E-commerce startups are bracing for a tough holiday season.
Because of an irregularity in the calendar, Christmas falls on a Sunday (and Hanukah the day before) this year. That means holiday shoppers are more likely to turn to the Web for last-minute gifts. While the National Retail Federation forecasts that online sales in November and December will climb a combined total of nearly 10 percent to $117 billion, retailers know well that last-minute shipping — and deliveries — can lead to high costs and unhappy customers. (FedEx, for instance, has already seen its quarterly profits decline, as it invested money in additional facilities and staff to manage more than one million orders daily. As a result, the carrier is reportedly charging retailers higher prices to make deliveries, and ending partnerships with those that refuse to comply.)
Jeremy Bodenhamer, the co-founder and CEO of ShipHawk, wants to eliminate this burden for small businesses. His Santa Barbara, Calif.-based company makes software that helps startups book shipments, generate labels and track deliveries online using its proprietary technology. ShipHawk also lets them compare rates from more than 200 carriers, including UPS and FedEx. The company brings in revenue mainly by charging larger clients a fee to use its API (application programming interface).
Bodenhamer says that ShipHawk has seen a significant increase in 2016 holiday sales, as more retailers are recognizing the hit that these expenses take on their bottom lines. “Halfway through the month [December], there were more shipments than we were expecting,” said Bodenhamer, who estimates that ShipHawk has facilitated many millions of package deliveries.
To be sure, the company faces dozens of competitors in the freight booking space, including uShip.com and FreightCenter, which similarly charge a fee to connect carriers to shippers, or to compare costs from different carriers. But ShipHawk has been growing at a rapid clip. The company launched back in 2011, and now sees more than $10 million in annual revenues. Bodenhamer attributes the uptick in business not only to the 2016 calendar confluence, but also to the pressure that Amazon is putting on smaller retailers.
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“It’s almost like ‘He Who Shall Not Be Named,” Bodenhamer says, adding that Amazon has, in a sense, re-adjusted the buyer’s expectation for how quickly packages should be delivered. “Everyone [retailers] feels the Amazon pressure.”
To his point, Amazon accounted for more than 30 percent of all Cyber Monday sales, and, as of last week, was responsible for nearly 43 percent of all online holiday sales, according to Slice Intelligence. The e-commerce titan is reportedly developing its own, Uber-like app to pair freight carriers with shipments, which could pose a threat to existing businesses.
Still, Bodenhamer says he isn’t concerned for his startup, given that it sells proprietary software to help companies manage logistics independently — and therefore isn’t responsible for carrying out deliveries, and competing with Amazon directly.
Adam Price, the co-founder and CEO of tech company Homer Logistics, adds that Amazon may not actually be focused on developing a freight-booking service, given that the company is constantly launching new projects without a clear path to profitability.
“They [Amazon] have so many initiatives, and they’re not afraid to lose money, so it’s really hard to tell what they’re going to get serious