Before Michael Krakaris co-founded an online fulfillment platform for eCommerce merchants, he learned firsthand how companies could reinvent messy spaces with software. One of his first jobs was working for a company that created an application programming interface (API) to help businesses send text messages to their customers.
That business solved a major pain point, he says, as companies used to have to make deals with the wireless carriers themselves to have that capability. After working for that firm, Krakaris went to an eCommerce company that built websites for brands. It had integrations with third-party logistics providers, and he began to have a logistics epiphany after he thought about the work he did with both firms.
Krakaris noted that warehouses are already capable of shipping items out fairly efficiently. “There’s no need to replace that existing infrastructure,” Deliverr Co-founder Michael Krakaris told PYMNTS.com in an interview, while noting that software in the space could be improved. As a result, he decided to create an Uber-like model for logistics that leverages existing carriers and warehouses to help online merchants fulfill orders. Krakaris saw a particular opportunity in serving marketplaces beyond Amazon through retailers like Walmart, eBay and Jet.
To use the platform, merchants connect their different sales channels and import their products. Then, Krakaris does some math on the backend to find out where merchants should send their products. If a merchant has 100 units of shampoo to sell, for instance, it will generate a demand graph based on where that item has been sold by the merchant or the other merchants. And, based on that information, the software could tell the merchant to send some of product to three or four different warehouses. (Krakaris noted that those locations are specific to the item, and every item has a demand graph.)
Merchants, in turn, will send items to the specified warehouses on their own or through the company’s discounted rate. After the products arrive at the different warehouses, the facilities update the merchant’s inventory for the item. The software then pushes that update to different marketplaces to show how many products are on hand. (It also pushes the badges that indicate free two-day shipping, for instance, on a marketplace website.) And, when a customer orders an item, it usually but not always ships from the warehouse closer to the buyer. The warehouse then, in turn, gives the item to the carrier and provides a tracking update. The carrier then delivers the item to the buyer.
The Business Model
The idea behind Deliverr’s platform is to focus on keeping the mileage per item low. By reducing the distance that an item travels from warehouse to buyer by shipping an item from the closest warehouse to a customer, Krakaris said, costs can be cut by using ground shipping methods. Krakaris said that a two-day shipping air method for an item could, for the most part, cost $20. But it might only cost $6 to ship an item through a ground shipping method. “And that’s a huge difference,” he said. That’s especially important as so many products that are bought online aren’t that expensive: they may sell for only $15 to $40, according to Krakaris.
Krakaris said that his company can “take pretty much anything” on its platform, but it does have some exceptions. The company will not take any hazmat items like a spray that might explode. He doesn’t handle logistics for batteries either, as government rules can be hard to navigate for that product. But he does handle a lot of health and beauty items such as shampoo and containers. Protein powders and makeup account for a huge space for the company, according to Krakaris, and the company also carries toys and games along with art supplies.
He seeks to serve the general big Amazon seller, working with the top merchants that might be pushing well over $10 million in revenue on Amazon looking to expand on Walmart, eBay or their own Shopify stores. He noted that some sellers may focus on one platform such as Walmart and eBay. (“They’re smaller, but they’re actually very agile,” Krakaris noted.) At the same time, he described them as almost like high-velocity traders that have a great understanding of search engine optimization (SEO) and pricing, among other aspects of their businesses, and they outsource their infrastructure.
Krakaris’s efforts come as Walmart announced in late October that it was working with its marketplace sellers to make millions of products available for free two-day shipping without the need for a membership fee. In a blog post, Scott Hilton, chief revenue officer for Walmart eCommerce U.S., said that in addition to expanding the number of items that will get free two-day shipping, it is simplifying the returns process for items purchased from marketplace sellers, including the ability to start the return process at any of Walmart’s 4,700 stores — showing that retailers, too, are seeking to improve the marketplace experience for buyers and sellers.