Sent Items #148: Tuesday, January 30, 2024

Welcome to the Year 2024 and 148th edition of Sent Items!

To avoid burying the lead – I will NOT be at Manifest this year. 

It seems as though I’m the only one in my network not there. But don’t strip me of my logistics credentials, I have a good reason! My focus has been on launching a new web-based platform we built to connect eCommerce brands with the right 3PL. Stay tuned for more info in the coming weeks…

Onto some news:

Logistics-Tech Startups Face Uncertain Future as Freight Slump Continues (link)

• I wrote about this in my last issue before the holidays (link), but the WSJ has a piece on the continued demise of certain logistics tech companies

• The Information had a similar piece the other day on Veho’s cuts, despite revenue increases (link)

• Meanwhile Flexport announced on Monday that they were cutting another 20% of staff (link)

• Flexe cut another 38% of its staff in early January, after a 33% cut only back in November (link)

I’m not a venture investor, but I do spend much time with brands helping them find the right 3PL partners. My key takeaway with many of these headlines is that it is important to understand the health of the supplier you are working with. It is very reasonable to request a balance sheet or financial statement prior to entering an important business relationship. The financial health of your partners impacts your business greatly. 

Cuts and drawdowns are affecting even the largest logistics companies. Just this morning UPS announced they are cutting 12,000 employees throughout the year after a slowdown in volume.

Many logistics companies became bloated during the good ol’ days of 2020-2021, and have started scaling back some of that excess. The mature companies have largely right-setted, while the venture-backed companies appear to be slower to adjust, in part, because of venture capital funding losses, coupled with a hope and dream that the exuberant times will return.

The Great Freight-Train Heists of the 21st Century (link)

• An incredible story of a thief in the Los Angeles area and how he learned to decode shipping containers stacked on freight trains by Googling the placards, locking devices, logos and numbers on the containers, which often provided clues to the loot he might find inside. 

• Piracy is an age-old occupation, particularly prevalent in places and times when large gaps have separated the rich and the poor. But this modern-day resurgence in cargo theft stems in no small part from the extreme ways the internet has altered the buying and selling of things. When the United States Census Bureau began collecting data on eCommerce, in 1998, online sales amounted to some $5 billion. Now that figure is upward of $958 billion; eCommerce revenue is forecast to exceed $2.5 trillion by 2027.

• Some 20 million containers move through the ports of Los Angeles and Long Beach every year, including about 35 percent of all the imports into the United States from Asia. Once these steel boxes leave the relative security of a ship at port, they are loaded onto trains and trucks — and then things start disappearing. The Los Angeles basin is the country’s undisputed capital of cargo theft.

Flexport raised an additional $260 Million from Shopify (link)

• The startup is kicking off 2024 by shoring up its business with a $260 million “uncapped convertible note” from Shopify - quite the vote of confidence, and further suggests the newfound strength of Flexport under the helm, once again, of Ryan Peterson. 

• As a reminder, Shopify and Flexport are already attached. Flexport acquired in 2023 Shopify’s logistics arm. The deal gave Shopify 13% equity stake in Flexport and a seat on the board. Ryan tweeted that, “Our fortress balance sheet continues to be one of our most strategic assets as we navigate the uncertain waters of global trade in the 21st century in pursuit of this vision.”

• Meanwhile, Flexport earlier this month opened a more than 1 million square foot logistics hub in New Jersey, part of an expansion into last-mile fulfillment.

• It is clear that larger companies want to work with companies that are financially stable, and building a strong balance sheet like they now have will go a long way in building this trust.

• I must admit, my first reaction to this news was, “Why the heck is Shopify tip-toeing back into the logistics business they exited miserably less than a year ago?!” That was my second reaction too. But after cleaning my spilled coffee, and asked myself, “Why”, a few decent reasons began floating in my head. It appears as though this investment will give Shopify greater ownership of the Flexport entity (which they previously owned about 13%), at a fairly nominal price. In other words, the investment to Shopify is not very meaningful in the grand scheme of things, and gaining the ability to ride the financial upside, and the value Flexport brings to Shopify’s largest merchants, while not being an internal distraction (like Deliverr/SFN was), is incredibly useful.

• But let’s give credit where it’s due and take a look for a moment at Shopify’s stock performance. The company is 2x its pre-COVID highs; 3x its post-COVID lows, and only about half its COVID all time highs. Quite a display of resilience. 

• Meanwhile, some new tailwinds in container shipping as rates are nearing multi-year highs due to the Houthi rebels in Yemen.

- Matt

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