ShipBob raises $4 million to help small retailers ship goods like Amazon Prime

Small businesses that sell physical goods online are struggling to delight customers and fulfill orders in an era where Amazon Prime sets an expectation for affordable, same- or next-day delivery.

While the largest e-commerce players can leverage economies of scale to give their customers affordable rapid delivery options, small businesses are stuck with standard rates at USPS, FedEx and UPS. And most can’t afford to hire full-time packers, or operate warehouses of their own. So just getting goods out the door can prove a challenge.

A Chicago-based startup called ShipBob has raised $4 million in Series A funding to help small businesses and sole proprietors with an outsourced packaging and shipping service. Hyde Park Venture Partners led the round.

According to ShipBob co-founder Divey Gulati, whether they sell on eBay, or Etsy, or run their own e-commerce stores built with tools like Shopify, Bitcommerce or Woocommerce, small businesses can sign up for ShipBob, have the company store inventory for them, then when it’s ordered, pack and ship it to customers at the best possible rates.

Typically, a successful ecommerce business can save 20-25% in overhead by using ShipBob, Gulati claimed.

Customers pay ShipBob a small subscription fee for its service, and the cost of discounted postage.

ShipBob provides packaging design help, and sources packaging materials for customers. In some markets, ShipBob can pick up inventory from a store or other small business.

Hyde Park Venture Partners’ founder Ira Weiss said he expects ShipBob to use the new funding for hiring and to build warehouses in at least 5 new U.S. cities over the next year.

In addition to working with traditional stores and e-commerce sellers, Gulati said ShipBob has become a hit with people who ran crowdfunding campaigns on platforms like Kickstarter or Indiegogo, and need to fulfill orders that their backers are eagerly awaiting.

According to IBIS World estimates, order fulfillment services generate about $9 billion in revenue each year in the U.S. alone. ShipBob’s competitors range from large public companies like Ryder Systems Inc., to privately held startups like ShipStation, FulfillRite and Shipwire.

Weiss believes ShipBob is poised for growth no matter what happens in retail, broadly.

“E-commerce sales currently represent only 8% of total retail sales, but is growing at 15% a year, while brick and mortar retail sales growth is limping along…The company is projecting 500% growth with this round of funding and we believe those are realistic estimates.”