Ohi, a startup looking to democratize same-day delivery for smaller direct-to-customer brands with analytics and micro fulfillment centers in unused commercial spaces, has raised $2.75 million in a seed funding round led by Flybridge Capital Partners.
The company has set up its initial MFCs in Manhattan, Brooklyn and Los Angeles, with more to follow in San Francisco, Washington, DC and other major metros, said founder and CEO Ben Jones. He got the idea for the company when he was forced to rely on ecommerce deliveries when laid up for a year with an injury. Everyone not named Amazon, he said, brought him stuff in 3-5 days.
Ohi’s vision is that a same-day delivery option at checkout will boost cart conversion rates for smaller brands among consumers who have become accustomed to the service level through the Amazon effect.
Jones said the company’s technology platform provides real-time inventory visibility and order routing so sellers can forward position stock closest to urban demand. Same-day deliveries are handled by partners including Doordash, Postmates and other courier services, and gig workers do the picking, packing and shipping. Each facility is no more than 2,500 square feet, using vacant commercial or retail space.
“We look for spaces with good (vehicle) access, where it can be pallet in/pallet out, it’s secure, well ventilated and no pests. That’s it,” said Jones. “We put in our technology and shelving, and it’s ready to be used as an MFC. It’s very lightweight and scalable and can go up in two weeks.”
Jones said the small size and non-traditional locations distinguish Ohi from “warehouse-on-demand” providers like Flexe and Flowspace, which tap a network of available space including 3PL facilities. It’s closer to the model of Darkstore, another on-demand space provider.
As the company scales, instead of striking leasing deals with landlords Jones said he’ll offer them a cut of the revenue from sellers.
“That will be good for us, reducing our fixed costs and risk, and good for them, with more revenue than a traditional rental model,” he said. “We tried that with one of our first spaces, but didn’t have enough ecommerce companies at the time to make it work. We decided to just lock down the spaces first.”
Brands pay a low monthly fee to access an Ohi MFC and use its technology platform. More expensive tiers unlock things like inventory prediction and optimization, including continuously monitoring and rebalancing stock and SKU levels. Ohi charges a per-item transaction fee for picking and packing services.
Jones said all Ohi locations currently are multi-client, although it could conceivably create single-client sites if warranted. “For smaller DTC startup brands, they benefit by aggregating their demand with others, and they can never afford to have a single location of their own,” he said. “In the future, maybe brands could partner together (at Ohi locations), offering ‘if you like that, you’ll like this’ type orders at checkout.”