Today’s cutthroat e-commerce environment, defined by consumers’ insatiable appetites for fast shipping, has spawned a network of technology-centered logistics providers for online vendors and retailers seeking to meet that demand.
Founded in 2017, San Francisco-based Deliverr is one of the contenders. The company, which announced the close of a $23 million funding round on September 24, fulfills orders from online merchants using a network of third-party warehouses that ship most items in two days or less.
With shoppers increasingly factoring in shipping speed when they purchase an item, Deliverr has a simple value proposition, co-founder Michael Krakaris told FreightWaves. “We believe fulfillment is a revenue driver,” he said. “We put [merchants] in the best position to make a sale.”
A sector grows
Deliverr joins a hot market. The tech fulfillment sector is estimated at around $1 billion and growing, an e-commerce consultant (who asked to remain anonymous) told FreightWaves.
Other players in the space include Flexe and Tompkins International. Each company has a slightly different model; Tompkins, for example, offers a retail platform and robotics.
Deliverr targets merchants that sell $1 million or more of merchandise via the major marketplaces including Walmart (NYSE: WMT), Amazon (NASDAQ: AMZN) and eBay. “But we work with everyone,” Krakaris said, “whether you’re a huge Fortune 500 company or mom and pop shop.”
The company uses a combination of data analytics and physical infrastructure to distribute inventory from online merchants across its warehouse network. “We’ve got a lot of intelligence going on, so we’re always figuring out how can we make sure to put [inventory] close to buyers,” Krakaris said.
Once an online shopper clicks on an item, Deliverr’s technology selects the cheapest fastest shipping option. A warehouse gets the order, and a carrier picks it up.
Among other efficiency tools, the platform features a “dynamic badge” function that lets vendors know when they need to reorder inventory. A countdown clock on each details page shows how much time shoppers have left to purchase in order to receive the item in two days or less.
Despite the surge in e-commerce, there is still plenty of warehouse capacity in the United States, Krakaris said, explaining why the company partners with third-party warehouse operators instead of owning the properties outright. “It’s really a software problem,” he said. “We’ve been able to solve the two-day problem without owning a single asset.”
Collaborating, and competing with Amazon
Krakaris described Deliverr’s relationship with Amazon and other sales channels as “dynamic.” Most of the e-commerce giants run their own in-house fulfillment operations, among them Amazon’s Fulfillment by Amazon program.
Deliverr might take some business away from the retailer’s logistics division, but it also fulfills Amazon orders. Plus, Krakaris said, many of its customers were shipping items themselves before signing on with Deliverr.
“We’re unlocking more selection that otherwise wouldn’t be available online with fast shipping. It’s an overall positive to the market.”
The amount of business Fulfillment by Amazon is losing to Deliverr and other tech fulfillment companies is still small, according to the e-commerce expert.
Next steps
In tandem with its fundraising announcement Deliverr on September 24 launched a two-day shipping program for Shopify (NYSE: SHOP) stores.
The company also plans to add more warehouse partners to its network and boost the employee headcount, which now stands at 50 staff members.
The recent funding round, led by Singapore-based logistics real-estate provider GLP with participation from venture firm 8VC, will help the company meet its growth targets as the industry continues to evolve, Krakaris said.
More urban warehouses will be required as the definition of fast shipping moves from two-day to next-day and two-hour delivery, he explained. But at some point, limits will kick in.
“Anything faster than two-hour delivery you’re talking about teleportation,” he said. “Then we need different technology.”