Crowdfunding website Kickstarter has seen $2.2 billion move through its website since 2009 in support of startups offering all kinds of outside-the-box products: everything from games to gadgets, smart watches to luggage. It’s revolutionized startup funding, providing new companies with the potential for a built-in order base and publicity. We’ve all heard about massive success stories where an enterprising individual has a great idea and design for a product, then uses Kickstarter to connect that product – as direct as a bolt of lightning – to legions of fans.
But when it comes time to actually produce and deliver the product, lots of these burgeoning startups run into issues. You’ve placed a huge emphasis on product design, branding, content, SEO, and customer service, but then the difficulties of fulfilment often come along and threaten to make life difficult and limit growth. Unforeseen costs pile up: packaging, warehousing, transportation and shipping costs. At this stage, you might find yourself in the awkward position of being big enough to have proven significant sales, but not big enough to meet the threshold for big packaging and logistics companies to help you deliver that product to your legions of adoring fans. Startups run into this problem even if they’ve used more traditional growth channels than Kickstarter or one of its offspring like Indiegogo.
Supply Chain – and the thicket of Procurement, Logistics, Warehousing, and Distribution – can be a big stumbling block for companies looking to grow. It takes the kind of specialized expertise (and connections) that a product guru, branding expert, or person with a million-dollar idea rarely has.
So we found it interesting to read in Fast Company about some new companies moving into this space, disrupting the 3rd party logistics industry by offering a logistics front end to startups. These “Warehouse on Demand” companies offer services to startups that are at the point of scaling up, but don’t have the capability or Supply Chain wherewithal to work with 3PLs or manage their own distribution. These companies, including Blackbox – which started as a distribution arm for the smash card game Cards Against Humanity – offer other startups a fixed price for a total shipping solution including a website “buy” button, an eCommerce backend, warehousing, and packaging.
While these companies aren’t full-on 3rd Party Logistics companies, they act as interfaces between startups and 3pls to make the fulfilment process as smooth and painless as possible.
The article profiles Lumi, another emerging company in this space that specializes in packaging materials – sourcing, printing, delivering for boxes, shipping envelopes, packing tape, etc. – that often give startups headaches, and add unnecessary costs through inefficiency, when demand for new products starts to mount. As Fast Company’s Glenn Fleishman puts it, “there are plenty of small-time creators whose eyes may roll back in their head when they look at text found on a typical 3pl site (like ‘make sure you understand the difference between Prepackaged and Ready-to-Ship and Not Prepackaged and Ready-to-Ship’). They may be eager to remove fulfillment from their list of things to learn how to do.”
Amazon has been in this space for a while (which shouldn’t be surprising to anyone following the Logistics industry). Its “Fulfilment by Amazon” arm has been a go-to for a lot of burgeoning startups who want to avoid Supply Chain headaches. So companies like Lumi and Blackbox are competing with the heaviest hitters in the Logistics industry. They’re hoping to bite off a chunk of the $70 billion 3PL market in the U.S. by offering a solution to startups who don’t yet speak the language of Supply Chain, and are more interested in a personalized, bespoke fulfilment service than Amazon’s one-size-fits-all solution.
We encourage you to check out the fast company article for a great look at this emerging trend – yet another one of the daily interesting evolutions of the world of Supply Chain. It’s interesting stuff.
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