The Future Accelerated
One of the common refrains during the 2020 pandemic was that COVID-19 accelerated trends long in the making. Nowhere is this more evident than in online shopping. Online retail has been gaining market share from offline at a steady pace for the last decade. In January 2010 e-commerce made up about 6% of all retail sales in the United States. That share rose 11 points to 17% over the following ten years. In the first ten months of 2020 that percentage jumped another three points to 20%. In the UK, that figure is even higher at 30%, and excluding grocery, it is 40%. The pandemic has pulled forward five years of e-commerce adoption in a matter of months.
The implications of this shift have been vast. The ease at which people can shop for almost endless items which can be picked up same day or delivered the next has forever altered consumer expectations around convenience. This has been a blessing and a curse for retailers. The digital channel has been a lifeline to many struggling retailers, but it has also eroded margins as they are now faced with serious logistical fulfillment and delivery challenges. Delivery services like Instacart have stepped in as an effective — if not extremely costly — solution to some of these challenges, but most retailers are looking for ways to effectively move into this new, accelerated world of online shopping in a way where they are in control of their own destiny. They look upon the 100+ retail bankruptcies over the last six years and are choosing a different fate. But to do so, these retailers need new technology solutions, giving rise to the next retail battleground: micro-fulfillment.
Micro-Fulfillment as the Panacea
Nowhere is the pain of the rapid shift to e-commerce more present than with online grocery. Grocery has specific supply-chain challenges that make online ordering especially difficult. Retailers that cannot overcome these difficulties face rapidly declining market share and profit margins. Much of grocery is perishable meaning the time a product has to get from the manufacturer to the end consumer is greatly condensed. On top of that, retail grocery profit margins are already incredibly thin at sub 3%, and that is without the added cost of fulfillment and delivery of online orders. Retail is great because your consumers do the fulfillment and pickup for you — not always the case with e-commerce; however, buy online and pickup in store (BOPIS) purchase have proven to be extremely popular during the pandemic. But even with BOPIS, retailers need a better system to manage and fulfill those incoming orders more effectively.
Much has been written about Walmart’s key advantage against Amazon — their 4,700 retail stores located across the United States, many of which can act as distribution centers for online orders. Not to be outdone, Amazon has plans to expand its network of 110 active US fulfillment centers to over 1,500 in the coming years. And thousands of other retailers, both large and small, are looking to Amazon and Walmart for strategic inspiration on how to manage this transformative shift in retail.
The best solution for nearly all these companies will incorporate a micro-fulfillment strategy. Micro-fulfillment involves using small, highly-automated storage facilities near the end customer to bring down the cost and time of delivering goods. This strategy turns physical retail locations — either in part or entirely — into fulfillment centers. But turning a store into a warehouse creates new challenges. Retail stores are not designed to maximize fulfillment efficiency, but rather to maximize the average oder value per shopper. Often, these goals can be at odds. And stores, unlike warehouses, have shoppers walking the aisles. Having robots going up and down the aisles grabbing items for online orders would most likely cause a panic.
A successful micro-fulfillment solution will:
- Enable retailers to lower their overhead costs associated with online orders while driving up efficiency
- Be relatively low-cost and agile
- Seamlessly integrate with all major WMS, ERP, OMS, POS and Planogram systems
- Facilitate both faster last-mile delivery and BOPIS
If ever there was a time to integrate such a solution, the beginning of 2021 is it.
The Workhouse Animal
We are excited to announce that MaC Venture Capital has co-led the series seed round of Ox, a digital order fulfillment platform that enables stores to operate as micro-distribution centers. Ox is building omnichannel order fulfillment software that increases retail productivity around e-commerce. The ox has been the workhorse animal for the human race dating back to 4000 BC, and Ox will be the workhorse platform for companies navigating this suddenly accelerated future of retail. Ox’s platform is focused on creating efficiency through simplicity. With that mindset, they have built their technology to be as light and versatile as possible. Ox allows companies to fully optimize their fulfillment operations by empowering their workforce to do more. The platform integrates seamlessly with current systems to automate pick routing and maximize units picked per hour. Ox offers a backend fulfillment platform and the associate facing technology that routes associates through the facility. Their collective product array is entirely modular and is structured to fit into any pre-existing fulfillment and inventory management systems a retailer may already have in place. The Ox solution allows stores to increase visibility of operations and strengthen their order fulfillment capabilities by improving the picking and packing process through optimized “pick walks’’ based upon actual store layouts and AR-enhanced item selection. The provided portal allows retailers to connect orders, batching and optimizing them for the most efficient item pick walks, and track fulfillment in real time.
Our co-lead in this round is Cortado Ventures out of Oklahoma and we’re very excited to work alongside one of the most notable Midwest venture firms. We’re equally excited about our other co-investors in this round: Rise of the Rest, Willow Growth Partners KCRise Fund, Florida Founders and Vuzix.
Ox was founded by Charu Thomas who turned an academic passion for wearable computers and augmented reality into an enterprise-ready company that is already delivering results for some of the world’s largest retailers. Charu is a former Georgia Institute of Technology researcher (where she worked with Google Glass inventor Thad Starner) and the youngest ever person to receive the Forbes 30 Under 30 Manufacturing & Industry distinction. Charu’s team is equally impressive: COO Tanner Green has a background in product design working with retailers like Walmart, Lowe’s and Sam’s Club. CTO Phillip Cannon has six years of supply-chain software development experience and has built a platform that makes picking orders 40% faster and 80% more accurate over existing technology.
The Future is Bright
While many of us have turned to online ordering during the pandemic for health and safety reasons, once we return to a more normal world we will stick with it because of the time it frees up for us to do other things. If a mother of three can have the option to not navigate a grocery store with three rambunctious children, and instead have her groceries delivered to her in a matter of hours, the choice seems like a clear one. As consumer expectation around convenience calcifies, all retailers, from the corner market to Walmart will need to adapt their retail strategies to accommodate this new future of shopping. Additionally, retailers want to get the most out of their teams. When technology works well it enables human productivity gains for the betterment of everyone. Just as the ox has been driving human productivity gains for the past six thousands years, Ox stands poised to do so for the future of retail.
Michael Palank led the Ox Series Seed round for MaC Venture Capital.
About MaC Venture Capital
Formed in 2019 after the merger of seed funds Cross Culture Ventures and M Ventures, MaC Venture Capital (MaC VC) backs technology companies that create infectious products that benefit from shifts in culture trends and behaviors. MaC Venture Capital identifies emerging behavioral trends and unaddressed multi-billion-dollar challenges, where technology will increase efficiencies, create new markets, and/ or expedite the move from a growing trend to a cultural and behavioral norm. MaC VC invests in talented and uniquely qualified entrepreneurs creating the next generation of technology and consumer products at the seed stage.