On-demand warehouses power today’s hip consumer brands

Last fall, Maddy Moelis was facing a towering to-do list. The cofounder of Great Jones, a new direct-to-consumer cookware brand aimed at the millennial market, Moelis was racing to launch her new company before the holiday rush (they would start taking orders in November). One of the many nascent consumer brands following the lead of companies such as Warby Parker and Casper, Great Jones was trying to assemble the puzzle, from procurement to delivery, to get their product to customers.

Amid the rush, Moelis found at least one aspect of launching relatively simple and straightforward. She chose Flexe, a Seattle-based warehouse firm, to provide what’s called third-party logistics, or 3PL. The company set them up with warehouse space in Pennsylvania, just across the border from Trenton, New Jersey, fulfills orders, and cost 10 to 15 percent less than other shipping and fulfillment options.

Flexe and its competitors represent a new take on shipping and logistics, one that its leadership believes is perfect for the 21st century e-commerce economy. Through its own software and technology, Flexe creates a marketplace for storing goods and products; think of it as a warehouse version of Airbnb. It doesn’t actually own real estate, but instead creates a marketplace for existing warehouses to utilize unused space and serve as storage and packaging providers for smaller companies and brands. So if you’re, say, a venture-backed startup selling cookware, poised to grow, and have no idea how big and how fast that might happen, using Flexe allows, well, flexibility, offering e-commerce fulfillment without the need for long-term leases.

The growth of Flexe, and competitors such as Darkstore, Stord, and Flowspace, seems perfectly timed for the growth in direct-to-consumer companies such as Great Jones, as well as the logistics and e-commerce evolution spearheaded by companies such as Amazon. Primed by next-day shipping and online retail, companies spent $1.5 trillion on logistics and shipping in the United States in 2017, according to the Council of Supply Chain Management Professionals (CSCMP) State of Logistics Report. Broad investment in warehouse real estate has meant space can often come at a premium.

Courtesy of Flexe

Since launching in 2013, Flexe now operates in more than 1,000 warehouses across the U.S. and Canada, just closed a $43 million funding round early in May, and works with Fortune 500 clients such as Walmart. Through word of mouth, it’s also become a darling in the new world of hip consumer brands. In addition to Great Jones, the company also stores and ships products for Hims, Casper, the luggage brand Away, Cargo, and even Lime, the micromobility startup.

In startup speak, Flexe could be seen as a “warehouse-as-a-service” company. Co-founder Karl Siebrecht likens it to Amazon Web Service, the cloud computing company, but for physical goods. It’s a network of spaces offering flexibility and no long-term commitments that removes the fixed cost of storing and packaging products.

“From my previous e-commerce experience, I knew about getting customers to the shopping cart, but I’d never thought about what happened after the purchase was made,” he says. “It was kind of right in front of my face, but I didn’t pay attention to it. The world needed an on-demand distribution service.”

The idea for the company started during a housewarming party attended by Siebrecht and his cofounders, Francis Duong and Edmond Yue. They found themselves talking to an entrepreneur whose company makes and sells barware, martini glasses, and coasters. The owner was complaining about the cost and challenges of warehouse space, both finding it and forecasting the company’s growth accurately enough to sign a lease for a right-sized space. Siebrecht and his friends, struck by a potential business idea, asked the owner whether he would be a client if they could come up with a solution for the problem. A few months later, the company, True Brands, was Flexe’s first customer.

In addition to its versatility, Flexe also offers interoperability with the other technology that’s powering the direct-to-consumer revolution. This warehousing tool integrates well with Shopify, the Canadian e-commerce tool that many startups use for their online stores. It’s part of the reason why it can be relatively easy to start one of these brands. Whereas before, a new company would need a physical stores, a network of warehouses, and print advertising, now, a combination of Instagram, Squarespace, Shopify, and Flexe can provide much of the support, backend, and logistics. Many of the traditional fixed costs of building a brand have disappeared.

At Great Jones, for example, orders comes in to Shopify, pass through Flexe and a warehouse partner, which prepares and labels packages, and then get shipped out through UPS. The process exemplifies how intricate and efficient the pathway from clicking a button online to receiving a box at your doorstep has become.

“Price impacts our margins, but the service element is more critical,” Moelis says. “When someone places an order, can the warehouse fulfill it correctly? Can they maintain a strong level of service while they’re at scale? While making the decision to work with Flexe, we spoke with a lot of founders and have been really satisfied.”