Upstart to Challenge FedEx, UPS & USPS
Called EquaShip, the start-up – just-out-of-stealth-mode & not yet up & running – is promising to be the cheapest game in town
By: Maureen O'Gara
Apr. 24, 2011 01:00 PM
Serial entrepreneur Ron Wiener, whose Venture Mechanics venture arm incubated Swiss Post's digitized postal mail partner Earth Class Mail, has spent the last couple of years putting together a new parcel carrier meant to challenge FedEx, UPS and the USPS in delivering B2C packages from the scads of SMBs that don't qualify for FedEx and UPS discounts and are basically stuck subsidizing the unprofitable volumes of the FedEx and UPS mega-shippers.
Called EquaShip, the start-up - just-out-of-stealth-mode and not yet up and running - is promising to be the cheapest game in town, offering to deliver even single pieces for 10%-30% less than UPS and FedEx, maybe more.
Of course DHL shot its foot off trying to take on FedEx and UPS in the domestic US market with its purchase of Airborne and cut rates, losing $9.5 billion in the process. EquaShip expects to avoid DHL's mistakes.
It will enter a market where only B2C shipments are growing thanks to the Internet and where the pressure is on the rankings of SMBs to offer free delivery that is also fast.
Most small and medium-sized businesses, it figures, pay full retail prices for parcel delivery giants FedEx and UPS - and ultimately their artificially delayed last-mile trudger USPS - to handle their goods. That means they are paying two-four times more than the chi-chi large shippers for what degenerates into inferior customer service. They also have to have their parcels ready to go several non-competitive hours sooner than the larger shippers.
EquaShip aims to play David to the Goliaths, offering "big shipper discounts for the rest of us" by the end of the summer.
It will be a "software-dependent" venture, Weiner says, available to shippers at EquaShip.com and through popular electronic storefront software and order management platforms including one used by a million small eBay and Amazon stores to start.
ABOL Software, whose multi-carrier widgetry is used by DHL, FedEx, UPS, USPS and Amazon, is running up the .NET- and cloud-based software for EquaShip.
The start-up, which says it won't do business with the enterprise, is building out a nationwide network of major retail chains where SMBs and the equally put-upon consumer can drop off their parcels. The chains, in return, see the new carrier driving significant foot traffic through their doors.
The bins and scanners are reportedly already making their way to the drop-off points.
EquaShip will demand no so-called "accessorial" fees, contracts or volume commitments, while promising superior service and better delivery performance.
It will employ many of the same carriers that mega-shippers like Amazon use in their hyper-efficient transportation networks, beginning with Blue Package, the largest parcel consolidator after FedEx SmartPost and UPS Basic, which will manage all of its carrier interfaces as well as operate its first-mile network (the retail drop-off partner pickups and customer-requested pickups).
These carriers generally work only with larger shippers who can fill trailer loads of parcels daily, and are virtually unknown to SMB shippers that send less than a few hundred packages a day. EquaShip says they have fundamentally lower costs than UPS or FedEx while providing superior delivery performance.
By aggregating SMB shipments EquaShip can offer carriers profitable incremental volume from customers they would otherwise have no way of reaching. Meanwhile, EquaShip will handle all frontline customer service, payment processing and first-mile parcel aggregation.
Wiener says, "For decades, mail order catalogers - and in more recent times, e-commerce sellers - used to be able to rely on the markup they made on shipping fees to create their entire net profit for the year. Twenty-five years ago no shipper ever got a discount from FedEx or UPS. Those days are gone. Since JC Penny got its first discount these giants have been in a race to the bottom giving away discounts of 75% or more to win accounts like Amazon, while consistently raising prices for SMB shippers by 7% a year to compensate. It's forcing many small retailers out of business. We saw the opportunity to build a new kind of parcel carrier focused primarily on SMB shippers, without taking on enterprise shippers that would have to be subsidized by the little guys."
EquaShip chief marketing officer Josh Leichtung said, "Free shipping has been the most powerful order incentive ever created, and accounts for more than 56% of online orders today. EquaShip gives SMBs the magic slingshot to combat the Goliaths' outrageously high prices and compete with larger retailers on a more level playing field."
Leichtung is also publisher of www.eShippingNews.com, a market analyst site that tracks trends at the intersection of e-commerce and shipping.
By the way, USPS parcel rates went up 3.8%-11.3% on Monday.
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