EP.156/ KASE
Navigating E-Commerce Logistics: Insights on 3PLs, Carrier Changes, Section 321 Updates, and Tariffs & Duties in North America with Jesse Kaufman
On Retention Chronicles this week, Mariah Parsons spoke with Jesse Kaufman, CEO of Shipping Tree (now Kase), a third-party logistics (3PL) company for ecommerce brands. Kaufman discussed his experience growing Shipping Tree from its founding to managing thousands of orders daily. He highlighted the importance of diversifying shipping carriers due to recent changes at USPS that impacted DHL eCom, and the effects of Section 321 rule changes on import duties. Kaufman also addressed the psychological challenges brands may face when transitioning to a 3PL provider, emphasizing the need for trust and proper onboarding.
EP. 156
JESSE KAUFMAN
Episode Timestamps:
0:04 Introduction to Retention Chronicles and Malomo
Mariah Parsons introduces the podcast, Retention Chronicles, focusing on customer retention strategies for e-commerce marketers.
She highlights the importance of post-purchase experience, noting that 84% of shoppers won't return if they have a bad shipping experience.
Mariah explains how Malomo helps brands turn transactional shipping emails and SMS into powerful marketing tools by adding cross-selling, educational content, and social media links to branded order tracking pages.
She encourages listeners to visit go.malomo.com to learn more about leveraging order notifications as a marketing channel.
2:57 Jesse Kaufman's Background and Shipping Tree's Journey
Mariah Parsons introduces Jesse Kaufman, Founder and CEO of Shipping Tree, a 3PL with four locations nationwide.
Jesse shares his journey of starting Shipping Tree eight years ago, initially looking for a 3PL but finding none that met his needs.
He describes the early days of Shipping Tree, starting with borrowed warehouse space and fulfilling orders himself.
Jesse explains how he transitioned from representing streetwear brands in Montreal to building a 3PL, with many of his initial clients becoming Shipping Tree's first customers.
5:25 Challenges and Evolution of Shipping Tree
Jesse discusses the growth of Shipping Tree, from a small operation to fulfilling thousands of orders daily.
He highlights the challenges faced in the early days, such as managing inventory and fulfillment without dedicated technology.
Jesse emphasizes the importance of having a technological bridge between merchants and 3PLs, which was lacking in the early days.
He shares insights into the evolution of 3PLs and the varying quality of apps used by different 3PLs.
6:04 Transitioning to a 3PL and Overcoming Psychological Barriers
Mariah and Jesse discuss the psychological challenges brands face when transitioning to a 3PL, such as trusting a third party with their inventory.
Jesse explains how Shipping Tree helps brands overcome these challenges by providing peace of mind and ensuring proper QA processes.
They discuss the importance of founders evaluating 3PLs based on their systems and the level of care they show for brands and products.
Jesse mentions the role of references and third-party validation in helping founders make informed decisions about choosing a 3PL.
6:19 Minimum Order Volumes and Finding the Right 3PL
Mariah and Jesse discuss the minimum order volumes required by Shipping Tree, typically starting at 2000 orders per month.
Jesse advises founders to look for 3PLs that fit their needs, whether they are small, mom-and-pop operations or larger, more established 3PLs.
He highlights the importance of finding a 3PL that can grow with the brand and provides the necessary support and technology.
Jesse mentions resources like Twitter and Third Person, a company that helps match brands with 3PLs, to assist founders in finding the right partner.
23:33 Carrier Diversification and USPS Changes
Mariah and Jesse discuss the importance of carrier diversification in light of changes in the USPS's contract with DHL eCom.
Jesse explains how the USPS is canceling contracts with aggregators like DHL, which will affect the cost and delivery of packages.
He notes that while the impact on rates will not be significant, it is still important for brands to diversify their carriers.
Jesse shares how Shipping Tree's rate shopping tools help merchants find the cheapest options for their desired day in transit.
32:32 Impact of Section 321 Changes
Mariah and Jesse discuss the impact of the upcoming changes to Section 321, a NAFTA law that allowed brands to import products duty-free from Mexico or Canada.
Jesse explains how the Biden administration announced plans to close this loophole, which has led to a scramble among brands to find new solutions.
He notes that the President of Mexico recently stepped in to accelerate the timeline for these changes, adding urgency to the situation.
Jesse expresses his support for the changes, believing they will create more jobs in the US and benefit the country overall.
37:02 Final Thoughts and Future Trends
Mariah and Jesse discuss the broader implications of these changes for e-commerce brands and 3PLs.
Jesse highlights the importance of staying informed about changes in the industry and being prepared to adapt strategies accordingly.
They touch on the potential impact of the TikTok ban on e-commerce, noting its timeliness and the need for brands to adjust their strategies.
Mariah thanks Jesse for the insightful conversation and encourages listeners to subscribe to the podcast and follow Shipping Tree's journey.
TRANSCRIPT
This transcript was completed by an automated system, please forgive any grammatical errors.
SUMMARY KEYWORDS
E-commerce, customer retention, shipping experience, order tracking, Malomo, transactional emails, shipping notifications, 3PL, fulfillment, inventory management, carrier diversification, USPS changes, Section 321, TikTok ban, Shopify brands.
SPEAKERS
Speaker 1, Jesse Kaufman, Mariah Parsons
Mariah Parsons 00:04
Hello and welcome to retention Chronicles, the customer retention podcast for E commerce marketers. I am your host and fellow ecom marketer, Mariah Parsons. Tune in as I speak with DTC founders and operators about strategy that works and strategy that doesn't of course, we are able to have these conversations because of our podcast sponsor, Malomo. I have seen 1000s of brand operators power their order tracking with Malomo to make every single message count. As a consumer, I personally have come to expect that brands have a phenomenal post purchase experience, or else I'm not really shopping with them again. And a lot of consumers are this way. 84% of shoppers won't return if they have a bad shipping experience. And it feels so important for E commerce brands to have a good pre purchase experience. You're trying to get that acquisition. Your customers are coming through the door. They're coming through your website, it is a very personalized experience. You have pop ups that are timed Well, you have customer testimonials that are easing fears. You have well timed car abandonment, emails, all of that stuff. And then you purchase with a brand, and sometimes there's no communication, and it leaves you wondering. It leaves you mad, maybe scared that you fell for a scam or something like that. And so I think it is such a smart decision to have your transactional shipping emails and SMS not just be about only business. Malomo helps turn them into a powerful marketing tool. What does that look like? It means you can cross sell other products on that branded order tracking page. You can put educational content on that page. So if you have something that consumers will have to learn how to use for the first time, you can put that there. If you have recipes that they could you know, use your product for when they first get it. You can put that there, your social media, everything, frequently asked questions, whatever you want. You get the control back so that you're not sending your customers to a carrier tracking page, you're putting them right back on your website, and you're also keeping them informed about their order status while you do it. That's the beautiful thing about this platform, if you're ready to turn your order notifications into a marketing channel and join 1000s of E commerce brand operators in making their customers happier while also adding to your brand's profits. Visit go malomo.com that's G O M, a, l, o m, o.com Hello everyone, and welcome back to retention Chronicles. I'm psyched for our episode today. Jesse, thank you for joining me. It's going to be a great one. I know that we have a lot of similar similar topics, similar things, a lot of symbiotic, you know, topics in the E comm world that I know our listeners are going to be really excited to hear. So with that, I'll pass it over to you to say hello and kind of give the audience a little bit of a background on yourself.
Jesse Kaufman 03:04
Thanks. Hey everyone. I'm Jesse Kaufman, Founder, CEO of shipping tree. We're a e commerce focus, three, pl, four locations nationwide. So we have Chicago, Columbus, Ohio, Dallas and Southern California. We have a fifth opening later this year in Pennsylvania, so keep an eye out for that. But yeah, I got into the space. It's been like eight years now, kind of like a typical founder journey for like a three PL founder, I think, was looking for three PL. You know, in fact, I didn't really know what a three PL was. I was like, looking for a company to do what a three PL does. And then I discovered the world of three pls. Very early days. E commerce, like prime just launched. Shopify wasn't public yet, so I was early. And instead of like, continuing looking for a three PL, because there was, like, nothing good out there, I decided to start building one. Okay,
Mariah Parsons 04:12
wonderful. I love that background. Two quick questions. So I'm actually based in Chicago. We didn't talk about this before getting on the call. So are you,
Speaker 1 04:21
where are you based? I'm based in LA, okay,
Mariah Parsons 04:26
okay, gotcha. I didn't know that you guys had, um, you know, had had roots here in Chicago. Um,
Jesse Kaufman 04:32
so that's awesome. New, it's a new facility, so it's a soft village. Yeah. Okay, cool.
Mariah Parsons 04:38
Um, awesome. And then so, because you were looking for a three PL, can you tell us a little bit more about, like, what qualifications, even when you first started shipping tree, what were you looking for that you couldn't find? Because I feel like that would be a really informative, yeah, you know, walk down memory lane,
Jesse Kaufman 04:58
yeah? What I was like. Looking for back then is actually they're like table stakes now those straights, like, if a three PL today doesn't have what I was looking for eight years ago, like runway, but pretty much what I was looking for was some sort of app that I could manage the three PL three without having to call someone or, like, figure out how to set up, like an FTP exchange or anything that was the main one. So I was, like, kind of shocked at the time that there was no technological bridge that was easy to use and pretty to look at, and like a pleasure to use, that linked merchants and three pls obviously, since then, a lot of three pls have it. I wouldn't say all of them, and there's varying degrees of quality between the apps that three pls use, but yeah, that was what I was looking for back then. Okay, awesome.
Mariah Parsons 05:56
And then tell us a little bit more about what you were looking for, the three. Pl for
Jesse Kaufman 06:04
Yeah. So I'm originally from Montreal, Canada.
Mariah Parsons 06:09
I'm Canadian. I'm a dual citizen, yeah, my dad's from Toronto. My mom's from Nova, Scotia, so I was born in the US, but dual citizen.
Jesse Kaufman 06:16
Cool, yeah. So all my kids are dual citizens. I'm okay. We relate. Yeah. So yes, you just finished school, started like a business in Montreal where I had signed like these streetwear brands from Scandinavia today, they're kind of like the it's kind of like the Japan of Europe. Like attention to detail, really clean designs. And I felt they were underrepresented here, so I signed a bunch of these and to represent them in North America. And one of the things we wanted to start doing was like localizing inventory for their e commerce operations, and that's how I started figuring out that we need to work with the free PL. Looking back, it was like shocking that these companies gave me their rights because I didn't even know what a free PL was back then,
Mariah Parsons 07:17
you learn, right? You learn to learn.
Jesse Kaufman 07:20
Yeah, eight years later. So that business is, like, super hard for a number of reasons, wasn't really going anywhere fast enough. So I wrote all these brands saying, Hey, I'm, if it's okay with you, I'm going to, like, sell your rights to a friend of mine who has, like, a distribution business, I'm gonna go build a three PL and I'll hit you up when the three pls built and we could work together again. And that's what happened, like most of those brands were our first customers. Okay, oh,
Mariah Parsons 07:55
that's awesome. So walk me through a little bit of just early, early days of shipping tree. Like, tell us, tell us. First about shipping tree, you know, like, now and then we can kind of walk through a bit, and then we'll dive into more about, you know, what brands three, pls, what brands would want to use a three PL, all that fun stuff.
Jesse Kaufman 08:17
Yeah, so shipping tree right now, fairly large, you know, 100 ish employees flexes up and down with labor in the warehouses. Like I said, we have four locations soon to be five. Total space of, you know, five to 600,000 square feet. Last year, we fulfilled a few million orders, mainly for Shopify brands. That's where we're at right now, which is pretty crazy, because early days of shipping tree, I remember telling my wife, I'm like, Oh, I'll be so happy once. We're doing like, 100 orders a day. Now we're doing, like, yeah, 1000s of orders a day. It's crazy, yeah? So that's where we're at now. Early days, I saw some pictures. It was like borrowing a piece of a friend's warehouse to, like, fulfill these orders for and figuring out how to fulfill orders myself and stuff. So, like, the first few years, like a grind, and then you start figuring things out, and things become second nature. You build, like an instinct to identify good versus bad decisions, and hopefully that instinct is good, and yeah, you build a company, yeah,
Mariah Parsons 09:43
yeah, for sure. So yeah, it's so interesting. And I would love like this. This will be a great conversation, because obviously, through Malomo, we know a lot of the logistics around delivery and just inventory management and all that fun stuff, but actually walk through like. Like, what does fulfillment look like on your end of things? I think would be really interesting. So if you could take us through, okay, first, when would someone say, you know, brand owner, their launch, they're doing whatever X amount, when would someone be able to judge like, Okay, I need to now start having localized inventory. I need to work with the three PL, because I'm hitting like, this speed bump or this speed bump. What would those? What would those bumps or those hurdles be where a brand would start to feel like, Oh, my God, I need, I need a three. Yeah, I think it depends
Jesse Kaufman 10:35
on the founders really. You know, if it's experienced founders, and, you know, they've raised a little bit of money, or they have money to put behind the brand and they really want to scale quickly, I would go to the three PL like, almost out of the gate. We work with brands that are just starting out all the time. We're a little bit picky with those. Like, we kind of take a process, like evaluating the odds of this company growing into a customer that's like, meets our minimums and stuff. But if you fall into that camp, I would go with a three PL almost right away, because you're going to be so busy like building your brand, focusing on product and scaling that you're not going to want to take up time fulfilling orders and packing boxes and like probably not doing as good a job as a three BL would do if you're kind of bootstrapping. And again, depends on your product, but I would probably you know if it's taking up more than fulfilling orders, is taking up more than two hours a day of you or your team's time, then I would start looking for a few people.
Mariah Parsons 11:52
Okay, that's a really good benchmark to have, like, Okay, two two hours a day. If you're bootstrapping, or if you know you you have some money backing you just to outsource it and then focus on growing your brand. In other ways,
Jesse Kaufman 12:06
you're going to need a three PL. Eventually, it's either like a three PL or you build out a warehouse, which there's like, very few people, yeah, very few people who want to take that on, also a very valid strategy in some situations. So, yeah,
Mariah Parsons 12:21
yeah, totally fair. So I always think about, especially in the Shopify world, where it's way easier to start a brand, just compared to previous Shopify, which I know you had said, you know, you've kind of seen the evolution through the years, going from, say, like you have inventory in your garage, right? Like that is just, I feel like the quintessential you're starting your business out of your garage or in your apartment or something, right? And you go from having inventory there and then transitioning it to a three PL, what does that process look like? Like? Now I'm just asking you all these little things that are, like, black boxes, in my mind, yeah,
Jesse Kaufman 13:03
so, so logistically, most appeals will, like, help you get the inventory from your garage to them. It's like, at that point you probably don't have relationships with trucking companies. Or, like, Where do I even get a pallet? You know, like to put the product on containers. Yeah? All that. Yeah. You can't just, like, put boxes on on a truck like that. So there's like, the logistical side of things that you know the persons are gonna have to figure out on their own. Or if they find a good three PL partner at the three PL, what kind of assist them there? Then there's like, the psychological piece of it, which I've seen be very hard for people to break away from, where it's like they've spent, like, a year or two being living with their inventory, literally, and like, being able to touch it every day, and new product comes straight to them where, the three PL, like, the inventory is going to be, you know, hundreds of miles away from you, potentially, if you're using more than one warehouse, it could be across the country. And they got, they have to get used to the process of, you know, getting pictures from the three PL, when inventory arrives, trusting the three pls. QA processes stuff like that. You know, we get we've seen the situation a lot where a brand might be using like a local three PL, and they like being so close to their inventory, but now they're they've outgrown just being super local, and they need someone with a nationwide footprint, but they're worried about being far away from the inventory. So we tell them, hey, we'll, we'll cover like a quarterly trip for two people to come visit the warehouse, and you could check out your inventory. No one like ever take. Success up on that once, it's just the guarantee that you would, yeah, it's just like a peace of mind type thing, but like, it's really rare for once, things get set up and they just see we're just going out, and they're going up properly, and they're getting delivered as promised. There's like a the peace of mind comes back, but that psychological issue of being like, far from their inventory all of a sudden, that's like the bigger hurdle.
Mariah Parsons 15:29
Yeah, that's actually such a good point, because I know too a lot of one of the things like we talk about at the Malomo side and on the podcast side is the difference a customer, a great customer experience can make and I think that's also one of the things that three pls are very conscientious of, right? Is, how can you make sure that everything's getting packaged correctly? Everything that's going out the door is, you know what it's supposed to be, and all that stuff. And I feel like the psychological component of you go as a founder from, you know, if you're including a card or something in your package, or if you're doing something that is a little bit more like, you know, you're going a little bit beyond, yeah, with the actual packaging, you know, you're putting stickers in it, or whatever, whatever you are doing for your brand, The trust that you have to have in your three PL is a big, big component, I would imagine, because you're it's just out of your control. And most, most founders I've met, you know, you you have the personality to want to get things out and want to do it yourself, and it's very it's very hard to relinquish that control. And, you know, trust other people with something that you've been building for however many amount of months? Yeah, totally. So what are some other things in addition to just like, logistics and then that psychological piece of everything? Are there any other things that you see like, okay, transitioning to working with the three PL for the first time, that founders sometimes are apprehensive of, or that, you know, just any trends that you see when it comes to onboarding a three PL,
Jesse Kaufman 17:13
yeah, so I think, like the three PL industry collectively has been burned by some bad actors and stuff out there. So there is, like, always, some inherent trust issues that you have to overcome. I think founders mostly, pls, like you'll, you know, I mentioned, founders are out there. They reach out to six, three, pls, initially, they narrowed down to three or two, and then they compare with the ones they like most. Pricing is going to be relatively comparable in those finalists, I think. And then I think it's the founders job to kind of go with their gut in terms of who's going to care about their brand and their products the most, and who kind of has the systems in place to do that properly? And so I think that's kind of a trend I've been noticing, is founders coming to us, they really want to speak to other founders that are in a similar position to them, or have been in a similar position to them when they came to us, and they they kind of need that third party, somewhat independent validation of us to feel comfortable to move forward a lot of time. Yeah,
Mariah Parsons 18:40
yeah, that's a great point. So will you kind of make, like, have those founders that are willing, like, those founders that work with you, that are willing to talk to other founders and be like, Okay, this is what I was struggling with, and just kind of talk through their experience and give that like, testimonial, yeah,
Jesse Kaufman 18:58
totally. And like, we've even seen it, we've, you know, introduced two founders to each other. And, you know, like, we're not perfect. No three pills perfect. We make mistakes. No person, yeah, yeah, even if you're shipping out of your garage, you're going to make mistakes also. So like, mistakes are going to happen here. And, you know, we found, like, some of the best feedback from references have come when they're like, oh. And we really appreciated that, you know, X founder mentioned, like, this time you guys, like, messed up pretty badly, but then we're able to fix it. And, like, we're totally fair about, you know, remuneration and stuff like that. So
Mariah Parsons 19:40
yeah, and to, um, I think when there's something that goes wrong, you are way less likely for that to happen again in the future, right? Like learning from those mistakes. And then, yeah, um, being a little being more protected on on that front, I think, speaks a lot to it, and to. Be able to remedy a situation like nobody likes when things go wrong, right? But in the situation when you're out of your garage, and maybe it's just you, or maybe two co founders, or whatever else, it's all on you, so you know what to deal with it, at least with, you know, partners, you could say like, Hey, understand that this got got messed up. What are we going to do to fix it? And I think that speaks a lot to, you know, the quality of what you guys do and your your work, if your customers are able to say, like, oh, yeah, this was something that went wrong, and then we fixed it, and then that was, yeah, yeah, um. So you also mentioned kind of, like, the minimums that you all are evaluating when you're working with brands, if you're comfortable sharing, I'd love to have you kind of walk down just like, What are you all looking for in terms of, like, minimums for working with a brand, or what makes sense for you all on the three PL side of things? Because I think that also helps the merchant or a Shopify founder just think about, like, okay, is this the right decision for me? Like, this is what my this partner is looking for. Is it mutually beneficial?
Jesse Kaufman 21:08
So for us, like, our minimums are a little elevated, so 2000 orders a month is kind of like our floor. We make exceptions all the time. Like I said, for companies just starting out that are, like, growing pretty fast, they could show us the Shopify data, like, if they're going to be at 2000 orders like next month, or in the six months even, we'll probably work with them, and then it goes all the way up. We have some customers fulfilling like 70 80,000 orders a month with us. So pretty wide range. My advice to other to Shopify founders out there. There's so many three pls in this country. And if you need a three PL, you'll be able to find a really good one that will work with you. So there's, there's small mom and pop type three pls out there that they specialize in those, like, sub 1000 a month brands, and they do a really good job. And when you, when you outgrow them, they'll probably tell you, like, Hey, you guys are too big for us now. Like, here's a list of three. Pls, we would recommend. So if you think like you need a three PL and you're still, you know, on the smaller side of things, great resources to find a good like Mom and Pop. One would be Twitter, one of my friends. His name is Matt hurts. He runs a company that, like, helps match make between brands. And three PL is called third person. So there's so many resources out there if you're looking for a three PL, and there's so many three pls now that, like, you'll be able to find one that that fits what you need.
Mariah Parsons 22:54
Yeah, I love that shout out. And I love the willingness to be able to say, like, yeah, you will be able to find someone, you just have to look in the right spot, yeah? And I think a lot of our listeners will hear that and be motivated to, you know, maybe go explore and see if, you know, they can find someone on Twitter or whatnot with a mom and pop shop, or if they're bigger and, you know, fit within your minimum,
Jesse Kaufman 23:20
yeah, reach out to me if you want. But yeah, yes,
Mariah Parsons 23:24
um, so I would love to also, we're recording this mid July, oh my gosh, mid January. And obviously New Year is top of mind. And I think there's going to be a lot of change, just with supply chain and all that, and International Affairs and whatnot in 2024 or, Oh, my God, 2025 for Americans, um, so I would love to kind of get your opinion on when you're looking at this year. What do you think is going to be really important for um brands and the three pls that they work with in in this year?
Jesse Kaufman 24:02
Yeah, I think the big thing is going to be carrier diversification. A ton of changes happening on the carrier side of things, all downstream of some new initiatives on the USPS side of things. So brands and three pls that have gotten used to super cheap postage from, you know, the dhls and the osms of the world, like the aggregators, they're called, that's going to change quite meaningfully depending on the size of your package and everything. But I think carrier different diversification is going to be something that every brand and their three PL partners are really going to have to take a look at. There's great regional carriers out there. USPS gets a lot of flack, but honestly, I think they're pretty good overall. All, and then the big boys, like UPS and FedEx, it's going to be interesting to see how they react to the USPS changes. And, you know, we're always evaluating new carriers, and, you know, testing them in a really thoughtful way with some of our merchants before, like, rolling them out on a wider basis. So I think that's going to be a trend you're going to see a lot of talk about this year, and then, like the section 321, stuff you know applies really to, like, larger brands, I think. But that was kind of that import packs and duties loophole through Mexico or Canada that's gone. So that's going to be a big change for a lot of brands and big household names that you guys know. So keep an eye out for that should be pretty interesting.
Mariah Parsons 26:01
Okay, those are two great things to look out for, and I think we should dive into both of them. Um, because we haven't really talked about either on this podcast. So, um, let's start just naturally by or with carrier diversification. So walk us through a little bit of the US. PS, changes that are going to be occurring. Because I don't even know, like, the familiarity is just headline for me. So I think it was really interesting to kind of walk through for someone like yourself, who's an expert in his face, to be like, Okay, this is what's happening. This is what I think is going to be like, cause and change, or cause an effect of it.
Jesse Kaufman 26:40
So I'll try to keep it like, not super granular. But what was happening before you're familiar with DHL e com, I'll use them as an example. But DHL e com Before would, you know, pick up from the warehouses, and then they would do some sorting, and handed off the USPS, like, closer to the end customer. That's kind of like a very high end, high level view of what was going on. And so DHL would do the final mile. I mean, USPS would do the final mile. DHL and USPS had an agreement for the price of that final mile, which was very cheap. So DHL was able to resell that final mile, final mile service by USPS, and I imagine, make quite a bit of money, and at the same time be able to offer that delivery for cheaper than USPS was able to offer it publicly themselves. And there's a few companies doing this. And so what you USPS said recently is we're canceling those contracts. So gotcha, here are your new rates, DHL. Do with them what you want, but like a lot of those, yeah, a lot of those packages you were delivering before for cheaper than us are not going to be cheaper than us anymore. So that's essentially what happened. It's a lot more complicated, but like, essentially, that's what that's what happened. So it's going to be interesting to see now USPS is also, they're not like total bad guys in this situation, because they have lowered their rates, their public rates, or at least rates. They're giving three pls. So it's not going to be like a huge hit. It'll be a hit, but it's not going to be like a massive hit for the industry, but it's something to keep an eye on for sure.
Mariah Parsons 28:53
Okay, that's a really good synopsis. I think of people who aren't in the weeds and granted, right? Like we're even, and I say we as Malomo, for me on marketing, I'm like, Okay, no, I know the headline, and that's, I know there's changes. I know that the contract is up, and that's about all I got. So it's even fascinating, from a tech perspective, to see how you know, kind of the sub surface, surface level explanation that you gave, um, and I think it'll be, it'll be really interesting to see kind of how that, um, how that plays out, and where people are choosing to go. So carriers, I know they, they can be so complicated, like this is something that I don't think a lot of people know unless you're in the space and dealing with them every day. Um, and I know from our team like it takes a lot, and so I can imagine it would be pretty big headache inducing thing for a founder to look at. Okay, this, this is happening. So how do I diversify my carriers? So say, you know you're talking. One of your founders that you're working with, and they're like, Okay, I know this is gonna affect us, because whatever, 95% of our packages were going through the DHL UPS system. So where is that? Where your team comes in. You're like, Okay, let's look at what carriers we can map to, or what carriers to bring on, for all of you know, to for to mediate between, like, the price differences, even though you said they won't be that much different.
Jesse Kaufman 30:33
Yeah, yeah. So it was kind of like this, an automatic reaction for us. We saw this news, we started making preparations for it really hard to diversify carriers, if you're not with the three PL, like, there's not a lot of brands out there that have the volume to do that effectively at all. Like we barely have the volume, so it's important to work with people that like have that capability, and then have the tech to take advantage of it. So most of our merchants, they just use our rate shopping tools, where they kind of set the desired days in transit that they'd like, and then our system finds the cheapest option for that desired day in transit. And so our merchants have seen like very little disruption from this. There's a there's a handful that particularly liked the HLE Comm, and now for their size of package and stuff, it doesn't make a lot of sense. So they're using other carriers, but for the most part, like, we've seen minimal interruptions here, and we weren't a huge DHL user before. Anyways, luckily, merchants don't love them. I haven't loved them and like, yeah, yeah, they're cheap for a reason. So,
Mariah Parsons 32:08
yeah, yeah, okay, so you mentioned the package size, so I just want to double tap on that real quick in that it is it generally lightweight, right? Okay, yeah,
Jesse Kaufman 32:20
sub, sub one pound. That's where there's going to be, like, the most carnage, yep.
Mariah Parsons 32:25
Okay, okay, cool. Um, okay. So now, kind of the second trend, or second thing that you are looking at in 2023 that you spoke to, which is the section 321 tell us about that, because that is, I'm even less knowledgeable on that, and this is why we have the podcast. So this is perfect,
Jesse Kaufman 32:43
yeah, so it's like a NAFTA law. And, okay, I'm not an expert on this. It's just article you
Mariah Parsons 32:53
have more than me, I think. So that's what we're that's our quantifying system right now. Yeah.
Jesse Kaufman 32:59
So it's a NAFTA era rule that allows, essentially a loophole where I don't want to name a brand, but Brand X, an American based brand. They would, typically, they would import their products to the US and then at import, they would have to pay duties and taxes, whatever the duty rate is on that commodity. They would pay what section 321, allowed for was entry to Mexico or Canada. Mexico, usually because the goods wouldn't be subject to import duties there. So they would import for free, essentially, to Mexico. And then what section 321 allowed for was any order going to the US under $800 in value had no duties on it. So brands would be able to fulfill from Mexico directly to the US and not pay any duties on the product, and their customers wouldn't pay any duties on the product. The Biden administration, I think in like November, announced that they're closing that loophole. I forget how I think they were perhaps lowering that threshold $800 to making it much lower. I forget the specifics. Sorry,
Mariah Parsons 34:38
don't apologize. This is good
Jesse Kaufman 34:41
but But recently, the president of Mexico kind of just like, stepped in front of it and said, we're not allowing this anymore. So brands thought they had, like, a couple of months to make a decision and find a solution here. Year, and then the President of Mexico stepped in and said, No, sorry. Like, you know, figure it out in the next week. Essentially, gotcha.
Mariah Parsons 35:07
Okay, so there's been a major, major scramble then, yeah,
Jesse Kaufman 35:15
I always thought like it was a silly thing to have, because it's like taking away business from us three, pls. Like, it's not a very US business positive rule. So I'm, I'm happy it's closing. Obviously, I'm biased as it means, you know, more customers for three, pls, but, but really, I think it's like, the right thing for the country, it's gonna be more jobs here. Yeah,
Mariah Parsons 35:44
okay, I appreciate your perspective on that. And yeah, it'll be interesting to see just the effects of both of these things, especially as we're recording even in weeks or months, right? Like when this episode is being released, things could have changed. Our merchants are already seeing the effects, or customers are seeing the effects
Jesse Kaufman 36:06
like you'd be shocked, especially apparel. Apparel is like the biggest category that took advantage, apparently, like home goods that took advantage of section 321, you'd be shocked at how many of those orders you get come from Mexico, because they just print a USPS label, and then in Mexico, and then they drive it over to, like San Diego, or a city on the Texas American border, and they give it to USPS there. So there's no like scan in Mexico or anything like that. It's just like a USPS, yeah,
Mariah Parsons 36:39
huh, yeah, yeah, you would never know. Like, I
Jesse Kaufman 36:44
know, I have, like, a small list in my head of brands that do this, and they're just, like, typical American success stories, but they're all using three pls. Mexico.
Mariah Parsons 36:54
How do you like, you don't, obviously, don't name them. But how do you know those brands are doing that? Just like, through the like, stratosphere of three PL, world, like people just, yeah, yeah. Okay. So you wouldn't know it unless you know you're in, yeah, in, in the world that you're, you're currently, it's
Jesse Kaufman 37:10
very Yeah. It's very hard to tell, okay,
Mariah Parsons 37:15
yeah. That'll be so interesting. It's, and there's so many different things along the just getting an order from, you know, click it like, for a consumer to click on the Buy Now button and then for it to get to your door. It there's so many different moving pieces, and it really can be something that is, you know, like it takes a lot to make it look flawless. And I think that's what you know, good partners that who who have figured out how to make it look flawless, and even when things go wrong, you can rectify it and all that stuff it is. It is why I'm still fascinated by E commerce and just this, this industry in general, because it is, it is ever changing. And it has ever changed so many different parts that he would never see. Um,
Jesse Kaufman 38:08
also, like the Tick Tock band, that's going to be a big
Mariah Parsons 38:10
one, yes, yeah. And very timely. Um, in the next couple days, you know, we'll, we'll see what's happening. So, yeah, it'll change. I mean, it'll, yeah, a lot of brands I know are looking at their their current strategy of like, okay, where do we go, based off that Tiktok band specifically, and everything else. So this has been a blast to have you here and just kind of dive down into the three PL world of things. It is something that I sit very tangential to, but I'm not in the weeds. That is much more our product in CS team. And so it's always, always a fun time when I get to put that hat on for a while. So thank you for making the time, and it's been a joy. Yeah, of course, that's fun. Good, good. I'm glad to hear it. Thank you for listening. To today's episode. These conversations bring so much knowledge to the table, and I'm so grateful for that. If you haven't already, please subscribe, follow us on social media and tell us who our next guest should be on our website. Let's give another shout out to our day one sponsor, Malomo. As you know, Malomo is an order tracking platform that enables Shopify brands to take control of their transactional email and SMS through branded order tracking pages. That means you can ditch those boring, all white carrier pages, you know, the ones I'm talking about. Everyone has seen an ugly tracking page in their life, and you can swap it with a page that matches your brand customers like you and I obsessively check order tracking an average of 4.6 times per order. That's why leading Shopify brands are turning that engagement into customer loyalty and revenue through branded order tracking. Learn more about how to get ahead of shipping issues. Brand your order tracking experience. And reconvert customers while they wait for their package to arrive with Malomo. Visit go malomo.com that's g, O M, a, l o m, o.com.
