Packing, labeling, shipping, handling: It's all really expensive. Here's how one designer tackled shipping costs...by continuing to outsource its logistics.
An award-winning designer of cat litter boxes, ModProducts, needed to make a major decision—outsource its shipping and fulfillment, or move to a warehouse space and do it themselves. This build vs. buy decision is something that many start-ups and small firms will deal with during the course of their business' growth. The challenge is logistics, which comes from the Greek logistikós meaning "skilled in calculation, rational" the planning, implementation, and coordination of the details of a business or other operation. Should designers concentrate on those details, or let someone else handle them?
ModProducts (now rebranding as Modko) partner Rich Williams was moving to a new place with his pregnant wife. He took over litter box responsibility for their two cats, and didn't like the way the box fit in their entranceway. His wife said, "You're a designer, design one!" Partner Brett Teper had some industrial design experience, and the two worked on an idea for a modern litter box. During 2007 and 2008, the graphics business was a little slower since their financial industry clients were asking for less work, and it gave Williams time to create the ModKat. With a manufacture's agent in Taiwan they had met on a previous job, the team at Modko contracted to create their product and have it shipped to the United States. But the minimum order was 1,500 units, but they had nowhere to store extra product. Teper had researched ecommerce solution Shopify, and found Shipwire as one of their integration partners.
We profiled Shipwire last year in this column. It is an outsourced logistics firm that has now spent five years building up capacity to help companies from the smallest Kickstarter project or Amazon store to much larger enterprises. The company has grown from 2 to 7 warehouses spread across the globe, and will receive goods on behalf of a company, pick, do light assembly, pack and ship them according to instructions from a customer. In addition to the Shopify connection, Shipwire has over 50 connections to ecommerce software and website APIs, according to Vice President of Marketing and Business Development Nate Gilmore.
Teper said "We called and spoke to Shipwire, and in the end we went with them. We liked their site, and how it integrated from Shopify to Shipwire. There's a dashboard, alerts, and tools to manage inventory. They set up a tutorial to show us how to manage and input information and manage billing."
The ModKat won an award for design at the International Contemporary Furniture Fair in 2009, which gave Modko press exposure and started a demand cycle for their product. They started doing outreach to press, design blogs and pet blogs, and got more interest at the Gift Fair in New York. The product was picked up for sale by design stores and national chains in the past year. This led them to think about moving to their own warehouse space.
"We looked at some Brooklyn warehouse space and we loved the concept. We had a few slipups with Shipwire, though they were quickly fixed. But now we're getting into production of two new products, which are considered "pick and pack," not the "lick and stick" products like ModKat (which comes in its own box, and only needs a sticker to be shipped out.) The new product has a base that nests inside the main area of the product, and the base and main part are coming from different sources," said Teper. This means there are separate packages that have to be opened and combined, which is a "special project" with charges. "We considered bringing it in-house. We could control all aspects of the packing, packaging, and more. But, we had never packaged and shipped ourselves. We looked at warehouse space again, but we walked away and decided we want to do design, we'll let professionals do the shipping. Once we decided this, we worked with Shipwire to create some custom procedures. Even though it seems like we're paying them a lot of money, it will be cheaper than managing this ourselves. "
For start-ups looking to do some of the calculations that Modko did, Shipwire makes the process pretty transparent. Its pricing calculator is right on the site, and customers can drag slider bars and see pricing change per their specifications. It has also made an Amazon-like experience available for any size of company. "For someone who wants to communicate a brand experience through the mail," said Gilmore, "They can connect an order to a customer while it's moving. We can use specific packaging, put in a packing list, put on stickers for branding, and provide targeted e-mails from the warehouse every time something happens. Customers are alerted: 'your order was received, it left the warehouse, here's a tracking number, your order is coming, did you get it, and are you satisfied? This is giving someone who has a hit on Kickstarter the same potential as someone who is an established business."
"Businesses are selling through Fab, Ebay, Amazon, webstores, and flash sale sites, and sometimes they'll liquidate via Woot or similar sites," said Gilmore. "They may sell to small retailers, or directly at wholesale." Shipwire recently relaunched their website, bringing many tools that were on the site but hidden to the forefront. "We looked at value proposition for merchants, and we wanted to show we can help small business, the mid-size market, and even the enterprise that they can go brand direct."
Have you had a different experience than Modko with your logistics? How do you deal with launching a product, storing and shipping it? Share your experiences with others in the comments below.