What if you found an interesting product on social media, decided to order it and it appeared at your door an hour later because it was delivered from a mile away?
That’s the system Santa Monica-based startup Gently is trying to create, starting from a handful of neighborhoods in Southern California and eventually moving to other U.S. locations.
Using lessons he said he learned while working logistics for a subscription retailer, cofounder Elian Pres-Gurwits explained that Gently aims to upend both legacy last-mile shippers and the gig economy.
“I really learned the importance that shipping has for the success of consumer-facing brands,” he said. “That was a major inspiration that drove me to build this business. We want to enable all brands and retailers to provide state-of-the-art retail logistics to their shoppers.”
Instead of hoarding its product stock in one location, Gently sets up smaller “nanofulfillment centers” throughout a service area, using predictive analytics and subscription histories to stock them accordingly. Gently partners with brands – such as Cloud Paper, which makes toilet paper made of bamboo – and then stocks popular items and delivers them for $6 each. The company pays the delivery fee to Gently but has the option to recoup part or all of that fee from the customer.
Microfulfillment is not a new concept, according to supply chain expert Nick Vyas, who cited newspaper delivery systems and the U.S. Postal Service. However, the pandemic created an economy in which most consumers expect their items to not only be delivered to their doorsteps, but to be delivered at a moment’s notice.
“You certainly have this opportunity space. In that space, there is a tremendous opportunity for innovation and growth,” said Vyas, who is executive director of the Kendrick Global Supply Chain Institute at USC Marshall School of Business. “It’s ripe for innovation and exploration and there is room for a lot of new players to come into the microfulfillment and last-mile delivery space. It’s not just the phenomenon that spiked during Covid.”
Targeting fulfillment
Pres-Gurwits said he saw firsthand the seesaw effect logistics can have on consumer satisfaction with a brand while he worked on the supply chain side for beauty product subscription service GlossyBox.
Customers, not surprisingly, liked a delivery that showed up on time. Nor was it a big revelation that late deliveries peeved customers. Most pointedly, even when a consumer loved a certain product, a late delivery of it often led to losing that customer.
“We saw the impact that logistics, and especially shipping, has on the brand. When our boxes were delayed, it drove enormous churn,” Pres-Gurwits said. “The customers became brand advocates, but in a negative way. When the boxes arrived on time, predicably and fast, we transformed those customers, especially on first interaction, into positive brand advocates.”
When Pres-Gurwits founded Gently with business partner Anas Aljumaily, they strove to shorten the distance between product and customer. Gently’s brand partners deliver their products to a localized distribution center – currently, the company’s Santa Monica headquarters. Using predictive data from the clients, Gently then stocks a series of nanofulfillment centers in other neighborhoods with the requisite amount of product. Then, Gently delivery drivers in three-wheel Arcimoto Flatbed vehicles make their rounds – rounds that cover a substantially smaller geographical footprint than centralized fulfillment vendors, making the use of EVs viable and same-day delivery the norm.
“Instead of a 25,000-square-foot central warehouse facility, we have 25 1,000-square-foot facilities that are deployed across a city and centered specifically where our existing brand partners have the highest customer penetration, so we can create smaller routes,” explained Michelle Saks, chief operating officer of Gently. “Obviously shortening routes adds more to the sustainability framework of our model as well. Using predictive analytics, we are able to determine which inventory should be deployed to those specific nanocenters.”
Gently made its first delivery in April, bringing an order of Cloud Paper’s bamboo-based paper products to a doorstep. Gently is nearing the 1,000th delivery milestone and will soon open fulfillment centers in the San Fernando Valley and Orange County. Other local companies Gently delivers for are California Baby – a Baldwin Hills/Crenshaw-based baby skincare retailer – and OWL Venice, a digestive cleanse maker located in Venice.
While subscription-based retailers that make regular shipments to customers have obvious synergy in microfulfillment, Saks contended that Gently’s model will also make a lot of sense for retailers selling products a la carte.
“It’s definitely really exciting for subscription model-focused businesses because they are already thinking holistically about where inventory should be and how many orders per month go to certain neighborhoods,” she said. “But increasingly, it’s also (exciting) from the perspective of brands that understand that customer acquisition increases significantly if you are able to give them a cost-efficient and extremely fast, same-day experience.
“It’s a game-changer for brands that immediately want to capture the attention of their customers,” Saks added.
Vyas said microfulfillment typically makes the most sense in urban environments, where distinct neighborhoods and their own mini-economies develop and a traffic-intensive footprint makes citywide deliveries challenging.
“It works in high-density, high-velocity markets. In that case, I think when you talk about Gently, the initial approach makes sense,” he added. “When you start to scale that up to other commodities” – time-sensitive things like food – “that’s when you start to run into other issues. You don’t know the velocity of that commodity, or how fast it’s going to move.”
Expansion plans
Gently has a fairly ambitious growth plan. By the end of the year, the company aims to reach San Diego and the Bay Area. Early next year, Gently plans to enter markets in Dallas, Chicago, Miami and New York City.
And in September, Gently began a partnership with New York-based DeliverZero, a manufacturer of reusable meal containers. Restaurants that partner with DeliverZero will make meal deliveries (through their typical delivery methods, not through Gently) of food packed in DeliverZero’s plastic containers, which, the company claims, are reusable up to 1,000 times. When the customer is done with the containers, they can leave them outside their door or home and prompt Gently via the delivery app to swing by and pick them up, after which it will be cleaned in a separate facility and returned to the restaurant from which it originated. DeliverZero pays for the pickup, delivery to the washing center and return to the restaurants of the containers.
The aim of this initiative for Gently is to reduce the single-use product waste often associated with takeout meals, and the company’s algorithmic route-assigning will task drivers on a concurrent route with retrieving the containers, to maintain efficiency.
“What (DeliverZero) is doing for the environment is obviously something that’s very exciting, and they can add to that by using an all-electric fleet of vehicles to touch the major pinpoints of their delivery,” Saks said. “From their perspective and our perspective, being able to support a business that cares about sustainability as much as we do is pretty amazing.”
Making it work
Pres-Gurwits said planning and expansion were easier for his company because of the commercial footprint they’re looking for. They expect nanofulfilment centers to be around 1,000 square feet in size, which means they’re probably going to be subleasing part of a larger, unrelated operation in a neighborhood center. And at $6 per package, Gently aims to undercut those legacy shippers, which tend to charge vendors by package size and weight.
“It’s a key pillar of our business, that if we want to build an infrastructure that enables brands and retailers to be fast, we also need to make it sustainable and cost-efficient. Otherwise, just fast is not enough. If it’s just a premium product, it will only reach a very select audience and not be able to scale,” Pres-Gurwits explained. “To do that, we needed to find a way to build this business and the operational blueprint without making the same investments (as legacy competitors). For us, that was made possible substantially by leveraging underutilized real estate.”
Vyas, from USC, said a new fulfillment company like Gently will likely have to be capital-intensive at launch, for the sake of gathering and processing enough data to flesh out the logistical operation. And as the operation scales up, it will probably encounter tension between its service guarantees – deliveries within 48 hours, per the company – and product demand. (Pres-Gurwits said Gently is so far funded entirely by its founding team but would not disclose figures.)
“Anytime someone guarantees a service model with a fixed price, it concerns me, because it defies the supply and demand variability,” Vyas explained. “The biggest trouble that exists in the supply chain, and will continue to, is demand sensitivity. How do I model and then build my resources to meet my demand frequencies? What really works in those areas is price sensitivity to create some influence on the demand.”
Put another way, think of surge pricing in rideshare services such as Uber or Lyft. Higher prices will simultaneously attract more drivers to an area while prompting some passengers to simply wait longer to call a ride.
“You have to establish the baseline in terms of resource allocation and balancing,” Vyas said. “Anytime you guarantee something, you’re working against the clock. When you’re working against the clock, you have to compensate with workers and resources. If you don’t have predictable forecasting for this event, you have to pump the money in (to develop that forecasting).”
Still, entrepreneurs with plans similar to Gently’s model will probably try to carve out a similar role in the fulfillment market, Vyas said. As he noted, Gently’s model is highly sensible in dense, urban environments, and the fact they use small, nimble vehicles works well in concert with L.A.’s very specific last-mile delivery demands.
“This is the holy grail of last-mile delivery,” Vyas said. “It’s no longer the last mile: it’s the last 500 feet, 1,000 feet, quarter of a mile. The whole paradigm of ‘last mile’ needs to be broken up.”
