How E-Retailers Make Sure Gifts Come on Time

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Thus far in our "Powering the holidays" series, we've looked at companies providing the speed, data, monitoring and privacy protection that enable e-commerce businesses to thrive at the busiest time of the year.

Even if merchants somehow master all of that, none of it matters much if deliveries show up after Christmas. All of their hard work can be easily overshadowed by grumpy consumers, especially if the malcontents take to public forums to express their frustrations.

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For Poshmark—an online retailer that lets people shop from each other's closets—straightening out its shipping system ahead of this holiday season was doubly critical. Not only did the company need to ensure the timely arrival of packages, but it had to do so without going broke. Poshmark is among the rapidly growing marketplace retailers, meaning the company itself doesn't have merchandise, but instead facilitates transactions between buyers and sellers.

The company lets women turn their closets into storefronts, selling their denim pants, vintage dresses and leather heels to second-hand shoppers.

Manish Chandra, who started the Menlo Park, California-based company in 2011, knew he'd tapped into a market opportunity by looking at the sales trajectory in the first couple of years in business. The company grew 10-fold last year. 

Still, sending all that stuff was a massive headache. Any deliveries up to two pounds were covered in the $6.99 shipping fee that was charged to buyers, but for packages that weighed more, sellers would have to cover the added cost and deal with the added hassle.

So Chandra came up with a customized solution and got the United States Postal Service on board. It's called PoshPost and was introduced in March. 

Since 99 percent of the 1.5 million Poshmark packages shipped last year weighed less than five pounds, he worked with the postal service to get a flat rate of $4.99 for any package up to that weight, with all of it going through priority (2-3 day) mail, anywhere in the U.S.

"Anything that sellers ship, except in extreme cases, will be a no-brainer," Chandra said. PoshPost allowed Chandra to establish a predictable and profitable business model. "For smaller packages, we're overpaying. For larger packages, we're saving," he said.

The buyer pays the shipping fee along with the price of the item to Poshmark, which then remits payment to the seller, minus the 20 percent the company keeps of every transaction. That cost includes all payment processing and administrative fees. Any time a sale is made, Poshmark immediately emails a pre-paid label to the seller.

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For Evelyn Jimenez in Orange County, California, PoshPost has been a huge saver of time and money. The 30-year-old full-time student buys clothes in bulk at wholesale and sells them on Poshmark at retail prices.

"I can now bundle two pairs of shoes, and it will be less than five pounds, so I don't have to pay the difference," Jimenez said.

Plus, prior to the new service, she'd have to go to the post office for heavy items. "I'd have 10 boxes to ship and that takes a lot of time. People get mad sometimes when you're holding back the line." Now, she said, "I just leave it all outside and the postman picks it up the next day."

Chandra expects the holiday period to account for about one-third of Poshmark's business this year and projects that problem packages and returns will be way down, because shippers have much more flexibility and clarity.

Adapting to the changing landscape of e-commerce is critical to USPS, which has suffered losses in 21 of the past 23 quarters. Since 2007, when first-class mail revenue peaked, sales have dropped 27 percent as volume declined 32 percent, according to the postal service's 2013 annual report.

Part of righting the ship is making it easier and more efficient for companies to ship, and equally important is creating a more reliable delivery service. To that end, USPS is delivering seven days a week heading into the holidays in the 5,000 to 7,000 most densely populated zip codes, said Nagisa Manabe, chief marketing and sales officer at the postal service. In some areas, deliveries will be made twice a day.

"E-commerce is exploding, and so all of us are doing our best to upgrade our services so they meet the needs of today's customer," said Manabe, who's based in Washington, DC.

That includes improving its technology for postal workers, with more advanced handheld devices that notify senders of delivery, have location awareness with GPS and Wi-Fi and advanced scanning capabilities. The postal service has also upgraded its call center and is using new routing technology to better predict what neighborhoods will see holiday delivery surges.

Poshmark is big enough to work directly with the postal service, but many companies don't have the resources. Or they'd prefer just to outsource the tedious process. That's where EasyPost comes into play.

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Founded in 2012 and based in San Francisco, EasyPost's software lets e-commerce companies offload shipping. Apparel company Teespring and women's marketplace Vinted are among the hundreds of companies that have turned to EasyPost to quickly put in place a delivery system, whether they ship via USPS, FedEx, UPS, DHL or others. 

Electronically integrating with any one of those services can take months, but EasyPost founder and CEO Jarrett Streebin says his customers can be up and running in hours.

They upload their account information to EasyPost and then pay 5 cents per package (monthly subscriptions are also available), which includes the shipping label and all the logistics and tracking. At a time when consumers expect everything to be as quick and easy as, smaller players need all the help they can get.

"We allow them to automate almost all their shipping infrastructure," said Streebin, whose 12-person start-up has raised capital from investors including Google Ventures. "We help companies ship like Amazon."

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