‘Ware-bnb’: The rise of on-demand distro

Two-way customer base

Created in 2013 by Karl Siebrecht, the current president and CEO, Seattle-based Flexe slowly grew its network of virtual warehouse space for a few years until it exploded on the North American warehouse scene last year.

“When I first started in January 2016, we had just under 100 warehouses to work with,” said Dominic Atkatz, a Flexe sales associate. “Now, we have close to 800 warehouse operators in the network across North America. There are still virtually no competitors now at this scale; no one else has more than 50 warehouse partners. We’ve created a real barrier to entry into this market.”

As Flexe has grown over the last four years, it has attracted the interest of venture funders. In July 2016, Flexe closed a US$14.25 million in Series A investment from a group led by California-based Redpoint Ventures. This investment raised the total funding for the company to $20.55 million, including $6.3 million in seed capital.

Amazon spent billions of dollars and leveraged its network of 450-plus distribution centers “to create a huge competitive advantage when it comes to reducing delivery time and costs,” said Siebrech. “Our marketplace enables any business to level the logistics playing field by providing immediate access to a much larger network of warehouses and related services.” Today, the estimated 10 million square feet of capacity in the Flexe network is about a quarter of the space owned and operated by Amazon nationwide.

One element of Flexe’s growth has been its utility not only to the demand side – shippers and 3PLs in need of extra inventory space for last-minute “pop-up” fulfillment – but also to the supply side, with warehouse operators that are looking for ways to add revenue during lull periods in their inventory cycles. “Some operations are suited to do simple storage,” said Adrian Grigg, Flexe’s vice president of sales. ”Others are looking to get into the fulfillment business, but they may not have the reach to cover national delivery.”

For example, a novelty goods wholesaler called Fun World, which sells holiday-themed products, was looking to utilize its 400,000-square-foot warehouse in between the many holiday peaks, and found that Flexe could put whatever unused space was available on the network market and then dial it back if more inventory came in. As a result, Fun World could charge $0.75 per square foot in a mostly full facility, earning twice as much as what’s needed to manage the property. “If you have excess capacity, we can help bring revenue,” Grigg added. “Some revenue is better than no revenue at all.”