Aspiring brands were once at the mercy of the legacy players. They were forced to succumb to the giants’ economies of scale in logistics, fulfillment, and distribution.
As a result, these young companies struggled bringing their products to market. They also had a tough time getting their products to the customer in a timely manner.
That said, with recent innovations in logistics, new brands are acting with unmatched agility and disrupting their larger incumbent peers. Prior barriers to entry have all but collapsed.
Product Design & Casper’s “Bed-in-a-Box” Game Changer
One of the key tenets of Casper Sleep was that existing companies were wasteful and inefficient in the way they moved around mattresses. Countless brick-and-mortar stores and armies of salespeople simply weren’t necessary if the USPS could take over distribution.
Basically, Casper figured that if you could put a bed in a box, you could ship it—no storefront or square footage necessary. This has turned out to be Casper’s greatest advantage.
The company even delivers through white-labeled versions of existing on-demand services like Postmates and Stuart. According to the company, if you’re in New York or San Francisco or Los Angeles, you can get Casper delivered “faster than you can get a slice of pizza.”
Casper’s “bed-in-a-box” concept has made shipping easier and cheaper for the company. It has also improved the experience for its customers, who can enjoy a stress-free ordering process thanks to the promise of free, easy returns.
Shipping Capacity Is Growing & Becoming Cheaper
Buoyed by the rise in global eCommerce sales, traditional transport methods—from air freight to ocean to trucking—are rapidly expanding. Costs continue to decrease in line with increasing capacity, and there are new, creative ways to leverage more space on trucks, planes, and ships.
Previously, if a young company did not have a big enough shipment, logistical options were scarce and costly. This is no longer true. A relatively new concept known as less-than-containerload (LCL) shipments was initially propelled by growth in small package shipments from eCommerce vendors.
In simple terms, shipping companies are aggregating many of these smaller shipments in order to maximize capacity.
For this reason, trucking has been forced to evolve. eCommerce is generating more freight that moves by truck, and the less-than-truckload (LTL) sector—which specializes in smaller shipments—is gaining business as retail emphasis shifts from large truckloads delivered to stores to smaller, more frequent shipments sent to fulfillment and local distribution centers. These centers then ship directly to the consumer, thereby maximizing convenience and efficiency.
IoT Is Driving Logistics Costs Down & Providing Transparency
Young eCommerce companies are turning to new cloud technologies to drive costs down while using their existing infrastructure. Companies like Flexport, Freightos, and Haven have successfully automated others’ logistics processes, from scheduling to paperwork—essentially acting as a virtual supply chain-as-a-service (SCaaS).
By using IoT and sensor technologies, new logistics firms are giving companies transparency, culminating in more optimized processes and a better customer experience overall. In addition, real-time data feeds on the inventory location and status have become the norm. Flexport in particular is investing $110 million in warehouses around the world to keep freight within its ecosystem.
On a separate note, companies like Honeybook are allowing companies to outsource key business functions, and letting entrepreneurs focus on their strengths.
Warehousing Is More Dynamic than Ever
Similar to shipping, bursting eCommerce volumes are also found in warehousing. It is estimated that for every $1 billion in new eCommerce sales, 1 million square feet of warehouse space is needed. And yet, the bar is no longer so high that young companies can’t get their products into local warehouses. Capacity is skyrocketing, costs are plummeting, and new and creative options are readily available.
In a brilliant Uber-like broker play, platforms such as Flexe are creating storage space markets to connect young companies with local warehouses. Flexe currently works with more than 750 warehouses across the United States.
Dubbed the “Airbnb of Warehouses,” the company’s broad distribution can help prime a young company’s inventory for efficient last-mile delivery, hitting the mark with quick turnaround and extremely responsive customer service.
Brands like Casper and Toms have been known to use Flexe for peak-demand times such as summer moving season (Casper) or holiday season pop-ups (Toms).
Bigger Companies Are Hustling to Catch Up
As young companies become more competitive and seize market share, legacy giants are caught flat-footed and racing to improve their logistics capabilities. They are resorting to partnerships and M&A in order to play catch-up.
In the grocery arena, Kroger and Aldi jumped at the chance to partner with Instacart, which swooped in to accommodate rigid grocers with little to no eCommerce or delivery capabilities. Instacart has achieved renewed growth by delivering groceries for some of the largest retailers, including Albertsons and Costco.
On the M&A front, Albertsons, Target, and H-E-B have all acquired food delivery startups to enhance their delivery capabilities and digitize their operations. Through its $550 million acquisition of Shipt, Target began offering same-day delivery in February 2018.
Through innovative product design—and by leveraging new developments in shipping and logistics—young companies are now reaching customers and fulfilling orders in ways that only large, legacy players were previously able to do.
Consequently, disruptive brands have become much more agile. They can provide unmatched customer service that commands loyal followings.
As eCommerce grows, back-end innovations will afford young companies every tool they need to compete. Significant growth potential exists not only for the front-end, consumer facing brands, but also for the innovative back-end companies that enable them.