Shipbeat Post-Mortem
This is the post that I never wanted to write. The post-mortem for Shipbeat. The company Joachim and I started to disrupt an old industry. We wanted to change how e-commerce companies acquired and used logistic services.
Logistics is costly for online retailers. About 8–15% of the revenue goes to cover logistics cost. Secondly, logistics is key to the customer experience and key reason for shopping offline.
Yet the logistics industry (the largest industry in the world) remain as one of the most conservative, in-transparent and in-effective services from a customer viewpoint.
Shipbeat aimed at changing all of that by creating a platform to automate and acquire logistic services for online retailers. We made it possible for online retailers to save time and money on shipping by using our service. We solved a problem.
Still, in the end, we were unsuccessful.
Why Did We Not Succeed?
Truthfully there is always more than one reason for succeeding and equally so not succeeding. Here follow some of the most important things.
We Could Not Build a Logistics Setup
A great thing about our value proposition was that customers loved saving money on shipping (obvious, it was a key reason for starting Shipbeat). So beyond great software, we needed to provide competitive shipping rates on which we could make a margin.
Building the software required hard work. A lot of it, but still doable. Achieving competitive rates from the carriers, though — that was a key problem we could not solve.
We expected resistance from the carriers, but it took us more than a year to get a shipping agreement with PostNord (largest carrier in DK). Even then and throughout the lifetime of Shipbeat, PostNord tried to prevent Shipbeat from re-selling their services. This was unexpected as PostNord paradoxically is required by law (Postloven) to sell some of their key services (befordringspligtige services) to anyone. Working with GLS was easy — only our customers mainly demanded PostNord which is the dominant player.
The effect? It took Shipbeat way too long to come to market with the full value proposition and we could only competitively serve very small customers. The economics made it difficult to build necessary volume as each single customer contributed only little in terms of volume.
Our plan was to build internally a broker/marketplace business for logistics. That required hiring entrepreneurial minded people with logistics experience and network to build relations at C-level with the carriers. That proved impossible for us to find at our stage.
Scalability of the Model
A couple of things make the Shipbeat service and model challenging to scale
Every new geographic market requires integrating a new set of carriers
Shipbeat existed largely because not a single carrier can fulfill customer needs and preferences globally and even global carriers (like DHL) require new integrations when moving into new markets. Thus in order to have a competitive offering in a new market you need to offer the most important carriers.
You start with almost zero volume in every new market
Obviously, if you have already built volume in one market it is far more likely you can do it again in a new market. However having massive volume in tiny Denmark do not exactly make you strategically important for large German carriers
Logistics is a Logistical-Nightmare
Onboarding customers when signed proved very time consuming. Making changes (even minor) to a business critical process in your operations happens with caution. It is far more than a simple software update done by a tech team. In many cases, it requires changes for the carrier (manual change of account setup etc), the customer (tech, warehouse, customer service) and maybe even an external warehouse (3rd party logistics).
Our Best Option
Our best option was to get a shipping broker or similar on board as investor or acquirer. One who could provide a competitive logistics setup that we could power up with the Shipbeat software. That could have led to leap frogging the competition and ultimately deliver on our value proposition widely.
Our Last Decision
After a good process with meaningful dialogues, but with no deal reasonably insight we (founders, board, and investors) could not justify taking more money into the company. Thus we notified Markedsmodningsfonden (whom we had continued funding from as a grant) that the project could not be completed as planned and we declared the company bankrupt on our own accord.
Final words
Time is the most valuable asset we have as humans. The fact that our team has chosen to spend some of it working with us has been one of the biggest privileges, we have ever experienced. We are thankful for the trust that investors, team, and customers have shown us. A lot of people have contributed to our journey, but a special thanks go to our team members; Minda, Martin, Kristian, Klaus, Theo and Ulrike and our investors; Max Niederhofer, Peter Egehoved, and Klaus Nyengaard. As well as our families for the tremendous support.
Closing down a company also means personally accepting that we, this time around, sadly missed out on creating what we all worked for.
We didn’t succeed, but we have not failed either. However paraphrasing Thomas Edison we found 10.000 ways that won’t work.
Kenneth
CEO & Co-founder
