Many companies rely on international freight shipping by ocean to receive wholesale orders from abroad, but the process is surprisingly complicated and expensive. Shipstr, which is launching on the Disrupt SF stage, wants to make the process easier, cheaper, and more transparent by becoming the “Expedia of cargo shipping.”
Shipping goods from one country to another involves numerous service providers, including container ships, warehouses, customs brokers, and trucking firms, founder Max Lock explains. Most companies, especially small- to medium-sized ones, rely on freight brokers to handle arrangements.
But having a middlemen creates many unknowns. For example, a company doesn’t know if their goods are being handled by the cheapest and most reliable service providers, and it’s also difficult to track shipments en route.
“Any industry that delivers poor service for high prices deserves to be disrupted and that is why I created Shipstr,” said Lock.
Lock is 18 and just graduated high school, but became an entrepreneur at 14 and has founded four businesses. One was an ice cream company called Schoolboy Ice Cream, which got picked up by Whole Foods and KeHE, a nationwide distributor of natural, organic, and specialty foods. Eventually, the business grew large enough that Lock began importing packaging direct from manufacturers in China—which led to yet another business opportunity.[gallery ids="1053545,1053546,1053547,1053548,1053549,1053550,1053551,1053552,1053553"]
At that time, one of his friends was opening a frozen yogurt store and asked Lock to order cups for him, too. Word began to spread through the frozen yogurt industry and eventually Lock started selling more cups than ice cream. As a result, he decided to focus on importing food packaging. So far, Lock has sold tens of thousands of cups to over 500 frozen yogurt stores.
Launching an import company made Lock realize that “international shipping is a complete nightmare” that can significantly impact a SMB’s bottom line. Most companies currently have to go through a freight broker, but they can add a high markup to the prices of third-party service providers. Shipments that come from China to the U.S. might have as many as seven different parties involved, so costs can add up quickly.
Furthermore, status updates on shipments are also difficult to get because businesses can’t communicate with third-party service providers. Since a freight broker might have many clients to deal with, it can take a long time to communicate with each shipping company and transfer documents.
Lock created Shipstr to make it easy for SMBs who don’t have a dedicated logistics company to handle their own international cargo. Shipstr’s first target market will be SMBs importing goods from Ningbo, China, to Los Angeles. In the U.S., currently more than 39,000 SMBs import goods from Ningbo, with over 19,000 of them using the Ningbo to L.A. route. Then it plans to expand to other ports in China and the U.S. and eventually cover the top 50 ports worldwide.
Shipstr works by aggregating information from different service providers onto one platform. The startup goes directly to third-party services, including trucking companies, customs brokers, warehouses, and ocean carriers, and gets information on their pricing and fees. This allows businesses to make their own shipping arrangements without the aid of a freight broker, get instant price quotes, and track their shipments more quickly.
For companies in the U.S., Shipstr is able to rely on APIs for information. In China, many companies don’t have standardized APIs, but they do store pricing information in the form of Excel spreadsheets. Shipstr allows those companies to upload their spreadsheets directly to its platform.[gallery ids="1056132,1056131,1056130,1056129,1056128,1056127"]
Shipstr also has “teamrooms” that allow businesses to communicate directly with service providers, see which one has their freight, and collect shipping documents, as well as a news aggregator that notes things like storms and port strikes that might affect the speed of a shipment.
Lock claims that Shipstr can save customers 30 percent to 60 percent over conventional pricing. Service providers, in turn, benefit because Shipstr brings them a larger stream of customers. The site also ensures that they get paid by taking payment from customers first and then transferring it to service providers after they complete their leg of the shipment.
While Shipstr serves as an alternative to the 17,000 freight brokers and freight forwarders currently in the U.S., Lock says that those businesses can also benefit from the site because it will improve their margins by making it easier to communicate with customers.[gallery ids="1052067,1052068,1052069,1052070"]
Q: What are types of business are you targeting for your initial launch?
A: We are targeting tens of thousands of SMBs that import textiles and electronics from factories around Ningbo. There are over 40,000 companies that use that lane in the U.S. and we know all the importers because their contact information is in customs data and publicly available.
Q: Where do you get data about the quality of shipping companies?
A: Based on customs data, we can tell when it left the port in China and see when it entered the port in the U.S. Then we pull a company’s shipping estimates and see if they made it.
Q: Is there anything you will optimize around customs because it seems like that is a very complicated piece of shipping internationally.
A: Yes, now you have freedom to select customs brokers who are more reliable and experienced in the industry, whereas before you were assigned one by your freight broker.
Q: Can you tell me about the SMBs that would be struggling without this? And then will you help larger companies as well?
A: Yes, this tech will scale to different size companies. The reason we didn’t target larger companies at first is because many have in-house logistics or contract with shipping companies, but there are so many companies that are underserved.
Q: If there is a problem or delay in my shipment, do I have to follow up with the individual service provider?
A: Yes, you can contact them directly instead of through a freight broker so that expedites the process. There will be problems sometimes so we will have a resolution team to address that.