In today’s retail landscape, what does it take to become the “Uber” of fulfillment services? Lee Hnetinka may have found the answer with his new third-party logistics company, Darkstore. Based in San Francisco, Hnetinka’s concept merges the best of drone technology, one-hour delivery services, and instant fulfillment to create a service that helps companies get access to same-day delivery even when they’re not set up for it.
Here’s the gist: Imagine you’re an independent retailer, strip mall outlet, corner store, or online store. You have a ton of demand and want to cash in on it in order to help your business thrive and keep your customers happy. But you don’t have the money for a warehouse, a delivery fleet, or even a smart storage option. The space simply isn’t there, and neither is the money. That’s where Lee Hnetinka’s Darkstore comes in. Rather than cramping your already limited quarters with stock and supplies, you’ll be able to outsource your delivery needs to Darkstore in order to give your customers the benefit of speedy same-day service. As Internet retail demands increase, driven by instant fulfillment business models like Amazon, Instacart, and Drizly, smaller businesses will need to keep up. Darkstore offers those businesses the ability to do just that, without a ton of capital.
So how does it all work? To understand that, you’ll want to take a deep dive into Darkstore Founder and CEO Lee Hnetinka’s specific brand of thinking.
Before Hnetinka had the idea of tying together storage services, delivery fleets, and small business owners looking for a competitive edge in today’s retail market, he already had a winning idea. WunWun, a one-hour delivery service based in New York City, was Hnetinka’s first entry into the world of fulfillment service and digitally native vertical branding. Through its promise of delivering New York City residents anything they wanted within an hour of purchase, WunWun had found a consistent, loyal clientele. The service did for retail what other hugely successful brands like DoorDash, Postmates, and Instacart had done for meal delivery and grocery shopping. Suddenly, busy parents, overworked 9 to 5-ers, and stressed-out millennials alike could all get exactly what they wanted to be delivered to their door in less than an hour. WunWun’s innovation paid off early, but Hnetinka wasn’t done yet. He had bigger plans.
Lee Hnetinka Thinks Big
After spending time developing the concept of on-demand, city-specific delivery with WunWun, Hnetinka was ready to expand his business. He already knew that certain parts of the WunWun model were key to its continued success. Keeping delivery times short and guaranteed was crucial to keeping customers happy, and making sure each retailer could complete a sale without extra cost or strain kept businesses happy. With this knowledge in mind, Hnetinka developed the concept of Darkstore, a fulfillment service that would combine the best aspects of on-demand food delivery with the speed and high-quality customer service of Amazon Prime and other large-scale delivery outlets. With Darkstore, however, there would be one crucial difference. There would be no delivery fleet, no main storage facility, and brick-and-mortar location. Instead, Darkstore would cater to the free market by offering its services to anyone and everyone who wanted the manpower of an Amazon retailer without having to pay the astronomical cost.
Darkstore is Born
Together with co-founder Wilson Lee, Hnetinka developed Darkstore, a full-service third-party logistics company created to serve small and large businesses alike, provided they were located in San Francisco. Later on, Darkstore would open new branches in cities like New York and Los Angeles. In its earliest years, however, Darkstore would stay native to San Francisco While Hnetinka ironed out all the kinks. It didn’t take too long. The concept of a “dark store” has been prevalent overseas in countries like China and Taiwan for some time now. Using the technology from some of the most popular American convenience-oriented apps like Uber and Airbnb, Hnetinka used the idea of a dark store to create an “invisible” process whereby retailers can level the playing field when it comes to fast delivery and on-demand service.
Hnetinka didn’t need to look too far for funding during Darkstore’s seed round. When investors saw the potential of a delivery vertical like Darkstore, they were eager to take the plunge. Hnetinka’s seed round acquired 1.4 million from the capital firm PivotNorth, who also put money behind a similarly promising delivery startup called Deliv. In May of 2016, after gathering funding to go live, Darkstore launched in San Francisco. After that, it was only a matter of time before the company gained its first large-scale clients like mattress company Tuft & Needle, a store without a showroom or brick-and-mortar presence to speak of, and the Bay Area-based clothing company Wildfang. After garnering its first prestige clients, Darkstore was off and running.
Almost a year and a half later, Darkstore has proven its worth on the market. The initial investment from PivotNorth has grown into a 110 million dollar estimated value within a year of the seed round funding. Through taking on new clients, building new relationships, and making a serious commitment to the customer service end of retail, Darkstore has defined itself by its sustainable model of fast, error-free service for clients and consumers alike. This last aspect of the business, according to Hnetinka, is what sets Darkstore apart and above the rest of the competition. Instead of trusting an important delivery to a faceless organization, Darkstore makes a point of offering each client not just a way to ship and store easily without the high cost, but a way to connect with customers that guarantees repeat business over time.
As technology grows and changes, many online consumers feel more satisfied overall with the speed at which they’re able to have household essentials and luxury products delivered to their home. What they’re not happy about, however, is the lack of human connection and error accountability that fulfillment services offer. With delivery services like Amazon or Postmates, the insistence on speedy delivery can create a sloppy product or a fulfillment service that’s far from error-free. Darkstore has taken pains to avoid this problem and to retain its clients at whatever cost. At a fee of roughly $16.50 generated per order, Darkstore can also afford to be selective with its clients, offering its services to a few retailers without feeling any rush to expand. Though expansion, of course, is already in the cards, as with any thriving business.
Though some retailers might look upon an idea like Hnetinka’s with a bit of anxiety at first, time has proven that they have nothing to fear. Darkstore offers incredible incentives for businesses, including a historically low charge of 3 percent fee per item, not exceeding $20. Partnering with a delivery service called AxelHire, Darkstore is able to supply businesses with fast, easy delivery at a fraction of the price it would cost simply to rent out a storage space for part of the year. They’ve also proven themselves trustworthy when it comes to the ever-trying Holiday season when demand is high and timing is of the utmost importance. Last winter, Darkstore weathered its first holiday season without a scratch. They were able to meet the high demand of consumers shopping for last minutes gifts and provisions without faltering. By proving that high demand doesn’t diminish the quality of service, Darkstore has managed to create a trustworthy business model with business satisfaction written right into its code. Darkstore also finds a way to negotiate a good rate on unused units in storage facilities across the country, making storage space a non-issue even for the smallest companies. Companies are also starting to notice the value of keeping operations close to home. In recent years, manufacturing, storing, and shipping goods from overseas was the most cost-efficient way of getting goods to consumers without racking up fees. Today, technology has made it much more possible and even more efficient for retailers to keep an authentic, local focus. Just as companies have begun to outsource their customer service jobs to American workers rather than overseas companies, retailers have started to understand the value of keeping business local.
Hnetinka and the “Invisible Retailer”
The future of retail may be uncertain, but one thing is completely clear: Digital native brands are on the rise. The way we live, work, and relax during downtime is constantly being reflected in the new inventions and services that can’t pop up fast enough to meet the demand. When consumers want something, they want it instantly. Whether it’s a matter of a busy working mom putting food on the table, a stressed student trying to make a last-minute textbook purchase before exams start, or someone who simply wants to be able to be catered to after a long hard day at the office, these consumers are refining the future of retail with every purchase they make. That’s why Lee Hnetinka has been watching closely all these years to read the trends and keep ahead of the shifting tide. By studying overseas retail patterns and zeroing in on customer service, Darkstore’s business model has turned into an unbeatable way of whipping a company’s retail game into shape.