Prakash Upadghyaya is one of the few people who sounds unimpressed with UPS’s record $5.47 billion IPO this month, or for that matter, Federal Express’ perpetual stranglehold on the overnight delivery business.
The package transport giants might seem unstoppable now, but Upadghyaya is out to level the playing field with a service that would create one of the Internet’s first “virtual” courier services, a network of regional players that could offer more choices to consumers and online merchants.
“What happens when the FedEx guy is gone and my package still needs to get there absolutely, positively overnight?” Upadghyaya asks.
The acquisition finance expert, who specialized in transport companies during his 10-year career with several investment firms, hopes to answer his own question with Irvine-based SmartShip.com, an offshoot of his 2-year-old Virtran Inc., a company that handles electronic transactions.
By leveraging 5,000 to 10,000 small couriers across the country, Upadghyaya believes he can challenge industry behemoths by offering after-hours pickup, clearer delivery options and shipping processes that can be completed entirely online. While UPS offers online scheduling of pickups, FedEx does not, and neither company offers online scheduling of after-hours pickups.
Courier Network
To customers using the service, SmartShip.com plays the role of the courier, taking the orders through its web site, collecting payment and handling customer service. But behind the scenes, SmartShip.com will weave together thousands of relative unknowns to actually transport the packages in a seamless service Upadghyaya promises will be cheaper and more flexible than the brand-name delivery services.
Upadghyaya plans to make money by contracting volume shipping services from affiliates and reselling them to his customers at a profit.
And he hopes to attract online retailers, who would provide the option to customers. Upadghyaya said one of the service’s most compelling features is its ability to base shipments on arrival time, not a pickup schedule and estimated shipping time.
Teamwork Counts
Not that he’s out to destroy anyone. Upadghyaya hopes to eventually use FedEx and UPS for some shipments, and already lists their prices and shipment schedules alongside his company’s own.
“They’re thinking that the Internet is going to disintermediate them and commoditize them,” Upadghyaya said. “They don’t see this as an opportunity. But they’re smart people and they’ll get there.”
At least one well-placed businessman is already convinced. Ted Smith, co-founder and chairman of Costa Mesa document storage company FileNet Corp., recently joined Smartship.com’s board of directors.
“So many times an Internet startup is dealing with rather ethereal concepts, but this is something that means real dollars and cents to businesses, ” he said. “There’s a lot of work to be done and a lot of things that need to happen in parallel. But it’s a huge opportunity.”
Some estimates put the total freight business at more than $100 billion annually, $20 billion of that in same-day shipments alone.
Smith said he was impressed with SmartShip’s management team, which in addition to Upadghyaya includes a Ph.D. co-founder, a 17-year FedEx veteran and a former business partner of eBay co-founder Pierre Omidyar.
So far, Upadghyaya has raised several million dollars in venture capital (he won’t reveal exact figures) and is in the process of signing up carriers in all 50 states. He hopes to formally launch SmartShip.com on Dec. 17.
Plenty of Competitors
He’ll have plenty of competition when he does, and not just from the likes of FedEx and UPS. A host of Internet startups with comparison shopping functions such as iShip.com promise similar convenience.
Upadghyaya, however, is confident his approach of enlisting lesser-known shipping companies and helping them get online will take the concept further. In addition to signing on affiliates to expand the service network, SmartShip.com is offering programming expertise to help them automate their online ordering and billing functions. SmartShip.com makes a little money for the technology license and pays affiliates a discounted rate for their services.
Upadghyaya also expects to be the first to offer same-day courier delivery via the web when SmartShip.com adds that service to its lineup.
In the meantime, the company is looking for an unspecified amount of “strategic capital” from individual or venture investors to support a branding campaign.
“We’re in this for hyper-growth,” Upadghyaya said. n
