The future of DTC shipping | #217 Izzy Rosenzweig

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Claus Lauter: Hello and welcome to another episode of the e commerce coffee break podcast. Today we want to talk about the future of DTC shipping.

So we have talked about shipping and other episodes, but we never really talked about on how to get products from Southeast Asia, specifically from China to your customer. So that's a complete different issue. There's something that a lot of dropshippers know about, and we want to dive a little bit deeper into that.

And I have an expert on the podcast today. It's easy Rosenzweig. He is a veteran in the DTC industry for over 10 years. He gained recognition by launching his own first TTC company, Browse in 2012. Browse specialized in home and kitchen products successfully delivered over 2. 5 million, million packages worldwide.

After opening his own China based fulfillment center to improve customer experience, Izzy recognized an opportunity to assist other DTC brands with direct shipping to their customers. And that's, we want to dive right into it. Hi Izzy, how are you today? 

Izzy Rosenzweig: Doing great. How are you? I'm very well. 

Claus Lauter: Shipping from China comes with its own challenges and you know very well about that.

 Tell me about the hurdles, the problems that a lot of merchants face there. 

Izzy Rosenzweig: Yeah, great. And you already covered such interesting points, which is drop shippers know about this model. And very often Some of the drop shippers will use products that aren't great quality and companies like either it's wish.

com or sheen. com. These are brands that also built on this model, and many people don't like their quality as well, but what people don't realize is that the quality of the product, it really is up to the brand. And some of the best brands in the United States and UK, Europe, all over the world, they are manufactured in China.

So the quality control is really up to the brand itself, but the logistics is where the magic is. So you could ship, use this model for a great quality brand that you're already doing distribution in the States for. And it doesn't need to have the bad name that let's say some other brands have given to it.

So if you have a great quality brand. The ability to ship from China from Shenzhen to us early and in the world has gotten incredibly efficient and it's not complex, where it used to be like, oh, how do I start? Where do I start? It's actually really simple. And from a customer experience perspective, which is also relatively new of the last two years, you're looking at the same experience they're getting today.

So we'll have, let's say a six business day delivery to the US. USPS tracking numbers, the consumer will get a package delivered by USPS. All not like all English packaging, English label, nothing that makes it seem like it came from overseas. It looks like it's coming from, Los Angeles or New Jersey or Chicago.

And so if a consumer within 24 hours of the order, we'll get a USPS tracking number delivered within six business days, same experience, but from the brand side, they can use this model to massively increase their cashflow. And that's where we've come in again, like you said, we started as a merchant but now we really focus on helping other Companies leverage this model after a company portless, which is what we're focused on right now 

Claus Lauter: at portless.

Obviously, you found a solution to that, but maybe let's dive into sort of the classical structure. A lot of companies are still using containers and they shipped it over. Tell, talk me through the process of and the downsides of having a container shipped. Yeah, 

Izzy Rosenzweig: Great question. Your typical DTC business would let's say they sell t shirts.

Let's say they'll buy 10, 000 t shirts because they need enough inventory for the next three months. And let's say it's summer inventory. So they'll lay out the money, the 10, 000 t shirts, they'll put it in a container. It could be 45 to 60 days before it lands in the states. And then they put into local 3PL and only then could they start turning that inventory to cash.

So there's actually quite a long time of where your money is stuck in the water and you can't do any sales. You have no choice. And what happens is you very often will take a risk on some new products, but, and you got to pay minimum inventory or else you're not going to sell anything.

And very often that doesn't do well. And you have to do liquidation of those products at a loss. And then you have another segment of products that do really well. Well, it's already mid July. You're not going to capture the summer. You got to wait 60, 90 days. You got to wait till next summer. And that's your typical DTC seller in the model of our model is we're right next to the factories.

You don't need to wait till you're done manufacturing 10, 000 units. Every thousand units you can send it locally. It's very cheap to move product within China. We do free inbounding, we'll just inbound it. Scan it. We're connected to Shopify through an app. So a five minute integration, you all of a sudden have a location called portless and all of a sudden you have your inventory two days post production.

And then you're moving that inventory into cash immediately. And your customer is getting it 6 days later. So instead of waiting 2 months just to start selling, you're selling 2 days after the factory is done. And the customer gets that same experience. And then if a product is starting to sell really well, well great, go back to your factory, probably 7 days or 10 days later, you could sell it again.

You could capture demand in the season. That's from our perspective, is absolutely game changing. Because historically, if you think of DTCs, the more successful they are, the less cash they have. But in this model, because they got to put more money into the boats and more money into inventory and this model, you're constantly moving your inventory to cash.

So you could constantly use that money either for branding partnerships, hiring people locally to build a business versus dead money on the water. And that, to me, is an absolute game changer. And another thing that a lot of our customers start doing historically, if you want to sell into, let's say, Canada.

You got to move a container to Canada. It's annoying, it's complex. In this model, you have one inventory place, you're selling to the US, just open up markets in Canada in Shopify, and we'll put a Canada Post tracking number on it. And a customer feels like it came from a Toronto 3PL, United Kingdom, same story, Royal Mail, Australia, Australia Post.

So we could give all those markets a local experience. Without risking inventory in all these different countries, one location, one hub, constantly lower risk and inventory. You're constantly restocking and you're shipping with really competitive rates across the board. 

Claus Lauter: Okay, now, interesting that you mentioned a lot of dropships are cash flow businesses, so they're always very short on money when it comes there, but also when it comes to the administration.

With dropshippers, always a problem when they have Chinese, suppliers, they cannot really communicate with them. How does the communication work from your side was in locally, let's say in Shenzhen with the local service providers? 

Izzy Rosenzweig: Great question. What we tried to do is give the most American experience that you would experience if your fulfillment center was based in LA or New Jersey.

So you would basically join a Slack group. In that Slack group inside that group is your account manager that speaks English perfectly and people on the ground in our performance center that speaking is perfectly. She's like, Hey, I need to make sure this one has a slip of paper thinking out some CEO.

We can help you do that. Please change unit number from 237 to 122. That's all done in a very English first. run business that we just happen to be in Shenzhen. So we're really very similar to local three pill provider, but we'll just skip the vote for you or less. And we'll go airmail right to your end customer.

Claus Lauter: You mentioned packaging. What's about branding? If you want to have your branded packaging, how does 

Izzy Rosenzweig: that work? We can help you with that as well. So we are, we have relationships, some of the biggest custom manufacturers for packaging, anything from a little logo to fancy design, all you need is a design file.

So if you have like, Oh, I love it, this design, we get very competitive rates in the custom packaging. Most probably much cheaper than you're paying locally in the U S. So anything from envelopes to beautiful design, to simple logos, to eco friendly packaging, we could do all of that and arrange it for you.

Claus Lauter: Are there any specific industries or verticals where your concept works best? 

Izzy Rosenzweig: Great question. So this model works really well for lighter products. So think of like apparel, think of accessories, think of a jewelry, cosmetics. Small electronics, that stuff work amazing. So you'll not only will get great cashflow, but you also get very competitive shipping rates, either similar or sometimes even cheaper than what you're paying currently as it gets heavier and no longer makes sense for us.

So if you're thinking like, think about five, 10, 15 pounds, or the volumetric rate is so big. That already starts getting less competitive for us. We do have companies that sell larger products that still use us because all they care is about cashflow. So they're actually maybe not saving any money on the shipping side, but let's say it's a break even by the time it lands for star shipping prices.

 But for them, it's like cashflow is king. We'll pay you same or even a little more just so we could constantly be agile in our inventory and send inventory once a week and constantly restock and turn that inventory to cash. 

Claus Lauter: Shipping for some smarter merchants is also an income stream. So obviously they need to know how much the shipping actually is.

 Give an example for a smaller item. What's , the pricing that they can 

Izzy Rosenzweig: expect? Yeah. For the U S under 5, you're looking at like 4 and 85 cents. The UK it's closer to 4 and 15 cents, Germany, Spain. All those regions really cost effective. It gets a little more expensive for Canada. So Canada, you may be looking closer to 6, Australia as well, closer to 6.

, but all within that range, starting point at let's say quarter pound, half a pound within that range. Once it gets heavier, that's more expensive. But if you're in the lighter game, you should be able to crush it. Okay. 

Claus Lauter: That sounds cheaper than, USP or USPS in, in the US for 

Izzy Rosenzweig: delivery, depending on your contract size.

But in many cases it is. Yeah. 

Claus Lauter: Let's talk a little bit more in, into the cashflow business. , once you have, when you said you have a Shopify app, , how does that link into this whole, , Shopify ordering process? Yeah. 

Izzy Rosenzweig: Great question. So essentially we have a Shopify app that you download. And what it does is we'll map the products you want to work with us.

So let's just say, Hey, I have 50 skis. I want to test you out. I want to test these two products. No problem. We download the app, we connect it to our system, and then you will map exactly which two products you want to send to us. You map the products, you'll send us some inventory. Maybe it's 50 pieces.

Maybe it's 100 pieces. We get it usually within a few days. We scan it your inventory, but we show up as a location. So Shopify by default has multi location all the stores now. your default location is your current location. Our app adds a location. So now those two products have two locations.

You have your current location and our location. Our location will show our inventory. And then in the beginning, what happens very often, like they want to, people want to test us, they'll manually change location for a couple orders and we'll do fulfillment for them. Like, oh wow, 24 hours later, I got a USPS tracking number delivered within six days.

 And then you start building automation. You're saying, okay any order to the state of New York, gift to them. And you start. Doing that business for them and eventually happens is we had to take him the whole U. S. But it's up to the customer. It could be logic. Only send them 4 units or more only send them if the is under certain amounts.

So we could that has business logic to do it, but fundamentally, it's a 5 minute phone call. We have the app integrated. You map the products. And then he built business logic. 

Claus Lauter: So if I understand that correctly, you can have products that are sourced locally from the U S and then some products are sourced from China.

And you basically just assigned your service to the product and then where it should go 

Izzy Rosenzweig: to. Exactly. So we wouldn't do your S source products, but we could do your China source products. So let's say if there's an order that comes in, has one U S product and one China product. So it's up to the brand either.

It could do split shipment. That gets split into two fulfillment requests. We do one side and you could do the other side. Or we have a business rule all or nothing. So if you have want some inventory to fulfill along with your U. S. based inventory, that's easy as well. Really up to the brand and what makes sense for them.

Claus Lauter: Okay. Tell me a bit about your pricing. How do you charge for 

Izzy Rosenzweig: the order? So we essentially have three pricing points. The first thing is the shipping rate. All you got to look at is the pricing tier. How heavy is your product? You look at the chart, how much you're going to pay for a certain weight tier.

And by country, we offer service to a lot of countries. Then it's uh, pick and pack. So we charge $1 for pick and pack. That includes up to three units for every additional unit you need above that is 25 cents. So if it's four units, it's a dollar 25. If it's three units, it's just a dollar. And then for warehousing, what we really encourage customers to think of, think of your inventory, very different than used to.

Instead of buying three months, maybe just buy four weeks. And the way we encourage that is, As long as we're moving your product within 30 days, you'll have zero warehousing fees, won't charge you anything. If you need a warehouse beyond 30 days, then it's 61 cents per cubic square foot, which is pretty standard for 3PLs in the States.

But we encourage you, like, don't pay us warehousing. Think of less, think of your inventory more agile, and we'll just ship it all day for you. But that's the three price points you got to think about. 

Claus Lauter: Okay. That seems very straightforward. Are there any specific homework that a merchant has to do before they get started?

Izzy Rosenzweig: No, we encourage crawl, walk, run. So very often we'll book a meeting with a customer, we'll walk through the prices, we'll explain the model to them. And then what we'll do is like, Hey, send us your address. Let's, we're going to send you five packages of t shirts or notebooks from Port West. They get the experience.

Wow. That was amazing. We send them a service agreement, non committal. It's only like you pay us if you use us type of service agreement. And then very often we'll map a couple SKUs. They'll send a few X amount of inventory to our fulfillment center in Shenzhen. Then they start sending us test orders and we usually just go from there.

Claus Lauter: Okay, sounds very easy. Is there anything we haven't covered that you want to say before we come to the end of the coffee break today? 

Izzy Rosenzweig: No, I think those are the key areas. So I think for the way I like ending it is explaining for DTC businesses. Containers were built for physical retail. If you have a physical retail store, yes, you need containers.

If you're Walmart, you need containers. But if you're in e commerce, it makes no sense to put something on a boat for 60 days to then just again ship it to your customer. Nowadays, cross border logistics is so efficient. It's been around for 10 years. The last two years, you're talking six days to the US, five days to the UK, similar timeframe.

So most Western Europe, Australia, Canada it doesn't make sense. If you're going to want to try to compete with the Amazons, the Walmart's the world. You've got to play a different game. They can't do this. They have physical retail. Amazon needs to do CMD delivery. But DTC, where you offer your customers, let's say five to seven days, you could absolutely crush your cash flow, run a very effective cash flow business, improve your margins, and go global with one inventory hub.

So if you're in DTC, you shouldn't be using boats. We would encourage you to go portless. 

Claus Lauter: I would highly recommend this specifically. And a lot of merchants have made the experience with specifically with Amazon, that they try to force you into fulfilled by Amazon warehouses. And then you're exactly in the situation that you need to deliver for whatever.

And as you said before, then you end up with stuff that hasn't been sold or you're running out of stock and all of that. And with your solution was portless. Basically you can offer a service that runs all the time. Where can people find out more about you? So 

Izzy Rosenzweig: you can find me on LinkedIn at Izzy Rosenzweig.

You go to portless. com, read about us. You can submit a form for us to meet you on Twitter, Izzy Rosenzweig as well. So portless. com, LinkedIn, Izzy Rosenzweig, or Twitter, Izzy Rosenzweig. Those are my three main places I like to hang out. Excellent. 

Claus Lauter: I will put the links in the show notes as always. Then you just want to click away.

Izzy, thanks so much for your time today. I think it's a very good concept and I must admit, I have used a similar company in the past with my own store, and that's the way to 

Izzy Rosenzweig: go. I appreciate it, Klaus. Great talking to you. Thanks so much. Great.