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Shyp, Which Wanted To Transform Shipping, Is Scaling Back To San Francisco

The company is leaving most of its markets and retooling its service to serve small businesses rather than consumers—tough decisions that it hopes will lead to profitability.

Shyp, Which Wanted To Transform Shipping, Is Scaling Back To San Francisco
[Photo: courtesy of Shyp]

“Magic” may be the tech industry’s most-abused term. But when I first used Shyp in 2015, the word felt just right. With a few taps on my iPhone, I snapped photos of items I wanted to ship and summoned a courier who arrived in no more than 20 minutes. Shyp whisked my stuff off to one of its facilities, fastidiously packed it in custom boxes, and sent it off via whatever major shipper provided the best value for the turnaround time I needed. All for a fee of $5, which it sometimes waived.

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In every possible way, it beat digging up my own packing materials, doing my own boxing, and schlepping to the post office. And unlike some on-demand services, Shyp worked flawlessly every time I needed it.

Magic is a wonderful experience, but whether it’s a sustainable business is another question. Today, the company is announcing a dramatic downsizing of its ambitions, at least for the time being. It’s ending service in Chicago, L.A., and New York, leaving only the San Francisco Bay Area, its home base and original market. It’s also laying off employees at its headquarters, though it won’t say how deep that cut is or how many employees will remain.

As you’d expect, Kevin Gibbon, Shyp’s cofounder and CEO, told me that the decision to make these changes was “very difficult.” But he added that “the great news is that we’ve found a customer that has a need for the product and service that we’re offering.” That would be small businesses, particularly online merchants who need help shipping out the products they sell.

Shyp isn’t cutting off consumers who want to ship out a box or two, but it’s no longer courting them. In fact, it’s leaning toward increasing the prices it charges for small-quantity shipping and may do away with its on-demand option (which already has a one-hour window instead of the original 20 minutes). Henceforth, it will focus on the needs of businesses who ship in volume on a regular basis rather than in sporadic onesie-twosie quantities and who prefer scheduled pickups to spur-of-the-moment ones.

Volume business is good for Shyp’s bottom line for reasons I don’t need to explain. Scheduled pickup times help because they allow the company to plan ahead rather than sending couriers out to cruise around neighborhoods in anticipation of on-demand requests that might or might not occur. And in general, business customers are attractive because they aren’t as fixated on the cost of a service like Shyp as consumers are.

By formally pivoting toward the needs of businesses—who care a little less about push-button simplicity, and more about advanced features and options—Shyp can serve them better, says Gibbon, who adds that if anything, he wishes the company had moved in this direction sooner. “We were trying to please too many customers and weren’t focusing on the profitable piece,” he explains.

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The Challenge Of “Uber For…”

In a way, Shyp’s retrenchment feels simultaneously hasty and long-considered. On one hand, it undoes an expansion launched just last month, when the company began beta-testing service in Philadelphia and expanded its coverage areas in L.A. and Chicago. But Shyp has been shifting away from its original proposition—on-demand pickup and packing for consumers at a remarkably low price—for well over a year. Anyone who’s used the service during that time has seen it put more emphasis on small-business customers, scheduled pickups, and a cost structure designed with profitability in mind. In just the first few months of 2016, for instance, it shuttered service in Miami, laid off 8% of its staff, and began charging for packaging services rather than rolling that amenity into the shipping fee. (You can also opt to do your own packing.)

Some of the challenges the company has faced are endemic to the on-demand economy. Even startups that have built impressive logistics platforms have struggled to grow to the point where efficiencies of scale turn into profitability; whole categories of services, such as meal-delivery startups that make their own meals and personal valet parkers, have already pretty much washed away.

With its network of couriers (some on bikes, others in cars or vans, and all employees rather than contractors) and warehouse-style facilities equipped with box-cutting machines, Shyp had substantial costs it needed to cover while it built out its footprint. During the era when venture capitalists were all too happy to distribute sacks of cash to startups that intended to be the “Uber of” various everyday tasks, it raised $50 million in funding from the likes of Kleiner Perkins. Now, Gibbon says, such funding does not flow anywhere near so freely. Hence Shyp’s abandonment of any immediate attempt to get bigger in favor of doing something more modest but closer to sustainability.

“Investors are looking to put capital into businessses that are cash-flow positive,” Gibbon says. “And we are very, very close, especially in San Francisco.” In January of 2016, when he was already retooling Shyp, he told me the hoped to reach profitibility by the end of that year; now he says that he expects the newly downsized business to get there before 2017 is out.

In its business-to-business incarnation, at the prices it now charges, Shyp isn’t quite the little miracle it once was. And the lofty tagline it gave itself—”the Global Standard in Shipping“—is out of whack with the reality of what it offers. But it’s still a useful service—and Gibbon is talking about new features he hopes to add, such as linking up with a service like UberRush or Postmates to enable same-day delivery.

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He also says that the plan is to get Shyp profitable so it can get more funding, and then begin expanding into other markets again. Here’s hoping. But for now, I will be relieved if the next story I write about this ambitious and inventive company isn’t an obituary.

About the author

Harry McCracken is the technology editor for Fast Company, based in San Francisco. In past lives, he was editor at large for Time magazine, founder and editor of Technologizer, and editor of PC World.

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