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Jul-17-2017 12:25printcomments

Lee Hnetinka's Darkstore Brings Cost-Effective Same-Day Delivery Services

Online brands will now be able to build relationships with their customers by ensuring access to delivery services they could not afford before.

Lee Hnetinka's Darkstore works with brands with fast-moving products or high-volume orders so they can offer fast deliveries without holding the inventory long.
Photo: TechCrunch

(SALEM, Ore.) - Delivery services form a key aspect of today’s retail businesses, and while many local retail brands with brick and mortar stores have been able to integrate delivery services, online brands seem to be lagging.

Darkstore’s model of doing delivery services holds the view that items purchased online can be delivered same day whether it is a mattress or a T-shirt.

Digitally native brands are growing and their businesses are thriving amidst the competitive e-commerce business. With this growth comes the desire for reliable same-day delivery services.

Many people would want to purchase products of their choice from online brands, but one problem they face is getting the products delivered within the same day to customers.

The digital native brands may not be able to establish brick and mortar stores everywhere, but they want to reach a wider clientele base. And, that’s the essence of going online in their business.

Now, that may be possible with Darkstore’s concept of same-day delivery services. Darkstore does not need to own warehouses or lease them, but instead, they are working out the operations with other stakeholders in the industry.

Darkstore is partnering with transportation companies that help in the delivery of the products. They are also engaging storage facility owners to provide space for the products that are to be delivered.

This is a simple model that is bringing new frontiers in delivery services.

Each day, digital native brands are offering single, superior products but at competitive prices. These brands don’t need to have brick and mortar stores, and it can be difficult if you have to own a warehouse from where local customers are able to buy your products.

However, if you work with Darkstore, you can have the products sent to a warehouse you have not leased or you don’t own and from there, they are delivered to your customers. Not only are the e-commerce brands getting more businesses, but transportation and storage space businesses are also finding the venture to be profitable.

There are warehouses, which are underutilized and the amount of money they get per square foot is too low. Darkstore has realized this downfall in warehouses and wants to make the storage spaces that the businesses provide to be more profitable. Likewise, transportation companies can chip in and offer delivery services to the locals.

The digitally native vertical brands do not need to own fulfillment centers because, for one, they may not be experts in operating fulfillment centers. However, Darkstore empowers these brands by allowing them to access same-day delivery with just a click of a button, and better still, this kind of agreement is done at an incredibly low price.

Hnetinka sees the future of digital native vertical brands to be tied to their delivery services.

Giant e-commerce businesses such as Wal-Mart and Amazon have delivery services. They have the finances to spearhead these operations. But what about the small-sized and medium-sized online brands that cannot have the money to invest in their own delivery services? It can be quite challenging for these brands, however, Darkstore brings a very promising solution that will create competition in online brands.

When you partner with Darkstore as an online brand and you have high volume orders made on your products, you stand a chance of growing. Through Darkstore, brands are penetrating markets that were limited to because they couldn’t deliver the products to the customers in time.

Darkstore came into existence in May 2016 with its founder as Lee Hnetinka. Since then, the company has been expanding and now it has operations in New York and Phoenix.

Darkstore has been providing same-day delivery for online brands using resources of third party storage facilities and shipping providers. Hnetinka saw Darkstore as the next-generation solution that will provide faster deliveries in locations where online brands could not be able to offer such services.

Wal-Mart and Amazon are currently two tech giants that have tried the expedited delivery services and while they may be doing well, many online brands may not find it desirable to work with them.

"Darkstore puts the power back in the producer’s hand to market and sells their goods." -Lee Hnetinka

Through Amazon Prime, retailers can get deliveries done on an annual fee- and that’s is unlimited 2-day deliveries. Wal-Mart, on the other hand, offers 2-day delivery, but that is for orders that are valued at $35 and above.

While these platforms may work for some retail brands, you may find that some producers are quite often overlooked and don’t enjoy the services. Again, small-sized retail brands may not get proper advertising. These brands may not have control over their own sales data.

Hnetinka says, “Individual producers also don’t like the idea of a large multi-national such as Amazon owning their products and sales data.”

Supporting the idea of Darkstore and how it can help these brand, Hnetinka says, "Darkstore puts the power back in the producer’s hand to market and sells their goods.

"We are simply a means for them to provide a same-day delivery service to their customers, without making the sacrifices that Amazon and other web-stores force you to."

Darkstore seeks to redefine customer experience by allowing e-commerce brands to get access to on-demand same-day and one-hour delivery services. These services have been cost prohibitive to many online brands.

Darkstore has partnered with traditional couriers like UberRUSH, Deliv, and AxleHire. Among the brands that are engaging with Darkstore include Frank + Oak, Tuft & Needle, Master & Dynamics, Peel, SkiPods, Wildfang, and others. After setting their feet in San Francisco, Phoenix, and New York, Darkstore extends their services to other locations like Seattle, Los Angeles, and Chicago.

The selling point and success of Darkstore lies in the partnerships it has formed with other businesses. Gary Fritz, the president of Expedia.com brought the idea to Hnetinka’s team after looking at the risks that come with having to set up their own warehouses.

It would be expensive to bring up warehouses and for brands that are trying to beat the giant e-commerce businesses like Amazon, that may prove impossible. Gary Fritz felt that leasing a warehouse to expedite deliveries was not in their business plan.

Darkstore has since expounded the idea and its initial partnership was with StorageSF, which is a company offering storage facilities in San Francisco. Darkstore offered them an impressive amount of $7.70 in every square foot and considering that StorageSF was only getting less than $2.00 for same space, the new partnership with Darkstore seemed quite profitable.

For instance, when Darkstore delivers a mattress for Tuft & Needle, which retails for about $750, it would take roughly $20 and then share that amount with StorageSF partner. The revenue is shared 70/30 with the storage partners, but the shipping and delivery companies are paid by the producers of the goods.

Darkstore model of doing business is very cost effective in that, the storage companies would take advantage of their excess space and turn it into an opportunity of making money. So, for the storage companies, they are finding new business and better still, the revenue seems to be more than what they would get in their typical way of doing business.

Darkstore stretches its benefits to the shipping companies are now getting new deals to deliver goods to local people. Darkstore does not take the operations of the warehouses, it pays no lease and has no ownership of the properties - the storage companies continue to manage their operations.

Using the Darkstore app, a storage facility will accept the products or freight that is delivered to the warehouses and it also processes the orders. Darkstore shows the storage facility operators how to use the iPhone app.

It is a pretty simple app that’s easy to use. When an order comes in, the staff of the storage company will scan the SKU and feed the number of the items to the system. The retail brand that has provided the items can be able to track their inventory.

They will know how many items have been taken for delivery to customers in any given locations. As the products are ordered, Darkstore API makes an update to ensure the orders reflect in the system.

Brands using Darkstore delivery services are finding that they can meet warehousing and fulfillment cost by only paying 3-5 percent from their sales. That is something incredible. They are not owning warehouses, they are not owning fulfillment centers, and they are not employing staff to offer these services.

With an estimated 4 billion orders being executed in e-commerce brands within the United States every year, there is a huge potential for growth in delivery services. Amazon accounts for 2 billion of the 4 billion orders that are done annually for e-commerce business, and that shows how Amazon has taken control of the online business.

However, that may be changing with Hnetinka’s same-day deliveries. Of the 2 billion orders that are associated with non-Amazon, Darkstore thinks that they can take about 15 percent of the market. That would be something like 270 million orders.

If this comes to reality, then Darkstore would be talking about an average revenue order of about $9, which translates to about $2.4 billion- and that’s the Darkstore’s 5-year projection.

Hnetinka feels that Darkstore is like Amazon Web Services that changed the way brands are able to acquire server space with minimal budgets. This time, however, Darkstore thinks of the same idea but for real space. Initially, Amazon Web Services involved brands taking only one server and setting it up just for their operations.

However, with the new changes in Amazon Web Services, you have a single server being shared by many companies, which means they are scaling down their cost and ensuring efficiencies. That way, startups that are trying to remain afloat in the competitive business are able to get a server space at a very minimal cost.

This idea is likened with Darkstore’s delivery services in that, businesses can share real space, and they don’t have to own it. They are using the space for the storage companies to make their ends meet as regards to offering timely delivery services to their customers for orders made. There is the element of cost saving with the Darkstore concept and online brands are able to access same-day fulfillment centers without much cost.

Darkstore is thus helping online brands to be able to take advantage of same-day delivery services that have only been largely associated with brick and mortar businesses.

Just like Amazon Web Services allowed online businesses to get server spaces at reduced costs, Darkstore is striving to bring fulfillment centers to online brands that would find it expensive to set up their own.

Online brands will now be able to build relationships with their customers by ensuring they are able to access delivery services, which they could not because of the lack of warehouses or delivery systems for the producers.

Connect with Founder Lee Hnetinka today:

Source: Salem-News.com Special Features Dept.


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