This start-up is the Airbnb of warehouses and has Amazon in its sights
A Seattle start-up 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 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 per cent 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.
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 per cent 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. “Start-ups 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 gamechanger.” Flexe declined to share financial numbers beyond saying sales grew 400 per cent last year.
Shoppers’ accelerating shift online is straining warehouse space around the US, 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 homeimprovement 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, health care and government clients, signed on with Flexe two years ago to sell extra space in its 1,000 facilities in 90 markets.