Flexe is one of those very rare startups that could (still) shake up the whole online retail market in the US. Flexe has slowly been bringing more and more warehouse space and fulfillment services to its platform and is now slowly reaching scale at which it truly becomes interesting.
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.
Building a warehouse infrastructure without owning or operating even one warehouse. Just like the world’s largest taxi service does not own one taxi (Uber) and the world’s largest The power of the internet.
Now it becomes interesting, as Flexe today is launching next-day delivery:
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.
For direct-to-customer brands like Casper, Flexe is a perfect solution: It provides infrastructure but it keeps them in control of branding and user data. (as oppose to going through Amazon)
Flex started as an ‘overflow’ service but added online order fulfillment last year, meaning warehouse owners not only provide space but can also provide packing and shipping for indvidiual order directly to consumers.
It makes sense for Flexe to keep expanding providing tools and technologies to make this easier for warehouse owners.
The company has raised only $20.8 million to date. Compared to its market potential, Flexe is almost certainly still pretty small. For one, you probably haven’t heard of Flexe before. The company also only provided relative growth data to Bloomberg: Sales grew 400 percent last year.
To get sense of the opportunity for Flexe, which now has 200 partners here is some context:
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.
The big problem/challenge is of course that everyone needs that same warehouse space at the exact same time: Holiday season. Flexe can be a solution for that time period but it is not clear yet if they truly are.
Ryan Sarver, a partner at Redpoint, one of the investors in Flexe, on the company:
FLEXE has built the first and largest marketplace for on-demand warehousing and fulfillment using over 550 warehouse locations all connected by a single unified software platform. Today they launched a new fulfillment service for e-commerce companies, called Next-Day Delivery, that let these businesses deliver their goods even faster than Amazon Prime, but without investing billions of dollars in capital expenditures. It’s “fulfillment as a service” for e-commerce companies giving them the same reach as Amazon without the capital investment, while maintaining their brand identity and the direct relationship with their customers. […]
From the first meeting we had with co-founders Karl, Ed and Francis, we realized that their approach to re-thinking the $1.5 trillion a year logistics industry had the potential to be transformational. We’re proud to partner with them as they continue to think big, and as summarized by a poster in the FLEXE office, “Move fast…and don’t break things.”
Flexe is based in Seattle. Even if it weren’t, it would not be a surprise if the startup got purchased by Amazon some time soon.
Because over the long run, Flexe and similar startups pose a far greater threat to Amazon’s long-term success than, say, a Walmart does, that may have the willpower now but is lacking a sense of direction.
Hence, the industry should hope this does not happen. And every company should take steps, small and large, to ensure this does not happen. (For starters, make sure to include re-negotiation clauses in contracts for the case of Flexe’s ownership changing.)
Of course, if Walmart management were smart, Flexe would be a far better portfolio company for the retail giant than mildly successful online retailers.. Even if Walmart is not interesting in buying the company (yet), Flexe would also be a perfect candidate for a strategic investment. (To, for example, prevent Amazon from buying and gutting the startup in the future. But also for laying the groundwork to use the Flexe infrastructure as well. Being Flexe’s best customer could lift not just Flexe but Walmart’s online operation as well.. Not for the whole online business of Walmart of course. But to catch up with Amazon, Walmart could deploy a two-tier logistics approach, half of it its own warehouse and stores, the other half Flexe locations.)
For VCs, if Flexe can execute the concept, it would propel the company to the core of the US commerce market’s logistics side.
Whatever will happen, Flexe is something to keep an eye on. It is fascinating that there aren’t copycats all around the globe by now. Does anyone know of startups doing something similar elsewhere?