Episode 182
November 6, 2020

The Magic of Logistics? Data and Optimization

Seeing a product travel from the computer screen to doorstep can seem like a magic trick. But, nope. It's not magic, it's logistics. Jason Murray joins the show to debunk the illusion and describes how Shipium is bridging the gap between eCommerce and Operations.

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Shipping is extraordinarily complicated

  • Shipium helps businesses by providing the tech behind the complicated processes of shipping to consumers.
  • Jason says that shipping is a series of events that needs to be coordinated well to give customers the optimal experience: “Our belief is that coordination should happen with good technology.” - Jason Murray
  • Jason had a long career at Amazon in which his career mostly focused on the merger between logistics and technology - eventually leading him to help launch FBA (Fulfillment by Amazon). 
  • Jason and the other co-founder of Shipium, Mac, both started working at Amazon together in 1999. After leaving Amazon, they both subsequently built similar software stacks for the businesses they were working on in managing their supply chains. 
  • They reconnected in 2019 and started discussing the idea that there was a gap of missing software in supporting the booming eCommerce industry.
  • This gap could be solved by paying someone to do everything for you, but Jason and Mac wanted to solve the problem by building a platform that could enable partners and companies in eCommerce to run their logistics operations efficiently and cost-effectively.

Logistically Speaking

  • “Once companies reach a certain size, the physical properties of what they’re shipping become an important part of how the customer experience works and their cost structure overall.” - Jason Murray
  • Jason says that once that size threshold is reached, businesses have to find a custom solution to fit their particular needs. Depending on the product and its specific needs, it becomes more cost-effective to build your process yourself which requires software for coordination.
  • Companies like Amazon and Walmart are becoming increasingly vertical, owning everything from their warehouses to their 747s. There’s a lot more competition in the smaller business spaces which creates a need for smaller operations like label printing, for instance.
  • “Logistics is much more than just the FedEx label you put on your box. It’s the entire linear sequence of making and delivering products. The key insight is that the linear sequence is very different for eCommerce and has its own areas to optimize… The bigger the company is, the more optimizing each link in the chain matters to the success and scale of that business.” - Jason Murray 
  • Most businesses focus on front end experiences, but it’s actually fulfilling that purchase and everything that happens after a sale that makes customers happy - so optimizing your logistic processes and continuing to improve them over time is recommended.

Shipageddon 2020 and the New Way of the World

  • In fairness, networks like UPS and FedEx didn’t have time to plan for the increase in shipping and eCommerce in Q4 - when reviewing capital expenditures in 2020, there was no way of having the hindsight to include a global pandemic in their plan for the year. 
  • Most carriers have been playing catch up since the beginning of the year: “There’s going to be a bigger supply problem than we’ve seen almost ever because of the combination of the pandemic and the holidays meshing together.” - Jason Murray
  • Jason predicts that eCommerce isn’t going to return to its previous levels but will continue to grow much higher than its mean after the holiday season. After the 2008 recession, Amazon took a disproportionate amount of the consumer spending volume into eCommerce and it didn’t subside after—people shifted to eCommerce permanently. 
  • On the shift into eCommerce in 2020 not being temporary: “[Companies] should think about it as a need to strategically put energy into solving our eCommerce challenges because this is the new way of the world.” - Jason Murray
  • Jason predicts that in 2021, we’ll see a lot of growth in local carriers and alternative shipping methods to compete with those that already exist or have not been able to rise to the occasion of growth we’ve seen in 2020. 
  • On logistics: “I would urge people not to think about it as a cost center, but to think of it as a living, breathing thing that’s part of the growth and dynamics of the business… There are these different stages you go through in all aspects of your business. And logistics and fulfillment and planning are all part of that.” - Jason Murray
  • Jason’s prediction for the next 18 months or so: “Companies that were omnichannel and neglecting their eCommerce channels are going to either not survive or they’re going to invest in them - which is going to introduce more competition into the market. Delivery experience will become more and more important because consumers now have multiple options to choose from.” - Jason Murray


Have any questions or comments about the show? Let us know on Futurecommerce.com, or reach out to us on Twitter, Facebook, Instagram, or LinkedIn. We love hearing from our listeners!

Phillip: Helloand welcome to Future Commerce, the podcast about next generation commerce. I'mPhillip.

Brian: And I'mBrian. And today we have Jason Murray with us, Co-Founder of Shipium. Welcome,Jason.

Jason: Hello,everyone.

Brian: Hello.

Phillip: Hey,welcome to the show. I gather by the word Shipium that you guys make thingsship.

Brian: {laughter}

Phillip: I'mPerry Mason. Basically, I feel like I've deduced it.

Jason: We helpwith the process, the complicated process, of getting things to people. Shipiumhelps with the technology to enable that.

Phillip: It'skind of a magic trick the way that things show up on your front step, right?

Jason: It is.It's a series of events that need to be coordinated to do it well, to giveeveryone the right customer experience and do it in a cost effective way. Andso our belief is that coordination should happen with good technology. Andthat's where Shipium comes in.

Brian: You saidcost effective. That sounds almost impossible. {laughter} Tell us aboutyourself and how you got started with Shipium. And I think maybe that will helpus understand better how you're able to do what you do.

Jason: I had areally long career at Amazon, and I kind of accidentally stepped into almost 20years. I stepped into this... Most of my career was focused on the merger oflogistics and technology. And so early years I worked on the technology and thefulfillment centers, and then I helped launch FBA. And those concepts that wedeveloped in those years are still in play today about how to run a warehouse,single piece flow out of the warehouse, et cetera. My biggest accomplishment,though, was in the later years at Amazon actually led the effort to reimagineAmazon supply chain to support Amazon Prime. And basically, how do you make twoday shipping a viable business as it became clear that Prime was going to be abig deal and people really, customers really wanted it. So the story behindShipium, though, is my Co-Founder and I actually started working at Amazonwithin a week of each other in 1999. We both worked together on fulfillmentcenter technology in the early 2000s. Mac, my Co-Founder, eventually went offto Zulily. And both of us, though, ended up building these parallel softwarestacks that were responsible for managing the supply chain. The deliverypromise, how you place inventory, how you manage carriers, how you routeshipments. And we reconnected in 2019 and started discussing this idea thatthere was a huge gaping hole of missing software to support the now boomingeCommerce industry. And so you either pay someone to do everything for you,which tends to be super expensive once you get past a certain size, or you usesupply chain software that wasn't really built for eCommerce in the firstplace. So that was the impetus, and Mac and I really wanted to start building aplatform that would enable partners and companies to basically run theirlogistics operations efficiently and in a cost effective way, which involvesthe data science, the scaled software, and domain expertise to do it correctly.

Phillip: So wow.Number one. Number two, I was a kid and I remember watching Jurassic Park. Andwhen Jurassic Park came out, there was a lot of discussion around how SiliconGraphics and Industrial Light & Magic wanted to create these effects, butto create these effects they had to create the software by which you woulddesign the effects, which meant they had to create the rendering systems, whichmeant they had to create the computer hardware that would run on top ofeverything. And I feel like the world of eCommerce has matured to a place wherewe don't understand the pains that early trailblazers had to go through tocreate the systems. That's an incredible thing. I mean, not so long ago, we hadto build eCommerce platforms, bespoke, from scratch with code. And nowadays wejust click a few buttons, you know, sign up for Stripe and you're done. I feellike we discount the complexity of what it used to be. Is there something inthe shipping space right now? I say the shipping space because I have no ideawhat I'm talking about. But logistics. That has a similar paradigm. WhyShipium? Is there a similar problem to solve to create the systems that createthe systems? And is that the opportunity that you see in the marketplace?

Phillip: Yeah, Ithink the way I would probably describe it is that once companies reach acertain size, the physical properties of what they're shipping becomes kind ofan important part of how the customer experience works and their cost structureoverall. And so what happens when you reach a certain size threshold and youhave some economies of scale is you can start to put together a more kind of acustom solution that fits your particular need? That's either packaging,shipping out packed underwear. It's maybe a mailer that's for fine, really highend clothing that you want to portray a certain customer experience or it'syour boxes need to be a bit stronger because you've got lots of of heavy, tinyitems in there that you don't want to get damaged. And so it becomes more costeffective to build it out yourself. But putting all of that together andcoordinating it does require software. It requires that you have to coordinateall these different pieces. And I would say, like maybe the way to think aboutit is 80 percent of the stuff that you use for fulfillment in eCommerce is thesame, but there's usually 20 percent that's kind of specific to the physicalproperties that you're driving because of exactly what your business is. And soI would liken that to, using your example, it probably is a lot like theformation before there was an open GL in the graphics space, everyone wroteeverything from scratch. I mean, I grew up in that era in computer science andI had friends in the gaming industry, and I would watch what they were doingand they were literally with assembly language writing the entire game fromscratch every time. And that's kind of... I think we're kind of starting tomake that transition to there should be some basic building blocks and basicpieces that you can use to put together your supply chain.

Brian: Wow, yeah,that makes sense. As Phillip noted, we are in no way logistics experts and Ithink something that would help us and our audience be able to understand whatyou're doing and why you entered this space in 2019 would be to give us alittle bit of an overview of the logistics landscape right now. Like who arethe players? What are the pieces that are required to sort of create alogistics experience that gets you all the way to last mile to your customer?And what are the pieces of technology that are required? And who's involved?

Jason: Yeah,absolutely, so, I mean, in general, the logistics base is extremely fragmentedbecause it's a very old industry and how it's grown up. And there's acombination of mom and pop offerings as well as bigger companies that havetried to consolidate. But overall, very fragmented. Companies like Amazon andWalmart are getting increasingly vertical. And you can see with Amazon thattheir solution to that problem is just to own everything up and down the stack.So they've got their own warehouses, they've got their employees, got their owntransportation offering now in many different forms. They're even talking aboutthese middle mile solutions that even do the kind of the long hauls betweenthese FCs. I mean, Amazon even owns 747s now. So that's their approach. They'regoing to do everything. And I could almost liken it to car manufacturers atsome point owned the steel industry, I guess. Because they were the ones thatwere consuming so much steel and they need to do it efficiently. But what wesee in general is that there's a lot of competition focused on smaller businessand smaller businesses. And this manifests itself with things like helping youwith label printing if you're running from the garage or the other form of itis something like a completely vertical solution that you send in yourinventory and will handle everything. But because of what I mentioned earlier,the solution for everybody kind of ends up being not good for anybody.

Phillip: That'strue. Yeah.

Jason: Because ascompanies get larger, they generally want to take more control over theiroperations because they have enough volume to reach economies of scale and theybenefit from tailoring the physical processes to specific needs of theirbusiness. Things like more exact box sizes, inserts, the PICC processes startto matter. Specific packaging for underwear, beautiful mailers for high endfashion companies. All that stuff is important and a critical part of both yourcustomer experience as well as how your company's cost structure plays out. Andso to me, ultimately, logistics is much morethan just the FedEx label you put on your box. It's the entire linear sequenceof making and delivering products. The key insight is that that linear sequenceis very different for eCommerce and has its own areas to optimize. I talk aboutthe full spectrum of this on our blog. The bigger the company is, though, themore optimizing each link in the chain matters to the success and scale of thatbusiness.

Phillip: We haveconversations all the time with a retailer that says we have to compete withAmazon. And my sense is, well, let's look at the things you're doing right nowand let's see where you're not competing with Amazon. Well, right now you aredependent on a third party logistics firm to handle your customer experiencefrom like a fulfillment point of view. Is that the best in class solution? Isthat the way you're going to compete with Amazon? That's how you're going to doit? Most companies when they think that they're thinking about front endexperience, but everything that happens after the purchase is the thing thatactually makes customers happy. It's like you can elicit a purchase, but canyou actually create a repeat customer? Can you actually fulfill on the promisethat you made to them to begin with? All of that's operational. Happens afterthe purchase. And I feel like this rhetoric around competing is rhetoricbecause I don't think that companies understand how or when to make aninvestment to bring that capability up to that... To actually compete on thatpromise, to invest in in logistics in a way that actually would make itdifferentiating. But I don't know if you have any response to that. I feel likeI'm just pontificating at this point.

Jason: You know,I think you need to be... It's I think the part of what you see is thatcompanies get overwhelmed, right? They see Amazon with one hundred warehousesand doing next day shipping. And it becomes this like an overwhelming challengeto try to get to that level immediately. I think it ends up being probably moreof a journey where even Amazon early days, 2003 say, they were they were makingcontinual improvements on how they thought about delivery experience andunderstood from an early point that it was a key part of the customerexperience. And so I think the main thing is you're continually trying toimprove what your fulfillment experience looks like because you recognize thatit's a key part of how customers are going to view your company. And so butit's going to be a journey. Amazon itself gets better every year. And I thinkas an eCommerce company, if you're gonna be serious about it, you have tocontinue to improve that process and continue to change it over time. Websitesin 2005 look a lot different than websites today.

Phillip: I guessthere's maybe a misconception, like in my mind, between what logistics is andwhat an eCommerce brand might think logistics is. To a particular eCommerce ordirect to consumer brand, they might think that it's I print a label and UPStakes the product from me or I send it off to my warehouse where some contractlabor does that for me. Is that logistics, though? That's not logistics is it?

Jason: I don'tthink it is. I think it's the coordination of all those pieces. I mean, onething I think you see a lot of is some of this probably came from an era, theold era of retail, where the logistics arm of a company was really aboutdistributing the product. And then it got to the store and then the actualmerchandizing and how it was presented to the customer was handled there. And Ithink one of the ahas is just that in the eCommerce space, logistics isheavily, heavily tied to the customer experience. It's basically when are yougoing to get it? What's happening with it now? Is it in stock? Am I going toget a note in an hour that says we don't actually have this? All of those thingsare tied to the overall customer experience, which doesn't really... If you goto a store, it's not there. It's basically not there. I can't get it right? Butin the eCommerce experience, if you're wrong about what you're presenting tothe customer through that whole chain, you're going to end up looking reallybad. And so I think that's a critical thing. But the other component is justhow much everything in logistics depends on the previous steps. Like you thinkabout as customers, it matters where you put the inventory when you ordered itin the first place, because that's going to get it closer to a customer. Andonce it's closer to customer, it's cheaper and faster to ship it to thatcustomer. It matters how you're draining that inventory from the fulfillmentcenter, because that's going to affect what future customers will see in termsof their offering. So all of those different pieces are tied together. And it'sobviously a stochastic process that needs to try to account for all of theseuncertain futures. But you have to kind of account for all of that if you'regoing to do a good job.

Phillip: So,Brian, we had this conversation yesterday, I think, where I said... I don'tknow if this is true. I sense this to be true. If you were to do something likelet's say you launch a small brand in a small town. In my town here west ofWest Palm Beach, has twenty five thousand people in it. And so if I were tocreate a small storefront and say I'm going to get every product in the storewithin one hour to everybody, I think that's really feasible. Right?

Brian: Yeah.

Phillip: Pizzachains do that all the time. It's when I widen the scope or I widen theaperture to try to scale that business is where I think technology is the thingthat allows you to deliver your promise at scale. And because I think if youdon't have scale and you have a very small... If you have your scale is quitesmall, you could probably power through with manpower. You could probablydeliver a pretty tall promise to a customer if your scope was small enough. Butit's technology that I think adds the scale component.

Brian: Well,especially going into this holiday season, like we've seen, I think, a scalefor eCommerce that we haven't seen before. And this is the interesting thingabout what we're going into this holiday season right now. Like eCommerce hasbeen scaling up in 2020 at a rate we've never seen. Three months of growthequaled 10 years of growth.

Jason: Yes. Yeah.

Brian: This is ascale problem we're about to launch into. Shipageddon. Shipageddon is real.

Phillip: Shipageddon.Yeah. What's your reaction to that there, Jason? I'm curious what you thinkabout that.

Jason: I thinkfirst of all, so because of the physical capacity requirements of eCommerce,there's a legitimate planning. You use the what you think your volume is goingto be in the future to do things like build capacity, higher labor, trainlabor, make sure it's up to speed ahead of these points. And like anything elsein our society, if everything's running in a stable way, those those thingstend to kind of follow these nice law of large numbers. It's going to get 20percent bigger next year. And here's where I need to add buildings. And all ofthe historical statistical models work really well, like the way we think aboutthings. And I mean, I think what's been so interesting about the pandemic isjust that you've seen... So maybe just to take a step back, for example, atAmazon, holidays... There's a whole team and system and processes in place to dealwith the fact that you're going to be selling four times the volume that you doQ4, as you do in other quarters. And so you you hire ahead of that. You traintemp workers, you make sure your building capacity is ready. And all of thosethings, they happen months in advance to basically make that dance go smoothlywhen Q4 comes around. And still it's always challenging anyway. But the thingis, what you saw this year was everyone was kind of thrown with a reallyintense Q4, with a week's worth of notice. And they had just kind of come offof the last Q4. And so I think, just in fairness to these networks, to the UPS,the FedEx, et cetera, they did not have time to plan for this. It was notsomething that, when they were doing their their review of of capitalexpenditures in 2020, no one was saying, oh, don't forget to add the pandemicin and build 50 more buildings. It was much more about like we've left Amazon,we're going to take a hit from that. We're going to grow 10 percent this year,whatever, I'm making up the number. But everybody was planning around thosetypes of numbers and this thing hits. And so you basically have now way moredemand than you have supply for shipments. And so I think for the most part,these carriers have been trying to play catch up since the beginning of theyear. And I think the worry is, is that you've got not only the pandemicmultiplier, but now you potentially have this holiday multiplier, which no oneknows... Everyone knows there's going to be some multiplier. We're not going tocancel the holidays as a result of the pandemic, but no one's sure how much.But I think it's very clear that there's goingto be a bigger supply problem than we've seen almost ever because of basicallythe combination of the pandemic and the holidays meshing together. Thenon top of that, I think these these other things that could kind of offset theneed for carriers... The buy online and pick up and store... These processeshave been kind of exposed as having... They were not tested like they're beingtested now. And I think it takes a lot of coordination for a clothing store tosupport buy online/pickup in store. You need to have your inventory synced, youneed to have a process worked out about how all that pickup is going to happen.And, you know, that's an area you could potentially offset some of thesecarrier issues. But frankly, everyone was not ready for this new shift thatconsumers are really excited about not having to go in the store and be aroundother people. That was not something that was essentially planned for. And soin general, I just think that it's a real, the biggest factor is everyone hasbeen playing catch up in 2020 in this space in general. And like we talkedabout earlier, you've got the chain of events that the carriers are underduress, the eCommerce companies are under duress for having too much volume.And everyone is kind of playing catch up throughout this year. And we've nowgot this... You've already thrown the gas on the fire and now you're going to Iguess toss the propane tank on there. I'm not sure.

Brian: Speakingof propane, so you're tossing propane tank on the fire, what happens afterholiday? {laughter} That's the question I have as well. So the insane scale upto try and address this demand that's probably isn't going to be properlyaddressed in holiday.

Jason: Right.Right.

Brian: Likethere's going to be a lot of disappointed kids on Christmas and other holidays.What happens after we go through this process and it doesn't really work, andthen we are coming back down off the holidays, but we don't really know whatthe level of demand is going to be after that. How are people going to respond?

Jason: You know,my feeling is that there's going to be some amount of regression back to the mean.But I believe pretty strongly that when these events happen, when the customerbehavior changes in some way, people just don't tend to go back to normal. So Ithink you are going to... My prediction personally is that coming out of thepandemic, eCommerce is not going to go back to its previous levels. It's goingto continue to be much higher than it's been. And it's just frankly, peopleneed a push sometimes to buy online, change their buying behavior, change howthey think about buying. But once they get a taste of it, they're not going tojust go back. You realize like, hey, I don't have to go to the store now. I cando X, Y and Z online. And so I don't see it as as something that's going tojust reset to normal. And so if I talk a little bit about Amazon again andthink the closest analogy I have to something like this is the 2008 recession,and the time that was happening, we all knew consumer spending was going down.We didn't really know it was going to happen in Amazon. But what ended up happeningwas there was Amazon at that time had really started focusing on systematicallykeeping their prices low. And you had this whole new population of people thatwere super price sensitive because you're now in this recession and people areconcerned about money. And so they started looking online as a potential way toget better deals, to get better prices on their whatever they're buying. And italso kind of coincided to, I think it's interesting because the iPhone also wasabout out in 2007, which then now introduces this like I can go to a store andactually check online and see what the price is. But all of that basicallyacted as this trigger that moved people to this online way of thinking that Ican get better prices online. And Amazoncontinued to grow through that recession, which meant that they had takenessentially some of a disproportionate amount of the consumer spending volumeinto eCommerce. But it didn't stop after that. After the recession kind ofeventually subsided, people that had shifted over to eCommerce kind of stayedthere. So the overall consumer spending kind of went back to normal, but thechannel shift was now a more permanent thing. And I really think that we'regoing to see something similar with this pandemic. I think companies should notthink of this as a temporary thing that they can kind of have to deal with fora year. They should think about it as we need to strategically put energy intosolving our eCommerce challenges because this is the new way of the world.

Phillip: Let meask you about... Let's put that under the lens of Shipageddon, if you will, andhat tip to Scott Wingo, who I think came up with the phrase. This idea of theconstraint of supply that can't rise to meet the demand... Is Shipageddonsomething that we can get out ahead of in the next year or two? And if not,does that tamp down some of the excitement of the digital shift that you werejust talking about? Could this be undone by just the inability to meet theoverwhelming demand?

Jason: You know, I think that the demand is going to be so strongand so apparent that someone's going to rise to the occasion. And what moreso... I don't think the right question is really will it be undone? Butprobably the more relevant question is, will some companies be undone becausethey were not able to rise to the occasion? But everyone's kind of giving thecarriers a bit of a pass this year because it's been a very unique year, but Iwould expect by next year that the expectation is they're going to catch up.And if they can't catch up, you're going to see a lot of growth in localcarriers. You're going to see a growth in alternate ways and new ship methodsthat are able to compete with those guys. And it's hard to predictexactly what that's going to be. But generally speaking, I think the demand isthere for a reason. It's just inherently more compelling. And because of that,I think you're going to see some supply arise from this that meets that demand.And so I don't personally think... I think that there might be some misstepsand people lose market share and that kind of thing. But I don't think that theoverarching trend is enough... There's too much there to actually disrupt thetrend.

Brian: Wow. Yeah,I think you're probably right about that. I agree. It's interesting. I thinksome of the things you're saying about eCommerce and Amazon and like how Amazonwas able to sort of find a way there. I think that's a super interesting.ECommerce loyalty, you know, we talk about Brand a lot and I think we believein brand and we talk about relationship to customer a lot and we believe in therelationship to customer. But there's still a ton of price shopping out there.It happens on the Web. People are using Google shopping more and more. They'reusing Amazon and they're comparing like direct prices on Amazon. That flows allthe way down. And that experience, the price experience, I feel like theconnection to shipping... Basically stuff for a good price delivered fast wassort of Amazon's promise in thinking back to even like 2008. Amazon, prior tothe recession, they were doing well. But I feel like that's the moment theyreally took off. Can you kind of talk through what you saw there and like maybesome lessons we can learn from how Amazon responded to the last massive crisisthat we saw?

Jason: Yeah, Imean, I think pricing was a big factor. I think it wasn't clear, you know, howdo you think about pricing online? And probably in fairness, Amazon wasn'tsuper clear on on where they wanted to fit in that spectrum. Were they had lowprice company? Or are they taking advantage of the convenience to sell to aless price sensitive crowd? That kind of thing was maybe not all worked out. Ithink the thing that really emerged, though, is that if you think about it justfrom a practical standpoint, if you're in a store, you're kind of limited by anactual physical sticker that you can put on the bin. And that's going todictate how you change your prices. Right? It's a lot of work. It's going totake a up to go through the store and make those changes, it's something thatprobably happens once a week, maybe less often than that, just because it's notfree to have someone run around and print labels and stick them on there. Andthen imagine doing that kind of across all of your stores. And so you can kindof see the the multiplication there. The Internet was just a really interestingformat because it lets you essentially change prices instantly. And I think youcan think back to the marketplace dynamics like eBay or eBay auctions orwhatever kind of way you want to frame it. But to me, the most fascinatingthing about that whole era was it let you adjust prices dynamically andquickly. And it essentially entered this way to not only generally get lowerprices, but essentially guarantee that you're not going to find this priceanywhere else, lower, right? I mean, that's the crawlers and the pricecomparison sites and all that stuff. It's something that if you had to be kindof a guy that was willing to drive from store to store and sort through couponads and stuff, if you wanted to find the lowest prices back in the day. Butnowadays, it was really just right at your fingertips. It's completelytransparent, completely available if you're a consumer. And I think Amazonreally leveraged that. You had physical stores that were kind of they'reconcerned about things like I've got a price for this in my physical store. Soeven if I'm going to do an online offering, I want to make sure I keep at thesame price because customers are going to think it's really weird if they go onto the store and it's it's higher than online. It's going to cause problems.But Amazon had this freedom to kind of say we're going to dynamically pricethis thing and consumers are going to start to figure that out in theirperception of where to get a good deal. They're going to figure out quicklythat I can just look on here and figure out what the lowest price is. Andthat's a very, very powerful concept that really plays into the dynamic-ness ofthe Internet and the ability to offer this wide variety of items and change theprices, change the shipping speed, all that stuff can kind of happeninstantaneously. I think the other factor around that time with Amazon was justthat Prime was starting to gain some ground. And it coincided with that. Andthat became... I have some intimate responsibility for being part of that wholepush and I think it became like, how do we innovate so that we can offercustomers this faster shipping? We already are offering them great prices. Sohow do you do both of those things to really pick up the eCommerce baton andrun with it?

Phillip: It'slike everything, right? Early adopters in channels, you know, they they havetheir challenges, but they enjoy a lower customer acquisition cost and maybethey make the best of that channel. We're seeing a lot of this now play out inother new digital channels, which I feel like we've probably hit ad nauseam onthis show in the past. But as more folks rush to eCommerce, there's certainlysomething that I sense is happening that the cost and the barrier to entry ison the rise across the board. And there's certain businesses we covered lastyear, Blackstone investing 19 billion to eCom logistics, for instance. They'recertainly those who have understood that there is an opportunity in themarketplace, and those early entrants are the ones who benefit the most. Mysense is that the channel becomes prohibitively expensive to operate in thelong term for the smaller direct to consumer brands. How can they compete andhow can they sort of fulfill on the promises that their customers aredemanding? The expectations that the customers are demanding of them? Is that alosing battle over time?

Jason: Well, myanswer is, I think this is something that you saw basically with technology andthe whole magic of the world we live in is about the amount of data that we'reable to look at to optimize these flows. And the scale of the software that'srunning is... We live in a magical times. It's amazing. It's amazing the workcontinued once we went into this pandemic because we have video conferencingand all the Google Docs and all the stuff you need to collaborate. But I thinkfor me there's an element of a business. There's kind of stages of growth. AndI think you have the early stage companies are probably super scrappy orthey've got something really compelling from a product standpoint. Or they'vegot a VC injection of money or some way to kind of we're going to grow at allcosts. And there's a point I don't argue that that's maybe the right time to bereally focused on how to get your costs down. And so for that reason, there's alot of offering that kind of makes the process easy. But I do think the pointin time where you have enough scale to start really making a difference in bothcustomer experience... So either you take your efficiencies in your combinationof scale and you give it back to the customer in an experience standpoint, oryou lower your fundamental cost structure so that you can go into other channels.Both of those things happen quickly. And I think we estimate it's probably morein the 25 million dollar range where you start to see this is where I can starttaking advantage of my scale. This is where I can start leveraging my scale andmy assets to basically either reapply this benefit to customer experience andgain longer term loyalty or again, bring the cost down to just generally makeyour business more viable and allow you to expand in different ways. Or you canput the money into marketing or whatever is needed. But when that thresholdhits, though, it's I guess I would urge people to not think about it as a costcenter, but think of it more as a living, breathing thing that's part of thegrowth and dynamics of the business. It's all intertwined. And I feel like it'ssomething that just like your website browse experience and your check out andpeople use Shopify when they get started, but then they start customizing it orthey move to their own solution. There arethese different stages that you go through in all aspects of your business. Andlogistics and fulfillment and planning are all are part of that also.

Brian: That makescomplete sense to me. You can't look at logistics as in a silo. It's not anisland. It's a part of your strategy because it affects your customers.

Jason: Right.

Brian: I knowwe're coming up here on time. And I really wanted to conclude with a questionthat we would like to get out at the end of a lot of our interviews, which iswhat trends do you expect to see in logistics that actually stick over the next18 months or so? The next 12 to 24 months?

Jason: I think sowe talked a little bit... The obvious one is that the channels have all pickedup, and I don't think that's going to slow down. So the mix. Inherently whatthat means is that even when spending goes back to normal, the channel mix isgoing to be closer to what it is now. That's my prediction. And so the moreinteresting thing is what comes out of that and competition is going to befierce. You're going to... Companies that wereomnichannel and neglecting their eCommerce channels are going to either notsurvive or they're going to invest in them, which is going to introduce morecompetition into the market. Delivery experience will become more and moreimportant because consumers now have multiple options to choose from. Ithink the delivery options that are out there are interesting to me becauseit's something that has... I think this pandemic kind of acted as thisaccelerant, like everything else. And I think it became very clear that there'sthis demand for things like buy online and pick up in-store, lockers, and newways of getting inventory to people quickly that's also cost effective and aresomewhere between I want it now, I'm willing to drive to the store, but I alsowant to shop for the thing online. I think that's going to have a somewhat of arenaissance from the push that this pandemic gave them. I think the other thingthat's interesting is just categories that have traditionally struggled witheCommerce are now getting their chance to shine. Grocery is a great examplebecause it's kind of like the worst case scenario and all things eCommerce,right? It's low margins. The items are big and bulky and cheap. If you includethe frozen part of it in the mix, you have to kind of deliver in a specificwindow so the food doesn't go bad. Because it's this commodity, people hateplanning for it. They don't want to buy it three days in advance, which themore time you have, the more opportunity you have to plan. And none of thatstuff exists. So what I see, though, is that there's all of this innovationhappening in that space across all the larger companies in some cases, butgrocery stores, et cetera, about how to make that whole process smoother. I wasat a grocery store the other day and a guy was walking around with thesebasically four carts stacked high, and he was he was picking into each cart,which clearly corresponded to an order. And I was thinking like, OK, this isthe beginning of a sortation process that we use in an eCommerce set up. Butthey're now starting to kind of shift how you think about the store to make itmore efficient for that model. So I think that all of those things are going tobe affected by the pandemic essentially permanently. And some of it won't work.Some of it will. They tried, it didn't work. But some of it the kind of push toactually innovate on this front and the expectations changing from the consumeris going to ultimately lead to an actual shift in the way that the whole thingruns.

Brian: Excitingtimes ahead.

Phillip: My guttells me that it sounds like you're making sort of bombastic statements. I feellike it's undersold a little bit. I think when we look back in this era we willsay wow we were right at the beginning. We didn't even know. We're what? Twentyfive, thirty, twenty five years into eCommerce at the moment?

Jason: Yeah.

Phillip: Likewe're at the very beginning. We have a long way to go, and so we're in theinfancy of what I think is a fundamental shift in the way that people exchangegoods and services in our world. And, gosh, that's yeah, that gets me fired up.

Jason: It'sexciting. This is a good, good time to be in commerce.

Phillip: It is.

Jason: And it'san even better time to be in the future of commerce. So you guys are in a goodposition.

Phillip: Well,thank you. And we benefit from the sort of like, oh, Future Commerce, FutureCommerce. That sounds like a thing that I want to be part of is the future ofcommerce. {laughter} Jason, it has been such a pleasure having you on the show.

Brian: Truly.

Jason: Thank youso much, guys. It's been great talking and I really enjoyed it. You guys have agood rest of your week.

Phillip: Yeah,thanks. Same to you.

Brian: You, too.

Phillip: And hey,we do want to thank Shipium for partnering with us to help bring the show toyou. And where can people get in touch with Shipium if they were to inquireabout what it is you're building over there and how you might be able to help them,Jason?

Jason: Theeasiest way to do it is just go to Shipium.com. We have a Contact Us area thatyou can send us an email. And it also has information about our Twitter accountand all the other stuff.

Phillip: Great.Well, thanks for joining. Hey, remember, hey, we all have to participate incommerce to live in this world. Right? And that means commerce touches us all.And that means that we believe that commerce can change the world. We all havea part in that. Let's shape the future that we all want to see. And we can dothat together. Thank you for listening to Future Commerce.

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