July 12, 2022

Investing in fulfillment: eCommerce delivery from an investor's perspective


TLV Partners
is an established Tel Aviv-based, VC firm dedicated to investing in game-changing, early-stage companies led by impressive founders across the globe. 
Some prominent investments include NEXT Insurance, Aqua Security, Firebolt, Guesty, and Unit

We sat down with Yonatan Mandelbaum, Principal at TLV Partners, to get the established investor’s perspective on fulfillment as a core growth lever.

We dive into topics like: 

  1. Why optimized fulfillment is critical in today’s supply chain
  2. How people overlook fulfillment due to “schlep blindness”
  3. Three tips for upgrading the delivery stage of your funnel

“Strong fulfillment means a positive brand-buyer experience — before they’ve even touched the product. It’s a vital but overlooked step of the user journey.” 

Turning Cost Centers into Revenue Streams

In Yonatan’s words, it doesn’t take a genius to understand that, with today’s market conditions, every founder, regardless of the industry, is doubling down on two basic functions: 

  1. Lowering burn
  2. Extending runway

To do this, they ensure their unit economics are as healthy as can be — typically by turning to any areas of the business that are operationally or fiscally inefficient. 

If you run a DTC brand, fulfillment and delivery logistics are usually one of those cost centers. This is significantly exacerbated for CPGs. 

It all checks out, explains Yonatan, because most eCommerce founders aren’t passionate logistics experts. They’re too focused on delivering the greatest products and user experiences. 

Why Do Most Brands Overlook Fulfillment? 

From Yonatan’s perspective, fulfillment typically presents both an operational pain point and immense potential for savings and extra revenue

Yet brands frequently ignore both sides of that coin. Fulfillment is ignored because most founders don’t understand it. Teams and consumers only understand broad strokes of delivery. 

But most either do not have the patience or the experience to understand the nitty-gritty nuances of what it takes to efficiently transport an item from Point A to Point B. 

Without that deeper understanding of all the levers at play and available to pull, most founders then wind up settling on — “This is just something difficult that we’ll have to pay for forever.” 

The Case of Schlep Blindness

To further explain, Yonatan cites the phenomenon of schlep blindness. The term was coined by Paul Graham, Y Combinator co-founder, to describe the kinds of investments he seeks out. 

  • “Schlep” is a Yiddish term in origin, meaning any tedious, unpleasant task
  • Most teams have schleps in their workflows that are dealt with for years
  • They then assume that schlep will just always be there and overlook it

This all changes when a company exploits that schlep blindness — by entering with a solution that automates away that pain point or even turns it into something beneficial. 

From an investment perspective, says Yonatan, those companies are the most intriguing. He points to fulfillment as a prime territory for this, specifically with: 

  • Tooling like PDQ that aims to turn delivery cost centers into metric growth drivers
  • Amazon’s investments of billions of dollars since 1999 into offering unmatched two-day, next-day, and eventually same-day delivery

“Turning a huge cost center into a revenue stream can literally change your unit economics without actually touching any product. That’s very, very powerful.” 

How Does Stronger Fulfillment Translate to Profits? 

Considering the big picture, Yonatan highlights loyalty and reordering as the key ways delivery drives lucrative, tangible growth. And it all comes down to basic customer psychology. 

Long-Term Gains: Loyalty & Reordering

Many present-day brands are guilty of promising 2–3-day shipping at checkout, but then mentioning the additional 1–2 days of fulfillment efforts in the fine print. 

Of course, consumers will mostly be fine if they receive a package 2–3 business days later than stated by your delivery promise. But this ultimately results in: 

  • Your brand failing to live up to its own set expectations
  • A negative emotional experience for a buyer with your brand
  • Lesser likelihood of the buyer repurchasing or trusting you again

On the flip side, a customer’s delivery arriving perfectly on time — or perhaps even earlier — easily wins you points in reliability and a sense of brand-buyer trust. 

Even if the consumer doesn’t repurchase right away, they’ve had an emotionally positive experience with your brand from end to end, which only boosts retention rates and LTV. 

Short-Term Wins: Upselling & Savings Toward Your Bottom Line

As for short-term timelines, Yonatan admits most merchants fail to optimize their checkout and post-purchase for upselling (i.e., by presenting varied options for delivery times and methods). 

Quite simply, this allows you to take advantage of the fact that modern buyers are accustomed to instant gratification. Even an extra $15 is worth it to upgrade to next-day shipping. 

And if next-day shipping only costs you $10 to execute, Yonatan elaborates, that $5 markup goes straight toward your operation’s bottom line. 

“Most merchants fail to take advantage of the prime real estate of checkout and post-purchase flows. You can step things up by leveraging new tools like PDQ.” 

Supply Chain Crises: Control What You Can

Yonatan doesn’t mince words with us: The ongoing supply chain crisis will almost definitely continue to worsen before things look up. 

Even more, the simple reality is that no company, whether they're an independent brand or a Fortune 500 enterprise, will be able to shift this global factor. "It will truly impact everyone." 

At the same time, merchants can and should focus on setting up their infrastructure to reduce delivery times as much as possible — by shifting and affecting change wherever they can. 

Within your business, this can look like: 

  • Gauging efficiency at your independent fulfillment centers or warehouses
  • Setting delivery expectations at checkout with supply chains in mind
  • Streamlining customer comms to warn of any potential delays
  • Using tools like PDQ to streamline logistics or ops flows

Ultimately, Yonatan leaves founders with one directive: “Grab the bull by the horns and take control over whatever you can as the merchant.” 

“You can’t control whether this lasts three months or three years. But you can control your warehouse management, logistics flows, user comms, and more.” 

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