Thursday, May 11, 2017

FLEXE -- THE AIRBNB OF WAREHOUSES

Adapting logistics to the new reality.

This Startup is the Airbnb of Warehouses and Has Amazon in Its Sights

Flexe finds spare warehouse space for e-commerce merchants, including mattress seller Casper, and is set to offer overnight delivery all over the U.S.
A Seattle startup has come out of nowhere to offer online merchants something even Amazon doesn’t: overnight ground delivery to nearly anyone in the country.
In less than five years, Flexe has created a marketplace of spare storage space in 550 warehouses, quickly establishing better geographic coverage than the vast delivery network that Amazon.com Inc. spent decades and billions building. Flexe did it without spending a nickel on facilities and already has 25 million square feet of storage, about 25 percent of Amazon’s capacity, and expects to add 10 million square feet this year. Merchants book storage space via a simple-to-navigate website; Flexe is essentially the Airbnb of warehousing.
Flexe Co-Founder and CEO Karl Siebrecht
Source: Flexe
The new overnight delivery service, launching Monday, is well-timed because online merchants are looking for new ways to reach customers but have few options that match Amazon’s speed. And because the inventory is stashed all over the country, overnight deliveries can be made by truck rather than plane, which is cheaper. Online brands such as mattress seller Casper also like Flexe because orders flow through their own websites, letting them maintain a direct relationship with customers.
 "You can get goods to your customers as fast or faster than you can through Amazon Prime at a competitive price and it’ll show up in your own branded box rather than an Amazon box," says Flexe co-founder Karl Siebrecht. "That is very important for companies looking to build brands."
The Flexe story begins at a birthday party in Seattle in 2013. Dhruv Agarwal, who owns an online gourmet accessories business called TrueBrands, was kvetching about the challenge of finding warehouse space. His company was growing 30 percent a year, but many warehouse owners demanded a five-year lease, requiring him to take a space that was either way too big or would soon be way too small. Agarwal wondered if he could find spare warehouse space for a few months at a time the same way tourists find a place to crash for a few days on Airbnb.
The Flexe founders were at the party and decided their pal was onto something. They launched that year offering "overflow" services, when retailers and wholesalers needed to stash pallets of inventory for brief periods. Flexe added online order fulfillment last year, giving warehouse operators the option to charge more to pack and ship individual orders directly to shoppers' homes.
The company has raised $20.8 million, including a $14.5 million round last year led by Redpoint Ventures, which invested after hearing from e-commerce companies struggling to line up warehouse space. "Startups don’t know how much space they’ll need because it’s hard to predict where they’ll be in a year or two," said Ryan Sarver, a Redpoint partner. "On-demand warehouse and fulfillment space is a game-changer." Flexe declined to share financial numbers beyond saying sales grew 400 percent last year.
Shoppers' accelerating shift online is straining warehouse space around the U.S., pushing the vacancy rate to the lowest level in 17 years. Flexe is tapping into a shadow inventory of unused space that doesn't show up in the vacancy measure. That space is tied up in long-term contracts, but much of it goes unused for months at a time. Beverage companies and home-improvement stores build warehouses with capacity for the summer months when their business peaks, leaving them with extra space the rest of the year. Warehouses operated by Halloween costume wholesalers empty out just as the holiday shopping season hits and most retailers need more space. Flexe is arbitraging the mismatch between supply and demand, taking a commission for each transaction.
Today, the company has 200 partners. Iron Mountain, which provides document storage for financial, legal, healthcare and government clients, signed on with Flexe two years ago to sell extra space in its 1,000 facilities in 90 markets. Solar panels, space heaters, sheets, pillows and mattresses from various merchants have now passed through its facilities without disrupting the main business, and e-commerce opportunities are growing, says Dale Lawing, an Iron Mountain senior vice president.
Casper uses Flexe to meet demand during summer moving season, says CEO Philip Krim. The company prefers Flexe to Amazon because the latter takes control of the customer experience "Our customers want to buy from Casper and not from Amazon," Krim says. Shoe and apparel brand Toms used Flexe to expand its holiday season pop-up stores beyond the reach of its west coast distribution network. Flexe determined the best locations to help Toms serve three new markets, and Toms was able to secure the space on short-term commitments. The pop-up stores are planned only a few weeks in advance, making it difficult to find warehouse space through traditional long-term leases.
Flexe’s appeal extends beyond startups to brick-and-mortar retailers struggling to compete with Amazon online and brands hesitant to work with a fearsome retail competitor, says Neil Ackerman, a former Amazon executive who runs e-commerce initiatives at Mondelez and sits on Flexe’s advisory board. "Manufacturers, brands and retailers that want to compete with Amazon on delivery without giving up data and the customer experience are all target clients," he says. "Flexe helps them compete with Amazon on delivery without making huge investments in new facilities."
To prosper long-term, Flexe will have to continue expanding its footprint by convincing warehouse operators they can accommodate other businesses on short-term intervals without disrupting their own. And the startup will have to prove itself equal to the challenges of operating during the holiday shopping season when warehouse space is most scarce.
"Being second fiddle in a bunch of warehouses is great 11 months out of the year," says Jarrett Streebin, chief executive officer of EasyPost, which helps retailers coordinate with delivery companies. "But when you consider one month drives most e-commerce sales, that could be a problem."