How This Startup Succeeded by Ignoring Its Most Important Customers
Kevin Gibbon had a serious side hustle in college: eBay Powerseller.
“I’d buy products and sell them for profit -- jewelry, clothing, sports equipment,” he says. But as business took off, he was stuck fulfilling orders in his parents’ garage for hours. “Nearly 50 percent of my time was spent packaging and shipping. Remove that and I would have been a lot more successful.”
Nine years later, in 2013, Gibbon created Shyp, an on-demand service that picks up, packs and mails anything on a customer’s behalf. No more post offices, ever. From his own experience, he knew this could be a transformative resource for small-business owners. In fact, he expected businesspeople to make up the bulk of his customers. But when he launched Shyp, he did something that seems counterintuitive: He ignored that audience entirely. Instead, in both the way he built and marketed Shyp, he targeted consumers --just regular, everyday people mailing stuff.
Why? Because sometimes, the perfect customer for tomorrow isn’t the right customer for today.
“Starting with consumers not only allowed us to build a lot of operational systems but also gave people a chance to check out that early product,” he says. Consider it: Shyp began as a small company working with little volume. It couldn’t immediately handle 500 packages from a business, it needed to start with Aunt Sue in Ohio mailing presents to her niece in Michigan. Also, because Shyp wasn’t big enough to negotiate low rates with mail carriers, its costs weren’t yet competitive -- meaning small businesses likely wouldn’t be impressed anyway. But consumers who wanted to save time on one-off shipments? They’d pay more.
“Turn that one-hour task into minutes, and people will tell their friends about it,” Gibbon predicted. He was right. Word of mouth drove steady 10 to 30 percent month-over-month growth for the first two years. That helped him strengthen all the parts of his business at a reasonable pace -- learning how to handle more and more shipments and work with bulk orders of materials, and continually lowering the cost, all while not burning through cash.
Eventually, Gibbon noticed an increase in users who sent 20-plus packages at a time -- a sign that these weren’t just birthday gifts. They were businesses, jumping in before Shyp was ready for them. “Our product was accessible only via mobile,” he says. “Typing in even 10 addresses on your phone? That probably took 20 minutes.” So he started talking to this new wave of users, and in 2015, as consumer growth started to level off, Gibbon decided it was time to make the long-awaited shift. “We knew exactly what we needed to build, because the business customers had already told us exactly what they needed.”
Shyp built a web-based platform that would integrate with ecommerce services such as Shopify. And thanks to the lessons learned serving consumers, its team now knew how to simplify pickups to get couriers in and out in minutes. Damage rates were down to .17 percent, well below the industry average of 1 to 2 percent. And because Shyp had the time to build relationships with national and regional carriers, it could offer fast, cheap shipping rates. “We could help our customers compete with the Amazons of the world,” Gibbon says.
When the new platform launched at the end of 2016, response was swift. “Nearly 60 percent of our shipments are now from business owners, and by the end of the year, businesses will account for 90 percent of our volume,” Gibbon says, adding that revenue is on track to triple in 2017.
Finally, he was ready to serve the customer he wanted all along.