers. And so, it is a cyclical process that grows based on momentum. ShopRunner also partners with payment processors like American Express, PayPal, Chase, and Apple Pay to provide its Express checkout service.

Through a combination of its data-driven marketing and logistics, ShopRunner helps generate repeat customers for retail partners. It also provides an express shipping service to frequent online shoppers who get deliveries to their doorstep within two days. Since the company doesn’t own any warehouses or physical locations, it saves on operational costs.

ShopRunner’s biggest rival is Amazon Prime as they offer similar services. However, Amazon Prime is based on Amazon’s in-house logistics and shipping network. In contrast, ShopRunner is a software intermediary between logistics companies and retailers.

Because Prime is part of the largest online retailer in the world, customers can get a much wider selection of items through Amazon. In comparison, ShopRunner is more focused on fashion and accessories. As a result, customers can find a more premium selection of clothing brands and luxury products on ShopRunner.

ShopRunner also doesn’t have any monthly plans, while Amazon Prime has a monthly subscription. However, ShopRunner’s yearly subscription is cheaper compared to Prime. Conversely, Prime offers extra services like Prime Video and Music.

ShopRunner is a better service for shoppers who primarily purchase clothes and accessories. It is also a service that focuses on long-term memberships and customer retention.

In December 2020, ShopRunner was acquired by FedEx.[3] This has likely resulted in the company finding a number of synergies to reduce expenses and allowing FedEx to prioritize its own shipping options for ShopRunner customers.

While FedEx is a publicly traded company, it doesn’t publish separate figures for ShopRunner’s revenue. For that reason, it is hard to judge how successful the company’s business model is.

Even though FedEx doesn’t separate operating costs and revenue for ShopRunner, it is likely that the company is profitable. It has low operating costs and a proven revenue model. ShopRunner’s main expenses are platform development costs, staffing, and advertising.

 

How Does ShopRunner Make Money?

ShopRunner makes money from two different revenue streams. These are memberships and commissions.

ShopRunner is owned by FedEx, which does not break down the revenue it generates from subsidiaries. It is not publicly known how much the company makes from each individual revenue stream.

Memberships

ShopRunner charges $79 per year to customers who use its service. The company only has yearly membership plans, without any monthly subscription options. ShopRunner generates subscription revenue based on how many paying members it has.

Currently, it is unknown how many paid members are active on ShopRunner. The website received 755,600 visits in September 2022.[4] Of this figure, 51.7% was direct traffic.[5]

 

Commissions

When retailers partner with ShopRunner, they pay a commission on each order that is placed using ShopRunner’s expedited shipping option. The amount is calculated on a percentage basis.

However, there is no recent data on the percentage. Data from 2013 suggests that the commission is between 3% to 5% of order value, but this could have changed in the years since then.[6]

 

ShopRunner Funding, Valuation & Revenue

ShopRunner is owned by FedEx (FDX), a publicly traded company on the New York Stock Exchange (NYSE). The company’s stock traded for just under $153 in October 2022, giving it a valuation of $39.7 billion.

Prior to its acquisition by FedEx, ShopRunner raised $115 million over two venture capital rounds between 2013 and 2018. Notable investors include August Capital, Alibaba Group, and American Express Ventures.[7]

ShopRunner was acquired by FedEx in December 2020 at a price of $228 million.[8] There is no public valuation data for the company prior to this purchase.

ShopRunner’s annual revenue is estimated to be $35.7 million.[9] There is no way to verify this since FedEx doesn’t separate ShopRunner’s revenue in its annual reports. However, FedEx reports its financial results as a public company.

For the fiscal year of 2021, FedEx generated $83.9 billion in annual revenue. It had a net income of $5.2 billion. Which is an increase of 307% over the $1.2 billion in net income it had in 2020.[10]

YearAnnual RevenueNet Income
2019$69.6 billion$540 million
2020$69.2 billion$1.2 billion
2021$83.9 billion$5.2 billion

 

Is ShopRunner Profitable?

ShopRunner is likely profitable. While FedEx doesn’t release any details on the revenue of ShopRunner, its subsidiary, the company has a streamlined business model with low operating costs and reliable revenue sources. That likely means that it’s generating significant revenue.

FedEx is a profitable company and has been steadily increasing its net income in recent years. The company made $5.2 billion in profits in 2021. That represents a 307% increase over the $1.2 billion it made in profits in 2020.[11] FedEx likely bought ShopRunner because it offered the company a number of synergies allowing FedEx to prioritize its own shipping services for ShopRunner customers.

 

Conclusion

And that’s how ShopRunner makes money. It’s a win for customers because they get to shop from all of their favorite online stores without having to pay for shipping and handling. It’s a win for retailers because they get more customers coming through their doors.

As you can see from our analysis above, we feel that ShopRunner has a strong chance of succeeding based on these factors:

  • A large number of potential customers are interested in paying for a membership program rather than paying shipping fees for every order.
  • A large number of potential merchants want their products featured on ShopRunner’s site.

As more and more people become aware of this new way of shopping online (and realize how much money they’re saving!), we think ShopRunner will continue growing its user base and merchant network exponentially over time.

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Sources

  1. TechCrunch
  2. TIME
  3. bizjournals
  4. Similar Web
  5. Similar Web
  6. TIME
  7. Crunchbase
  8. Chicago Business
  9. Growjo
  10. FedEx
  11. FedEx