Last Tuesday, Shyp, a mobile app which offers a package delivery service, confirmed that it had received $50m in venture capital funding, led by Kleiner Perkins Caufield & Byers (KPCB).
So what is the big deal?
Having been founded in San Francisco in 2013, Shyp provides a shipping service for small items, whereby the company offers to collect an item from a customer’s home, before packaging and shipping it to the required destination, for $5 fee (in addition to the cost of postage).
But why would someone need this? Surely, it is not too difficult to pack something and research courier options yourself, right?
But this is to miss the point.
Yes, budding Shyp users could pack and sent an item independently of such a service. It is not difficult to pack a box. It is not difficult to research courier options. But it is time consuming, and requires more effort than you would expect; finding a correctly sized box, selecting the right shipment option, and the greatest pain point, waiting in line at the post office (it was in fact the latter that inspired Shyp co-founder Kevin Gibbon to create the company).
And this is the genius of Shyp. It is quick, it is hassle-free, and above all, it is easy. This is Shyp’s main selling point. Having experienced such ease of use once, customers are then finding it impossible to go back to the DIY method; as Gibbon told Venturebeat, “Retention is off the charts”
So, how does it work?
Customers place an order by using the Shyp smartphone app. Through this, they upload a picture of the item to be delivered, select the origin and destination, input their contact details, and pay. Within 20 minutes, they receive a knock at the door from a Shyp representative (these people are known as ‘Shyp Heroes’), who then takes their item away, to be packaged and delivered “using the lowest cost, most reliable option”.
The operation behind this is a bit more complex.
Shyp’s team of Heroes is split between those using bikes, and those using cars; the latter being deployed if an item is too large to be carried using the former. After arriving at a pickup location, the Heroes place collected items into bags with attached QR codes, which are used by the company to track and trace each consignment. The Heroes then transport the items to a van, known as a ‘Satellite’, before heading out to further pick-ups.
Once the Satellite has loaded up a sufficient number of consignments, it transports them to a central warehouse, where items are taken from the QR bags and machine-packed to customised specifications, ensuring Shyp uses the minimum necessary material to package each item.
Shyp then selects the cheapest means of shipping the aggregated consignments, by using the likes of FedEx, UPS and the USPS. Ultimately, the business model works because Shyp is able to leverage its buying power to negotiate bulk deals with parcel delivery providers, allowing the company to make a margin on the difference between this and the rate it charges consumers.
Through its contracted parcel carriers, Shyp offers delivery to anywhere in the world, and though deferred deliveries represent the default option, the company also offers express options, which are more expensive.
However, the company does work within several service restrictions. Shyp is only willing to accommodate items up to up to 50 lbs, with certain dimension restrictions; for example, the company is willing to transport furniture that is below the weight limit, but only if it can fit in the back seat of a four-door car.
In addition, the company will handle perishables, but discourages users from shipping them, as it cannot currently offer temperature controlled services.
However, the biggest hurdle for customers at the moment is location. Initially serving only San Francisco, Shyp has so far expanded to include Miami and New York, but as of yet, only offers its services in these cities.
Nonetheless, Shyp is exploring opportunities to grow both its service portfolio and geographic coverage. After seeing that around 15% of users were utilising the app for returns, the company began offering a dedicated returns service in March. However, the majority of the company’s funding will go towards geographical expansion; at the same time as KPCB’s investment was disclosed, Shyp announced the launch of a beta programme covering part of Los Angeles.
Shyp is still a small company, and remains in the early stages of its development. However, as the investment backing it has received shows, this is a company with vast potential. With its services currently confined to four cities, Shyp’s potential for expansion, assuming the continued strength of demand, seems high.