Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their incredibly successful companies. And when you find out about today’s guest company, you probably are going to say, “Oh, why do I need to even know about this? This doesn’t seem that interesting.” And you won’t be the first.
He actually took this idea out to investors and they all had this big response, big yawn. And it’s because we all think about, “How do I sell more online? How do I get more people to look at my product? How do I get more people to take their credit cards out and buy and then once they buy we don’t really care?” We think it’s all going to work itself out. I did the hard part. I sold. And today’s guest said actually what happens after people buy decides whether they buy from you again, decides whether they go online and they start to rag about you or whether they celebrate you and tell people about you and give you high ratings, and he said, “This is my mission. I’m actually going to build a company that handles the question of what happens after they buy.” The question that many entrepreneurs don’t think about which is, “What if this product is successful and we actually sell a lot?” He decided he’s going to take it on.
He is Nicholas Daniel-Richards. That’s a hyphenated last name. Nicholas is the founder of ShipHero. It is a cloud-based warehouse and order management system. Anyone who sells online should find out about his company. And beyond that, anyone who at all is interested in software needs to understand that a lot of the things that we don’t think about often mean that there’s incredible opportunity. I think it was Paul Graham, the founder of Y Combinator who said, “Schlep blindness. We have schlep blindness. The idea that things are really tough and we don’t pay attention to them because we believe that’s the way it has to be that’s where there isn’t competition and a deep need for somebody to come in and solve that schlep problem.” And Nicholas did it, and we’re going to find out how he did it.
Thanks for two great companies. The first will help you do your online marketing right. I used to say just email marketing, but really it’s all marketing, Active Campaign is there for you to do that. And the second is a company that in a past ad for them, I talked about ShipHero because I read about them in relation to ShipHero in a Bloomberg article. The company is called Toptal. And I’ll tell you how if you’re hiring you got to know about them. Nicholas, good to have you here.
Nicholas: It’s good to be here.
Andrew: All right. I’m going to get right down to dollars and cents like I always do. How much revenue did you guys pull in in the last year? Give me a sense of the revenue.
Nicholas: We’re about to hit that 3 mill mark.
Andrew: Three million in what?
Nicholas: In annual revenue.
Andrew: Annual recurring revenue. And what I have here in my notes from your conversation with the pre-interviewer is 2 million which means that you guys are growing nicely.
Nicholas: We’re growing, yeah.
Andrew: And what we’re talking about is . . . You know, give me a use case. I know you do lots of different things, but give me a use case to give people a sense of what you do and then we’ll talk about how you got here.
Nicholas: Yeah, I guess the best use case would be I’m an e-commerce business. I have a Shopify store, maybe I sell on Amazon. I manage inventory and I want to ship my product that my customers are hopefully buying. I want to ship those orders out to my customers and I want to do it . . . If I’m using Amazon, obviously, Amazon have very strict requirements so I’ve got to make sure I’m getting those shipments out on time or as I will get penalized.
And if these orders are coming in from Shopify, my customers’ expectation is . . . You know, pretty much everybody has the expectation of prime. So I got to be fast. I got to get the order out, I got to ship it, and I’ve got to do it fast, get it to the customer correct and also not overpay for that shipping label. Every time I send a shipment I’m generating shipping label, that’s a cost, so I got to manage that cost. So that . . .
Andrew: And your software will print out . . . When you say the right shipping label, what do you mean?
Nicholas: Yeah. So there’s a couple of ways of looking at that. One way of looking at it would be the right shipping label in relation to cost. So we have a couple of options that we have in our system. One of them is you can let ShipHero figure out the cheapest shipping label to get that shipment to the customer at the time that they’re expecting it and the day they’re expecting it. All the other ways you can actually . . . it’s a comprehensive system, so you could set up pre-matt like, “Okay, the customer ordered this thing and they asked for free shipping. Let ShipHero figure out what the cheapest shipping label is. Oh wait, this customer ordered expedited shipping.” It’s going to be DHL e-com priority next day or something like that or not far as . . .
Andrew: Okay. And I was looking at the list of clients, you’ve got smaller companies that are using you, but you also have Nike and the Universal Group. Why wouldn’t Nike just have their own shipping people and their own shipping software?
Nicholas: So we’re not doing Nike as in the sneakers. We’re doing Nike as in some of the . . . They have an internal, it’s sort of like an incubator for new brands, and they need to be nimble, so they can’t have, you know, a multimillion-dollar system that takes 10 years to make changes. They need to operate really fast. So that’s how that came about. We’re sort of taking on the big boys in terms of a very comprehensive solution, but we’re doing it in the way of like it’s a cloud-based product, and you just go in and set up.
We have customers that come to us and they’ll come to us in the morning and say, “We’re frustrated. We’re losing . . . We’re messing up orders. We’ve got late orders. My inventory is driving me crazy. I want to set up now and I want this up and running by the end of the day.” And we’ve had a couple of customers like that and we’re like, “No, no, no. I would recommend a couple of days,” and they’re like, “No, we’re going to do this today,” and we’ve actually done it, so it is possible . . .
Andrew: You set them up with the software and they use it to manage their inventory.
Nicholas: We give them some training and . . . Yeah, yeah. Yes.
Andrew: Most people I think would not think of this as a big need. It just doesn’t occur to us, to be honest with you. The reason it occurred to you is because you told our producer you’re building e-commerce platforms and that alerted you to this need. Give me an example of an e-commerce platform that you were working on and how you recognize that this was a need.
Nicholas: Yes. So the big one where this was quite honestly a big pain in my ass for two years, was building out BBC. So building out BBC I had a team of fantastic engineers. This was 2008. So this is pre like, “Oh, I can just use Shopify or BigCommerce.” So we were building out a lot of the architecture. We were procuring servers and the environments, you know, building the environment and sort of really high-level low-level engineering and yet somehow that was the easier part. The more difficult was when we had to connect their system to a 3PL. So 3PL is an outsourced, it means a 3rd Party Logistics company. They basically, they will do the fulfillment for you. They’ll keep them.
Andrew: I ship my products to them and then my software tells them when to ship to my customers, they handle it.
Nicholas: Yeah. And it turned out that whole experience it took more effort to integrate with a 3PL, and that’s what they do for their business. It took more energy and effort to do that than it did to create the entire e-commerce platform for the BBC which just blew my . . .
Andrew: What do you mean? What was the problem that they had? Maybe we just pick the bad 3PL.
Nicholas: No. I mean, you talk to anybody that uses 3PLs it’s going to be pretty consistent . . .
Andrew: Believe me, I’ve had issues with the two. See I have beads on my mic. I wanted to freaking ship beads out to people. I just wanted something that would integrate with a simple form and ship it out so I don’t have to deal with it myself. It’s a pain in the butt. Yeah, I’m completely with you.
Nicholas: Is that why you keep them all on your microphone? You’re just going to ship on straight off your mic.
Andrew: I tell them come to office for scotch and I give it. No kidding. What I end up doing is I have the receptionist here put it in envelopes, which is like not what we’re here to do and ship it out to people or else it’s never going to go out, otherwise it’s just way too cumbersome just to ship one freaking bead, one bead bracelet for anyone who doesn’t see it. All right. So I get the problem, but I want understand more specifically when you as the BBC were working with them, what was the problem that didn’t work?
Nicholas: So, the problem was every 3PL has different technology and this 3PL . . . Typically, a 3PL, especially, we’re talking 10 years ago, the technology that they were using it was like yeah, yeah. So we do stuff in the day and we change inventory and we ship orders, you’re not really going to know about that until like tonight at 1 a.m. when there’s FTP file ready for you to transfer, which you can’t do that. If you’re doing sales, you need real-time inventory. You need to know what I have on hand and what I have available to sell right now, and you can’t rely on some system that’s going to tell you 20 hours later.
Andrew: I’ve had that experience too.
Nicholas: Yeah, yeah.
Andrew:Right. I don’t know how to . . . Not I don’t. I do know how to do FTP file. Tons of software for it.
Nicholas: Right, but you shouldn’t . . .
Andrew: I don’t want to. I don’t want to do it.
Nicholas: Because you go to FTP then you’ve got to get the file, then you got to unzip it, then you got to parse it, and then you got to do, you know, plug that into your system. So that’s one problem.
Andrew: Okay. And you’re saying, this was not just them, it wasn’t just my experience. You’re saying, you looked at that third-party logistics company, you saw that this was an issue that they had antiquated software. You also have a partner in this business . . .
Nicholas: Yeah, so that’s the key.
Andrew: Who noticed the same thing? Aaron. How did you know Aaron?
Nicholas: So, Aaron, how I met Aaron was he stole one of my developers many, many years ago. I was like I got to find who this guy was that took my developer. And we had a conversation. It was non-threatening, I promise. And we got along really well. Over a few years of trying out different ideas, he came to me with this idea, he was like . . . And Aaron has owned his own e-commerce company since ’99 and it’s . . .
Andrew: Doing what?
Nicholas: Selling karate, MMA gear. Very successful. But he was struggling with this himself. And he went through all the different rounds. So he went from paper picking and as he scaled he hired expensive consultants and private . . .
Andrew: What’s paper picking?
Nicholas: That’s basically you just print all your orders out like invoices and you have a pile of invoices and someone’s running around the warehouse like their heads fallen off.
Nicholas: Yeah. That’s a great system. So he had gone through all these different ways of trying to solve his own inventory in order and shipping process, and he came to me and he was like, “I’ve been dealing with this problem for years and I think we’re the only ones that can solve it. Like, let’s dig into this and let’s solve it.” So we worked at it in a private, like it was just being used in his warehouse for his business so it was actually being in a real live environment for about two and a half years before we even let our first customer because . . . And when we started this, admittedly, you had said at the beginning of this interview, it’s kind of boring. There are people that find this stuff really exciting and it is something that’s exciting someone. If you say, “Hey, logistics and shipping,” they like, “Oh God.” But when we were looking at this, we were like, “We don’t even know if anybody would ever be interested in this as a product, but let’s try and solve a problem.” And then two and half . . .
Andrew: His business was zengu.com, right? A jujitsu . . .
Nicholas: Zengu, karate depot, BJJ. Yeah, he’s got a few, like, it’s really impressive. And the . . .
Andrew: And so you just said . . . Was there any thought of, “If we just help him, then it’s successful enough for” or was it, “It has to be him as a lab rat for something we eventually have to sell together as a product”?
Nicholas: That’s . . .
Andrew: It has to be the latter.
So at that point what’s going on here? How is it that I’ve let go of people in the warehouse because the sales decreased and yet I’m now getting more productivity and less errors? And part of that can be attributed to when you’re less busy sort of less errors are made, but it was also because he had accidentally I guess discovered that he had got rid of a few ineffective people in the warehouse that were affecting the operation. So another part of the hypothesis that we were setting out to solve was, how do you have analytics of the performance of every team member in the warehouse, which was the big key.
Andrew: Okay. So it took you two years.
Nicholas: Yeah, yeah.
Andrew: Again, this is not coming as an insult when I say it, but it feels like a pretty easy thing to solve then, right?
Nicholas: Yeah, yeah.
Andrew: Why was it a two-year project?
Nicholas: Well, if you’ve been using ShipHero, you would say it’s a pretty easy thing to solve. Because we solved it, it’s simple.
Andrew: And you know what I think? And by the way, it always seems easy when you think about it, so I’m not saying, “What’s wrong with you guys? Why couldn’t he hide a better dev . . .
Nicholas: No, no. I know that.
Andrew: I’m just saying, “What is . . . ” I want to understand what the difficulty is in creating it because I do see from your point of view, “This stuff just stinks. Somebody should make it easy. Everything works so well online. Why doesn’t this work well? I’ll do it.” What was it that surprised you that was harder than you might see as you look at?
Nicholas: Maybe not necessarily a surprise to us where we’ve been around the block a few times in terms of building tech, but we knew that we were going to be in for a bit of a time integrating with shipping carriers. Shipping carriers, a few of the carriers are really trying hard to modernize. They’re using language such as API, which is impressive, but that was sort of our biggest struggle and especially where . . .
Andrew: So I think you’re meaning UPS, DHL etc.
Nicholas: Yeah, all those kinds, all the carriers. If you’re going to have a platform that makes it easy, right, so it’s sort of end to end, it is the order comes in from, say, your Shopify store the order comes in, inventory change occurs and is published to Shopify stores, you don’t oversell, that happens, then the order is prioritized, someone goes and picks and packs it, they create a shipping label, boom, your order is out, they’re tracking link to the customer sent.
So that seamless flow has multiple integration points and one of them is like, so you’ve got to do . . . You’ve got to send information to the shipping carrier, for example, and say, “Hey, I’ve got this product. I’ve got this box, these dimensions, this way. I want the shipping method, blah, blah, blah.” And if you’re doing rate quoting because we do the rate quoting, it’s like, “All right, I got this. And now you’re going to hit every carrier. Give me a price. Give me your best shot. What have you got?” And then that’s going to come back and you can say, “All right, this is the one. This is the label we’re going to print.
So doing all of those integrations we’re shipping carriers, you have to get over the hurdle of, “Hey, can we work with your API.” Like a lot of carriers don’t let anybody just play with the system. So, you know, going to a shipping carrier and saying, “Hey, can we play with your API? How many orders do you ship? Zero? Oh.” You know, so getting into those conversations. So it was definitely a lot of work in the earlier days just to set up those basic building blocks.
Andrew: Who was doing the work?
Nicholas: Who was doing the work? I introduce . . .
Andrew: Who was coding it?
Nicholas: Yeah. So we have now . . . We’re 25 people and we have, I think, it’s 14 engineers. We sort of grow it like 20% a week when had . . .
Andrew: When you hired developers right from the beginning.
Nicholas: Yeah. So . . .
Andrew: But you weren’t working full time at the company as I understand it until last year.
Nicholas: That’s right. So actually, the first version that we were testing it was myself. I’m a rusty developer now, but it was myself that built the mobile app and Aaron that built the backend services. So we . . .
Andrew: It was the two of you, the two founder sitting and coding. So maybe that’s partially why it took two years, two, that you were doing it yourselves.
Nicholas: Yeah. And then after about a year and a half we hired our first engineer bootstrapped and hired our first engineer and just kept growing, it kept growing it out. And that’s basically been our approach. So we’ve bootstrapped, and as we’re increasing revenue, we turn around and put that straight back into hiring additional team.
Andrew: All right. Let me take a moment to talk about my sponsor and then come back in and understand how you guys grew it. It was kind of feeds in nicely with my first sponsor, which is Toptal. I can’t see the article now because on this computer which I use for interviews, I’m not logged into Bloomberg and Bloomberg would not allow me to see this article. But I do have like a clip from this article from Bloomberg about how Aaron said . . . Here it is. Last spring, Aaron Rubin, that’s your co-founder, hired a freelance coder through Toptal for about two weeks to get ShipHero, his company off the ground. “To find someone that talented in New York in three days was never going to happen,” Rubin said. “Every talented engineer I have has a job.”
And so that’s the thing that I saw that in Bloomberg one day which is, by the way, a great site for . . . They’re still one of the best for actually getting real news, largely because they don’t need the extra ad views day. They sell those terminals for so much money.
Nicholas: Yeah. And it’s not Trump. Every article is not about Trump.
Andrew: No. It’s just really in-depth journalism, one of the best. So they had that article, I go, “Wait a minute. I’m clipping this.” I saved it, I brand it in one of my ads for Toptal and then I forgot to bring it up again. But that really points out the beauty of Toptal. If you need to hire a developer, someone who’s really advanced, Google level, Facebook level developer, it takes obviously a long time, a lot of perks, a lot of money to get them on board. And what top Toptal said is, “I’m going to put together a network of these guys and we’re going to do that Google won’t do is, let them work from anywhere and give them the flexibility to work on their own schedule even if they happen to want to go back to whatever Eastern European or Asian country they were from, instead of coming to the U.S. where we’re saying no to a lot of people who want to come in. And so that’s the benefit of going to Toptal.
If anyone out there wants to hire from Toptal, they should not just go to toptal.com, they should go to toptal.com/mixergy where . . . You know what? Let me ask you something. I want to be aware. I think as I was saying Toptal I noticed something on you and I want to be clear that if you’re not happy with Toptal, just because I’m reading an ad, doesn’t mean that you should support them. How did you feel about Toptal?
Nicholas: So we ended up . . . That engineer is still working with us and because of that hire, we were able to find other talent that knew that talent, like . . .
Andrew: Ah, that his friends then came on too.
Nicholas: Yeah, yeah.
Andrew: Got it.
Nicholas: We were really, really lucky using their service. Yeah.
Andrew: Oh, good. Okay. I always say to my guest, “If you want to say that you had a bad experience, that’s fine. They’re not paying you to lie, they’re not paying me to lie either.” All right. So if you want to have a great experience hiring, go to toptal.com/mixergy. They’re going to give Mixergy listeners . . . I’m kind of saying this a little bit with guilt because you didn’t get this deal because you guys didn’t get it from our URL, but you had a great deal anyway. But Mixergy listeners are going to get 80 hours of Toptal developer credit when they pay for their first 80 hours in addition to a no-risk trial period of up to two weeks. Go check them out. A top as in top of your head, tal as in talent, toptal, T-O-P-T-A-L.com/mixergy.
Nicholas: I wish I had that when I . . .
Andrew: I know.
Nicholas: Hired our first . . . Yeah, it could have been good.
Andrew: When you’re getting started, all those little things help.
Andrew: All right. So you’re building it up for yourself. At what point did you say, “This is good. This actually makes sense. It’s time for us to take this out to other clients.”?
Nicholas: That is a really good question. So we were using it in a live environment in basically Aaron’s business was using it. He had, you know, his full fulfillment process operating on it. Aaron also has helped because of his . . . He’s built up a lot of experience in this space, so he’s got a network of people that he knows and he’s sort of in a network of e-commerce channels. So he sort of threw the question out there, “Hey. Would anybody be up for giving this system a shot? Early access, give us feedback. These are the things we’re trying to solve.” So we had some initial interest from that, and it’s kind of incredible.
So from that, that sort of triggered the, “Oh cool. We’ve now got two people using ShipHero.” Next month. “Wow, we had two come conversations this month about another couple of people that want to use it.” And you fast forward over time. Yeah. I guess the one thing that we haven’t had to worry about yet, but we’re currently working on it is outbound marketing. Everything at this point is word of mouth. A lot of it is we purposely focused on Shopify. Shopify is a fantastic platform and we knew that our strategy to get customers was not to try and build out marketing and spend lots of money on marketing. Build an app in one of the most popular e-commerce platforms where there’s a lot of traffic.
So we put our app up in Shopify, so Shopify customers could install our app and give our system a try. And that’s . . . And we did the same thing with BigCommerce, started to build those relationships with DHL, FedEx, and all those guys. And all of it is just been organic for us.
Andrew: And once you get into the Shopify app store, you start to get customers from them. They do a good job of bringing you potential customers once you’re in the store.
Nicholas: Shopify alone is the reason why we are where we’re at today, I think, because of that. Yeah.
Andrew: The first version, as you told our producer, was just about picking things off the shelves. Right? It was an iOS app that helped anyone who’s going to the shelves pick things off. Why was that the first thing that you decided to tackle?
Nicholas: Because that’s . . .
Andrew: How did you know?
Nicholas: That’s where the mistakes happen. So, you know, once you have the items, you can put them in a box and print a shipping label. You know, that’s a part of the process that you need to make sure is right, but where the bigger errors occur around fulfillment is picking the right items. So, if you didn’t have the list on your device, then you’re going out into the warehouse with a printed list and that was the bit that we wanted to replace. First and foremost, get rid of paper, because there’s . . .
Nicholas: There’s no audit trail. It’s amazing how . . . If someone’s made a mistake on an order, I didn’t do that order, that wasn’t me, and you have no ability to really know who did it because unless it’s just one person working in your warehouse.
Andrew: Versus if you give my iOS devices, everyone has to log into their own account.
Nicholas: Exactly. Everything is tracked.
Andrew: They then know what they need to go grab. Every time they grab it, they have to scan it to make sure so that this machine says, “Yes, you picked the right thing,” or, “No, you didn’t put it back at the other thing.”
Andrew: All right. And so that’s the first thing that you guys decided to tackle. Did you talk to others before you got started? Did you do any research to tell you that people were upset that paper was there or something like that?
Nicholas: So, this is what I’ve learned and I spent a lot of years in the agency world. And in the agency world, you deal with pleasing . . . you please your stakeholders that are ultimately funding the project, right? So if they’re like, “Yeah, bananas. We should have flying bananas.” You’re like, “Okay. All right, let’s do the flying the bananas.”
Andrew: “You’re the client. We’ll do it.”
Nicholas: “You’re the client. We’ll do it.” In this case, you sort of have to take a stand and say, “Look, this is a problem. If you’re doing things from paper, it’s going to cause problems.” And we actually . . . Especially in the early days, we would have these demos with customers and we would say, “Okay, this is how the product works.” And they’re like, “Yeah, that’s great, but we’re fine with paper. We just want to use paper.” And we’re like, “Yeah. That’s not something that we do. We don’t allow you to print your things on paper because the whole thing that we’re solving is accountability and all that stuff.”
Andrew: So you’re taking such a big stand to know this has to happen. All right. And so you’re building that into the . . .
Nicholas: So you’re going against what people are used to and what people expect right. And you can have the argument, “Well, the reason why we’re doing this is because this is the fastest way of doing it.” And you’re like, “Yeah, but the reason why we’re having a conversation is because you’re trying to scale and you’re running into issues, right? This is why you’re running into issues, like, you’ve got to change that behavior.”
Andrew: It was free at this point, though, when you were starting to bringing it out to people, right?
Andrew: Even in the App Store, wasn’t it free for a long time?
Nicholas: Yeah. We basically had like a lite version that didn’t have all the functionality. What could you do? You could do some basic picking and print labels, but it was like it was limited, but it was enough to give you . . . You know, if you did like under 20 orders per day, it was enough to . . . And our premise at that point was, it’s essentially people that are using the system, so that gives us feedback, and also the low volume and if this helps, some they’ll grow and they’ll become a paying customer, so that typical growth thing. But we learned the hard lesson from making it free.
Andrew: What was the hard lesson?
Nicholas: So the hard lesson was, you are going to be quickly overwhelmed with people that are going to kick the tires and not necessarily be that serious. I don’t know. If it’s something that’s completely self-service, that’s fine. When it comes to warehouse management, managing inventory, connecting with shipping carriers, there are things that you need to have conversations on, you need to . . . sometimes you need speak to the shipping carrier to help with the customer. You need to have conversations to the customer. We do onboarding and we found that we were being flooded with calls and onboarding and “I want to get set up,” and you go through the efforts like, “Okay, cool. Yeah, but we’re not really going to use it.”
So we shifted from free to free 14-day trial, and then we still ran into the same problem. We scaled up and then we go more inbound that started to flood us from the perspective of all the free 14-day trials, lots of effort to onboard and demos and conversations, and then after 14 . . . or they wouldn’t even be that serious because, “Oh, it’s the 14-day free thing.” So that’s when we decided . . . And it was Aaron again. I sort of argued with Aaron on this. I was really concerned but he was like, “Look, we got to do it because we can’t handle the inbound.” We did the 30-day money back guarantee.
And I always feel like a sales guy when I tell a customer that, but the reason why we done it, and it really has worked, is it sort of puts an emphasis on, if I’m signing up I’m really seriously going to put my time into evaluating this platform because, after 30 days, I don’t get my money back if this doesn’t work for me, which it really works.
Andrew: I’m wondering if the store owners are . . . Why did the store owners end up being the right market for you? Because it seems like they just want to sell their own stuff. The Shopify store owners that I know will sell on their own and ship on . . . Excuse me. Will ship on their own for a while, but as soon as they become significant, they just find a logistics company, a 3PL. Right?
Nicholas: Yeah, yeah. So really . . .
Andrew: They don’t want to have to deal with packing and shipping.
Nicholas: Right. So we serve both. We have ship here . . . And that’s sort of been our evolution over the past several years. So two years ago we launched ShipHero 3PL. So it’s all of this functionality for warehouse management, order management with the additional ability to manage your customers and give your customers the ability to log in and see their inventory, create purchase orders, do customer support on returns and stuff like that.
So we have, I think the latest count is 35 3PLs that use ShipHero, and they’re running their businesses on it. And you’re getting on to something that’s very, very interesting which is what we’re really hyper-focused on right now, and that is, really when it comes down to it, you’re hitting on it. Even the smallest customers, they don’t really want to deal . . . Most of them don’t really want to deal with inventory and fulfillment and location management and printing shipping labels, but you do it because trying to get into a 3PL if you have low volume or just trying to find a 3PL and then getting into a contract with for free, it’s expensive, it’s time consuming. It’s easy just to do it yourself.
And then larger brands, you know, they struggle with, what if you need multiple distribution centers. And that’s multiple 3PLs. So we’re actually working on that right now with Shopify to get to the point where you can just have your product in a fulfillment center and the ShipHero software is going to figure out where it needs to go, which warehouse it gets fulfilled from, and so on and so forth. So that is sort of the next phase for us.
Andrew: So the 3PL will be the focus maybe, and software to store owner will just tell them . . . Will they make the deal with the 3PL or will you guys do it? They will.
Nicholas: Yeah, initially. I mean the moon shot for us is to get to a point where I just have product, it goes into the system, I know what my costs are going to be and the system just takes care of everything. There’s a lot of things that are going to need to take place before we can be at that sort of abstracted level. So first thing that we want to solve is we have all the . . . Well, we don’t have all the 3PLs. We have 35 3PLs and we’re growing those at a healthy clip. We have the platform to allow a customer to now connect. If they want to do their own fulfillment and inventory and also use a 3PL on the West Coast and also have a 3PL in the UK, ShipHero becomes the operating system to allow them to connect between all of that in one system. So let’s solve that problem first and then we’ll keep abstracting the complications away. So yeah, that’s sort of our next phase.
Andrew: You say you’re . . . Well, I wonder how you understood that that should have been the next phase. What was your thought process behind that?
Nicholas: Part of it is scale. So it seems to make sense from a scale perspective if we focus on 3PLs and allow the 3PLs to serve the customers. And then the other part of it is . . . So we added the 3PL version of ShipHero and we have the merchants version of ShipHero. We’ve had a lot of feedback from both 3PLs and merchants who are saying, “Hey, you serve both the 3PL and us. Why can’t we use one of the 3PL that use ShipHero? Why can’t that appear in my account?” And, you know, we have 3PLs. We have a 3PLs that we work with. There are some characters in terms of like passionate, they live and breathe and do not sleep and this is what they do and they’re four or five years old in terms of the business, obviously.
Andrew: Yeah, yeah.
Nicholas: And they’re looking at and saying, “Can you help me in terms of get additional customers? Like, we want to grow our business.” So we get a lot of inbound, right? And I’ve been asked if we manage ships, which that’s a no. But we do have a lot of inbound that’s like, “Hey, I noticed your site. Can I ship you my product and can you fulfill it for me?” So it’s sort of . . . Part of it was, you know, when we were talking earlier on about the BBC and that 3PL experience, for me it was like, “Wow, 3PLs. That seems a bit of a pain. Outsourcing fulfillment is a bit of a pain.” And then as we built this product, we’ve sort of got it to a point where it’s like, now we can start to build this ecosystem with the merchants, the 3PLs and start to solve that bigger problem of, “Hey, maybe I want to have a 3PL to do my fulfillment, but I don’t want to deal with the hassle that sort of typically goes into the process of finding a 3PL. I can use this system.”
Andrew: Why the 3PLs? Why do these logistics company make it so hard to work with them? Is it that they don’t want to deal with someone who has two little inventory? It seems like that wouldn’t be an issue. Just take it, put it on your shelves, add it to your software, move on. Why do they have to have a call with the client, do the whole . . .
Nicholas: Because they’re not necessarily . . . So, a 3PL, they’re not necessarily good at marketing. Right? That’s not the business. The business is not so much marketing or . . . I’m not speaking for all 3PLs, but marketing or customer service or technology, they’re not software developers, right? And that typically is where a lot of problems come in, like, they’re using a technology solution, it’s kind of archaic. And we’ve sort of hit upon something here. Right? So we’re solving the core problem which is the software and that now makes it easier for the 3PLs that use our platform to now have a much better customer experience and to be able to say, “Yeah, we can take those orders in and we can fulfill them because it’s not so painful for us.” So yeah, it’s amazing. Like, we’ve got . . . We’ve had merchants that use ShipHero for their own fulfillment and after a couple years are like, “You know what? We’re going to be a 3PL.” So I think what we’re going to see if we’re going to see a whole new generation of 3PLs. So you have 3PLs that would use some archaic technology and it’s very difficult.
Our goal is . . . And we’re launching this at the end of May. So we call it ShipHero Marketplace. So our goal is essentially to create the Airbnb for outsourced fulfillment. And that is I can go to this marketplace and I can plug in, this is my volume, this is where my customers are at and where I ship. These are my carriers. This is my e-commerce channel, or if I have multiple. And then ShipHero will match-make and say, “Here’s your 3PLs and we got all the information. You’ll get a quote back from each one and you can just choose which one and shipping inventory there.”
So we’re solving that problem because we’ve got the warehouse experience and we’ve got the network, but at the core, we’re solving the technology and the user experience problem. And your typical 3PL is not a software company. They’re a non-user experience company. They have shelves, they have warehouse space, they’re trying to get stuff out the door, right? So they sort of don’t have the same tools that we have to solve a problem.
Andrew: Do you think somebody can just take your software now, find some let’s say warehouse space and just become a 3PL? Does it take more than that?
Nicholas: I think the right . . . You wouldn’t need to have the knowledge of . . . So your challenge is going to be, you’ve got a scale. That’s the key. So . . .
Nicholas: Scale is the key.
Nicholas: Because you’re not going to make much money with one or two customers.
Andrew: Because shipping rates go down as you get more customers. Is that what it is?
Nicholas: Well, we will . . . Actually using us, we’ll get you the competitive pricing because we have vol . . .
Andrew: So then why do I need to . . . Because of what? Sorry.
Nicholas: Because we have volume on our network. Right? I think last month there were close to 800,000 labels generated on ShipHero, so that gives us sort of leverage to negotiate with the carriers.
Nicholas: I like how this light is hitting me.
Nicholas: Yeah, it’s beautiful.
Andrew: Right in the eyes as you’re talking.
Nicholas: It’s probably better. So I guess what I’m saying from a scale perspective is, as a 3PL I need to be shipping out . . . In order for it to be a money-making profitable business, I’ve got to be shipping out a few hundred orders a day. So I either land that one big customer and I serve that one big customer or I get a bunch of smaller customers and I’m processing those orders. But in order for you to do that, you got to be really efficient. Like, it’s not easy if you don’t have the system and process in place to ship out a couple of hundred orders per day and not mess up. You got to do it right or else . . .
Andrew: So what I’m saying is, can I just sign up for ShipHero, get myself some locations, a couple here, a couple in the East Coast, and then become a 3PL, maybe do a podcast. I don’t want to do this, but I wonder, is this as easy as it is today? You know, let me take a moment and talk about my sponsor while you think about it. If somebody wanted to, is there an opportunity created and then what would go into it?
While you’re thinking about that I’m going to talk about my second sponsor. It is a company called Active Campaign. I did not read a single Bloomberg article about you guys in Active Campaign. So I will tell you. Here’s how Active Campaign can actually help you. Let me go over to your website. Do you guys do email marketing? No, you don’t.
Nicholas: We don’t. No. There’s no marketing effort at all at this point.
Andrew: So imagine if you guys decided that you are going to beef up your blog and actually write two different kinds of blog posts. Actually, your blog looks nice. Imagine you started to write two different kinds of blog posts, one is directly targeted towards a Shopify store owner. We just case that at first of people who are doing well on Shopify and what they’re doing well now and they’re doing well. Then you expand it beyond to just tips, here are tips for software that will help you upsell. Like 10 piece of software that will help you upsell, or, another tip that will help you write better copy, or whatever it is that’s selling. You just write all these tips and then maybe you do another one for how to manage a logistics company and you write a bunch of blog post about that.
Now, obviously, these are reaching two different kinds of people. Anyone who’s on your mailing list, regardless of how they came on your mailing list if they are reading all the Shopify store owner messages. Right? That’s what they’re on, reading those blog posts. They’re looking at the pricing for Shopify store owners. You want to just tag them and say, “This guy is probably a Shopify store owner. Let’s send them email that is geared towards explaining to them how we help Shopify store owners and then sell to them the product that’s for Shopify store owners.”
If on the other hand, they’re reading the 3PL articles, you tag them that way. Right? And I would even go even deeper. If someone’s reading this, how to start a business, you might just talk to them about . . . you tag them as a beginner and you might just start to promote to them via email the startup business plan, which is $200 a month. But if they’re reading the enterprise articles, they’re probably an enterprise person and you talk to them about the $1,500 a month plan or maybe you just email them about how to schedule a demo with you. I’m getting way too granular here. The point here is . . .
Nicholas:No, that’s good from a segmentation perspective.
Nicholas: Right. That’s usually important.
Andrew: So many people say, how people sign up to the mailing list for one option or the other, but most users don’t sign up for one or the other, they just sign up. And then the other option is, you start asking them via email, “What do you want to hear about?” but people don’t want to tell you what they want to hear about. They don’t want more marketing from you. They don’t want to help you market.
The idea behind Active Campaign is nobody has to tell you anything. You just put a pixel on your site and it watches. What are people doing? What are they interested in? What are they clicking on? And then intelligently, it allows you to message to them based on that. I’ve done way too much talking about Active Campaign. The best way to understand it is to go and try it out for yourself, really. Grab a drink, go to activecampaign.com/mixergy, in the upper right-hand corner, you’re going to see Try It For Free and just try it. Play with it. Experience what it’s like to actually send out and target people. Actually, send out targeted messages.
And if you decide to sign up, they’re also going to give you your second month free. They will also spend two phone sessions with you where they will tell you one-on-one just you and then how you can implement all these tactics in your business properly. Finally, since I know most of you are new to . . . are not new to email marketing. You probably already have a system in place. They will migrate you from that software to Active Campaign. Go check them out, activecampaign.com/mixergy, activecampaign.com/mixergy.
All right. So, what do you think? Can I just go and get a warehouse in some cheapo part of this part of the country, cheapo part of the East Coast?
Nicholas: Yeah, yeah.
Andrew: Can I do it?
Nicholas: You could, yeah.
Andrew: What are the issues that I would have to face, other than I need to get store owners on board? But let’s suppose I’ve created a podcast for Shopify store owners . . .
Nicholas: You got to get the warehouse, obviously.
Andrew: Right. A warehouse. That’s not too hard to get.
Nicholas: You want to make sure that you’re set up with carriers. So either you’re creating your own carrier accounts. I mean, like USPS. If you’re familiar with how the carrier stuff works, great. You can then go to DHL and FedEx and those guys and basically create your account. We provide commercial plus pricing which is your best pricing for USPS if you create that through ShipHero, so you’re great there. But really, I think it’s going to come down to you’ve got to have your process sorted out in your warehouse. So, where you put your inventory, you got to put you inventory in two locations, how do you receive inventory, putting into locations, and then the pick and pack process, which, you know, we have a lot of guides on how . . .
Andrew: Yeah. Doesn’t your software do that for me, tell me where to put it?
Nicholas: It tells you where to put away and scan to confirm if you want to enforce that, and it will also tell you . . . So we have this batch picking process where you could do 20 orders at once and you just see it will say, “Go to location blurb and pick blurb,” and so you scan it.
Andrew: Tell my warehouse employee, “Go here, go grab this.” But will you also tell me where to put things in my warehouse?
Nicholas: Yeah. So when you’re receiving, you have the location to put it, and you can do multiple locations. So typically, you’ll have a primary location then you’ll have overstock locations which may be at the top, right? So, yeah.
Andrew: And you’ll tell me where to put that.
Nicholas: Oh, yeah.
Andrew: Oh, you will. You’ll specifically say . . . Because I remember hearing that Amazon will not put the vegetable bullion next to the chicken bouillon which is what we would think they should do because all the bullion should stay together. It turns out people if they see it close to each other, they might pick the wrong one, so they put the vegetable bullion next to the dresses maybe or something like that. You guys . . .
Nicholas: Well, there could be another way in which you organizing, and a lot of our customers do this. They will organize inventory based upon the activity of the inventory. So the things that are more popular, you want them closer to your packing station, to your packing area. It depends on what your approach is, but typically that’s how people approach it. They will organize inventory and sort of, you know, you have your . . . And all of this can be configured in ShipHero. ShipHero will even print out all the barcodes for your locations. So yeah, you can just basically put your inventory in locations. If over time you’re like, “You know what? It would be better for me to have this inventory in this other location,” you can just change it to the other location updates and ShipHero is fine.
Andrew: So, I interviewed the founder of ShipMonk. His revenues in 2016 were $4 million. Revenue for 2015 was 1 million, to give you a sense of the growth. He was on track to hit $10 million in 2017. It’s a huge business.
Andrew: What am I missing then and being able to duplicate that using ShipHero?
Nicholas:I think you just do it. And I’ll sign you up. I can’t believe I just got a new customer on this call.
Andrew: I’m not doing it. I feel like I’ve got Mixergy. But what am I missing here? It seems way too simple.
Nicholas: I mean, you were talking to someone that lives and breathes this stuff, so there’s a lot of stuff that seems obvious to me. I mean, you’ve just got to be familiar with the basics of running a warehouse. So I’ll share this. We have customers that come to us and they’ll be setting up our software to use it and be doing things like batch picking and creating purchase orders and receiving on purchase orders and using a barcode scanner, and three days before, they didn’t even know the difference between, say, on hand and a seller head value on inventory.
You know, part of that is because we’re making that user experience that much easier. It’s not a Windows CE, $3,000 Windows CE device with 6,000 buttons using. It’s just an iPhone or an iPad. But yeah, I guess, you’re asking the question, what seems so difficult about it. I guess, what we’ve done is we’ve changed what our customers have to worry about in terms of the business. It’s not worrying about the inventory, is the inventory accurate, or how’s the team doing in terms of picking and packing and we managing our shipping costs. They’re able to focus on marketing. How are we getting more customers? How are we making sure that we can understand when we need to replenish inventory and all that stuff? Yeah, I don’t really have a straight up answer for you because I have [inaudible 00:48:38]
Andrew: All right. Let me ask you then this. You told me before the interview that it would be okay if I ask you this one when I noticed that you’re in your ex-wife’s house.
Andrew: How is that? Like, you’re not even living in the city, you come in, you guys are not married anymore and you can just hang out in her house and have a call with me.
Nicholas: Yeah. So my . . . I mean, part of it is because of my award winning personality. But now . . .
Andrew: You know what? She’s not British, right?
Andrew: No, the British accent just get you very far.
Nicholas: Oh yes. There’s the reason why I do the demo course.
Nicholas: But yeah, unless you’re speaking to someone in the U.K. So I’d be like, “Hello, Nicholas here.” And they’re like, “Yeah, I’m British too.” But yeah, it’s just . . . So, philosophy that I have is don’t be an asshole. So try not to be an asshole. Sometimes I may fail, but it’s very important for me that I get on with the people that especially . . .
Andrew: So even when you’re angry you said, “I’m going to make sure that we’re friendly enough that I can . . . ”
Nicholas: Yeah. Well, there’s children involved, so you got to be good friends, right?
Andrew: How long after you were married did you guys break up?
Nicholas: Seven years.
Andrew: Seven years.
Nicholas: Yeah, yeah.
Andrew: Was it because you were working too much? I just interviewed an entrepreneur, I said, “How are you working until 3 in the morning?”
Nicholas: Yeah, that’s . . .
Andrew: It is.
Nicholas: Yeah. So I was working . . . So I was working in a big agency and I started ShipHero and was doing some consulting. So I was definitely doing a lot of work and also traveling, which was the killer.
Andrew: Travelling like for fun or part of work?
Nicholas: No, no. For work. So, I was . . .
Andrew: Why were you doing so much?
Nicholas: Because that’s what you got to do, man.
Andrew: I see. Because the agency work was your business. It seems like it wasn’t like bringing in tons of cash. ShipHero was just getting off the ground and so you needed some outside.
Andrew: Wow. So you had to do this balancing act.
Nicholas: Yeah. Yeah, yeah. But I mean, that’s part of . . . It’s kind of interesting because I’m so used to working ridiculous hours that I think if someone were to turn around to me tomorrow and say, “Guess what? You don’t have to work ridiculous hours anymore. Just take a year off.” I’d be like, “Ah, I wouldn’t know what to do with myself.”
Andrew: You wouldn’t know what to do. What do you do for fun now?
Nicholas: I compose music. I like to cook. I run a British . . . Of course, I do a British blog that talks about being British in American and I’m always talking about food. And I’ll hike, hiking and cycling. So that helps get my mind . . .
Andrew: Like long distance cycling?
Nicholas: Yeah. It helps get my mind off of . . . You have to find things that can get your mind out of thinking about this stuff all the time. So hiking is a good one because you basically hiking and going, “Wait. Is that a bear? Oh no, I’m all right. Okay, that’s good.” So that helps get my mind off of work.
Andrew: So when you go hiking you’re going for multiple days.
Nicholas: Yeah, like three or four days. Yeah.
Andrew: Where do you go hiking?
Nicholas: So I live 40 miles north of New York, so like around Bear Mountain, upstate New York, Appalachian Trail down in Delaware Water Gap, New Jersey I’ve done a few times. Yeah.
Andrew: You know what? I just interviewed the founder of 1Heart Journey. He is doing Ayahuasca trips. Have you done Ayahuasca?
Andrew: Do you know what it is?
Andrew: He calls it plant medicine and I was calling it a drug, but . . .
Andrew: Right. But he takes entrepreneurs over. And frankly, I’m not a drug person or a plant medicine person, but I was thinking maybe I should go give this a shot. So he takes them out there, loosens them up, helps them find something, their module again.
Nicholas: Oh, so that for me is pinot noir.
Andrew: Pinot . . . Yeah. For me it’s whiskey, but I keep like . . .
Nicholas: Oh, you’re . . . What whiskeys do like because I’m a big whiskey guy?
Andrew: The peatier the better. Peaty or now rye. Sonoma Rye. Number one now in my book. So good.
Nicholas: I’m now coming to the ryes, but peaty. So you’re Laphroaig fan, yeah?
Andrew: Yes. I want to punch to the face like it’s got to be so hard that it knocks me out and . . .
Nicholas: You basically . . . So Laphroaig is great because you smell like a campfire for like three days after you’ve had a couple of glasses of it, so that’s that.
Andrew: Yeah. I’ve said this before. Anyone who’s listening to me, if you want to do scotch tasting, here’s what you absolutely should do, if you’re getting started. Number one, you get Glenlivet, it’s good, not very expensive. Oh, tell me. What are you thinking about that?
Nicholas: So, I guess it depends where you’re coming from. When I first started what got me into scotch was actually drinking bourbon, and it was sweet enough, that was sort of the gateway drug,
Andrew: You know what? I’m not a sweet person so I never thought of it. Okay, so you get a bourbon because it’s sweet, you get . . . I would still suggest Glenlivet because it’s smooth and easy, and then a Laphroaig, and you have those three. They’re very different from each other and immediately you get to understand the differences between whiskeys. Now you got one that’s super sweet, super simple, and then one that’s a kick in the mouth because it’s like a campfire started in the back of your mouth. That’s the way to do it.
Nicholas: Yeah, and you don’t . . . And I hope you don’t. You don’t have whiskey over rocks, right? Over ice.
Andrew: You know what? I’ve been a non-believer of it for long time, and then . . . because I just want the pain in my mouth is what I mean. But then I got to Sonoma Rye Cask version. It’s so super strong. I tried it with an ice cube, it was good. So now, occasionally, I will absolutely put some ice in.
Nicholas: And so if you’re going to do something to chill it, use an actual stone not an ice cube.
Andrew: It wasn’t just chilling. It was I wanted to just like loosen up a little bit.
Nicholas: To cut it. Yeah, yeah.
Andrew: It was so concentrated.
Nicholas: So there’s this guy on I’ve watched his YouTube videos. He’s like some like . . . I don’t know. Like scotch master. He’s from Scotland, so he seems legit. I was watching his YouTube videos. He’s quite a character, but he basically has this process of tasting whiskey. You got to bring it to the nose, take it away, do that a couple of times and then when you take it into your mouth, you chew it for like 12 seconds and then you swallow. And what he was saying was you’ve got to cut it with water, just a little bit of water because your taste buds, your palate cannot take over whether it was like 30% alcohol. So that’s why it opens up is because the water is like diluting it a bit and your taste bud and your palate can actually . . .
Andrew: That makes sense. To be honest, I don’t get that deep into the palate. I still want to feel like a man, and if I start to sit there and think about how do I make my palate understand, it’s too much. It ruins the whole effect. I might as well be drinking something else. Shirley Temple, I don’t know.
Nicholas: That’s really sweet. That’s amazing.
Andrew: All right. So the website for anyone who wants to go check it out, it’s ShipHero. And frankly, if you’re a Shopify store owner, you could just see it in the Shopify app store. They’re very big on saying, if you want you can do the demo, I would do the demo because I feel like that’s when they get to talk to you, but only if you’re serious. I don’t want people to just hang out with you because they saw you in this interview.
Nicholas: Yeah. I mean, anybody that’s willing to, you know, a demo . . . We call it a demo just because we don’t know what else to call it, but it’s a conversation. What are you trying to do? What are you trying to solve? And we’ll know within . . . I’ve done so many calls. We’ll know within 10 minutes if, you know . . . Our goal is to basically not waste anybody’s time on that call. So that call is, I’m going to listen to what you’re trying to do and if you are saying something that we don’t feel is a fit for ShipHero, we will call it out straight away because we don’t want to waste your time and we don’t waste our time. So yeah, it’s a pretty effective process.
Andrew: Why doesn’t the call demo thing ask a couple of questions like that? Like how . . .
Nicholas: It does. It does ask a few questions.
Andrew: Oh, it does. Let me try to do right now.
Nicholas: We are . . . Yeah.
Andrew: Ignore me when you see me in here. I go, Andrew. Oh, here we go. What can we talk about . . .
Nicholas: We have 60 people reaching out to.
Andrew: Not enough. No, it’s saying, “What can we talk about?” It’s asking for my name, then asking for my email address, and . . .
Nicholas: And that’s the problem you’re trying to solve.
Andrew: Okay. Maybe that’s how you guys get a sense of whether I’m the wrong person or not.
Nicholas: Yeah. So we all looking to expand it, right? So more of a process of, you know, how many SKUs do you have? What’s your average number of shipments per day? How many e-commerce channels? What are they? We are going to actually implement that pretty soon, but the process that we’ve had has been working pretty good at this point because it’s sort of allows . . . It’s amazing the range of customer that we have. So one of our customers is Radio Shack. They have a lot of experience around SKUs and product and fulfillment. They had a system that was 30 years old that they had to get away from, but they knew the space and they’ve been absolutely fantastic to work with.
On the other end of the scale, you’ll have someone that’s like, “Yeah, I don’t know what to do. I got 80 orders going out a day and I’m losing my mind.” And when you say to them, “And how many orders do you think you’ll get to next year?” and they’re like, “Maybe 200.” And we’re like, “I think you can do better than that.” And we have customers that will do 10,000 orders, 20,000 orders per day on our platform. That blows their mind. It brings them out of the vacuum and the bubble that they’ve been in. So it’s really great conversation.
Andrew: When they think 200 is going to be huge, you’re saying, “You do so much bigger.”
Nicholas: They just think 200, that’s going to be impossible. And then once you get into it and they start to understand, they’re like, “Oh, wow.” So that’s the reason why . . .
Andrew: I still wonder what makes a Shopify store do well. I feel like I should do more interviews with it because I see . . . I know that people do well with Shopify stores, but it’s also hard to tell who and why. And frankly, I’ve got a lot of people in my audience who have Shopify stores who are not doing that great and most of their businesses is done on Amazon.
Nicholas: So the big thing . . . At least from my takeaway, some of our really effective Shopify customers are those that have got that whole Instagram game down.
Andrew: The Instagram. Oh yeah, I see.
Nicholas: Yeah. They’re driving sales via Instagram or social. They’re just really good at it. They’ve built a following and they’re basically just nurturing and building that following and whenever they put anything out. I think one of the best examples is GFuel.
Nicholas: GFuel. Gamma Labs. And those guys how they’ve scaled they’re absolutely brilliant when it comes to the social media and they’re also like at events. They are really, really effective in terms of understanding their audience, reaching out to that audience, and maybe they use that Active Campaign. Who knows?
Andrew: Are they going after gamers with energy drinks?
Nicholas: Yeah. Gamers . . .
Andrew: Energy drinks for gamers?
Nicholas: Yeah, because you got to have that focus. If you’re gaming for what? I mean, you’re going to be gaming in a competition for like you’re going to be at that computer for 72 hours in a stretch without using the bathroom, I assume. I’m obviously being silly. But, yes.
Andrew: You know what? Maybe that’s why I don’t game very well. I can’t sit still like that. Maybe that’s what I need. Wow. I had no idea.
Andrew: All right. Somebody on my team better get me Gamma Labs as a guest.
Andrew: All right. Thanks so much for doing this interview.
Nicholas: You’re welcome, so thank for having me.
Andrew: Again, the site is ShipHero. And did I say toptal.com/mixergy, activecampaign.com/mixergy?
Nicholas: You did.
Andrew: Good. All right. Thank you. Bye, everyone.
Nicholas: Same. Take care.