Shyp carves out a legitimately new space in a crowded shipping industry. But to last, it may have to remain a little fish.
Anticipating the holiday package rush, last month USPS slashed its parcel rates up to 58 percent, causing tremendous uproar from competitors. FedEx and UPS filed comments with the Postal Regulatory Commission decrying the price drops, calling them "aggressive" and a "red flag" in light of the Postal Service's financial woes.
Yet shipping consumers will benefit, and especially e-commerce—not just Amazon, but individual sellers from platforms like Etsy, eBay or Rakuten. The rise of e-commerce has piqued competition among delivery companies, who vie to offer not just the best rates but also perks: Traceable packages, Saturday delivery, door pickup, and more.
It's a crowded market in parcel-world. But there's one area that's never gotten a good look: The first mile, or how an item gets from the sender onto the delivery truck. Until now, with the arrival of Shyp.
Shyp's model: Snap a photo of the item you want to send, and a Shyp "Hero" (courier in a sky-blue hoodie) will be at your doorstep within 20 minutes. She'll slip your peanut brittle/skate helmet/vintage turntable into an appropriately sized satchel with a QR code, and hand that off to a so-called "satellite van" circulating the neighborhood. After a few more pickups, the van will trek to a Shyp warehouse, where a "packing expert" will swaddle up your valuable in the necessary materials, flip it onto a pallet, and wave goodbye as it boards a wholesale shipping van.
The cost: $5, plus whatever you'd pay retail for the cost of shipping. Shyp's profits are in the difference between that rate and the wholesale prices they pay to companies like USPS, UPS, and FedEx to collect several hundred packages rather than just a few. "It often ends up cheaper for a customer to ship with us rather than go out and do it themselves," Kevin Gibbon, CEO of Shyp, told me over the phone. "Which is pretty crazy. The feedback has been very, very positive."
In fact, it's been magic. You'll see that word thrown around quite a lot in appraisals of Shyp, which launched in San Francisco last March, and just expanded to New York City this past week:
Dear @shyp you are magic. I'll always have to live in a city where you operate.— JoyceSolano (@JoyceSolano) September 21, 2014
Besides cost, convenience is obviously part of the enchantment: No schlep to a retailer, no lines, no "we're out of flat-rate boxes." But it's also Shyp's model that makes it special. It's not just another Postmates, whose surprising success Eric Jaffe details here today. No, Shyp carves out truly new space within the sharing economy and the shipping industry, using wisdom from both schools of thought.
For example, unlike Uber or AirBnB, whose viability depends on cracking apart existing industries and expensive regulations, Shyp isn't actually trying to "disrupt" USPS, FedEx, or UPS, despite what their job descriptions may say. "We don’t see shipping companies as competitors, but as partners," says Gibbon. "We’re increasing the market." The easier it is to pack up a box and send it, Shyp figures, the more people will want to do it, and the more wholesale business the big shipping companies will have.
At the same time, Shyp is also drawing on the thing all sharing-economy services use to multiply sales: Trust. After all, customers are putting valuables—sans wrapping, sans box—into the hands of utter strangers, much as they put themselves when they step into shared cars or rentals.
But Shyp is leveraging this trust factor in a doubly shrewd way: For most consumers, the big players in the parcel industry don't summon up great feelings of confidence and accountability. If something you've shipped USPS breaks or disappears, for example, it can be virtually impossible to figure out what happened, let alone get your money back. FedEx and UPS do better in customer satisfaction than USPS, but both suffered drops in that index due to last year's delayed Christmas deliveries.
With Shyp, you don't just get the tangible counts of confidence attached to your item, like a traceable QR code and automatic $1K insurance guarantee. You also get a face and name in your Hero, whose job it is to project accountability and trust. "We don't just run background checks on people and send them out to work," says Joan Touchstone, Director of Communications at Shyp*. "We interview them to make sure they're the right kind of person to have in the system: Customer-centric, savvy, and with a lot of attention to detail."
But will Shyp succeed? Well, most start-ups don't. Plus, as the old courier services of the '90s learned, it's expensive to build and maintain warehouses. And Shyp employs not only Heroes, but customer and coordination support staff to ensure snag-free pickups, all of whom are costly. Gibbon wouldn't disclose whether the company was profiting or not; what is known is that the company raised a hefty $10 million* in venture capital, and plans to expand to Miami in time for Art Basel.
What will really count for Shyp's survival is whether it can expand its services the way Uber is preparing to. "Uber's not a threat to the taxi industry—it's a threat to Amazon, because they're horning in on delivery services," says Michael Munger, professor of economics and political science at Duke University and a respected source on the sharing economy. "So the question for Shyp is, do they have software good enough to let them offer things beyond shipping, and do them just as fast? It's going to be very difficult to succeed unless they can do that."
And given how narrow Shyp's approach seems to be—and how expensive their overhead—that seems unlikely.
But perhaps where Shyp could sail into the arms of FedEx. In that crowded parcel marketplace, it would be a brilliant add-on for a big delivery company looking for ways to add customer perks, and which already has an existing infrastructure of trucks, routes, and warehouses. Why FedEx? Well, USPS is tightly limited in the services it can offer by the Postal Regulatory Commission; UPS is strongly unionized, with a company culture markedly different from Shyp's courier-hero aura. Ditto with DHL. Outranked in customer service for the first year ever by UPS, FedEx seems it would have the most to gain. "They wouldn't just be getting Shyp's software," says Munger. "They'd be getting the existing network of trusted faces."
Of course, Shyp turning into an acquisition doesn't feel especially sexy or, ahem, heroic. But as doubts over the viability of the sharing economy grow louder, it might be one way to make the "magic" last.
*This figure was originally reported as $9.2 million. Touchstone is Director of Communications at Shyp, not Lyft.
Special thanks to Kevin Kosar, senior fellow at the R Street Institute, for his insight into the Postal Service.