Logistics startup Fabric has raised $136 million to build shipping warehouses in unused real estate like retail stores and gyms

  • Fabric is a robotics and micro-fulfillment startup helping retailers to quickly fulfill orders in city centers.
  • Fabric's technology can be installed in a much smaller space than a typical fulfillment solution.
  • Last-mile delivery has been a hot topic as e-commerce has surged to new heights.
  • Visit Business Insider's homepage for more stories.

When people think of fulfillment centers, they likely envision massive warehouses in industrial parts of major cities. 

But robotics and micro-fulfillment startup Fabric is focused on creating much smaller spaces for retailers to fulfill their online orders.

In doing so, it hopes to help partner retailers get closer to their customers, cutting down on the time — and money — it takes to get goods into their hands. 

Fabric's centers are typically between 10,000 and 15,000 square feet (compared to about 800,000 square feet for an Amazon fulfillment center). They are located in urban centers, often in repurposed spaces like former big-box stores or gyms. The micro warehouses can host 15,000 SKUs and fulfill about 500 orders a day.

In a recent interview with Insider, Chief Commercial Officer Steve Hornyak described Fabric's tech as being like a "giant vending machine" that uses robotics and AI and can "flexibly fit in a number of different places." 

When working with its retailer partners, Fabric can either integrate its system into its partner's existing stores or real estate, or it can fulfill orders from micro warehouses that Fabric owns itself.

So far, it has partnered both with general merchandise e-commerce shops and grocers. Its biggest partner so far is FreshDirect, which Fabric worked with to power grocery delivery out of a microfulfillment center in Washington, DC. 

Fabric has also built a fulfillment center in New York City that is meant to host multiple tenants. Hornyak said the company plans to announce more partnerships with grocers and general merchandise retailers soon. 

Read more: Top VCs say they want to fund startups that solve retailers' biggest problem — e-commerce logistics

He said that technology has progressed to a point that having large conveyor belts in massive warehouses is no longer necessary.  

"Now it's a whole different approach to automation that allows you to shrink it down," he said. 

Hornyak added that the difficult retail environment has made for plenty of available real estate in urban centers. 

"Retailers are scaling back on the square footage that they have," he said. "The big-box guys don't need the entire square footage that they have, so why not leverage that in order to do e-commerce and click-and-collect?" 

Some retailers, particularly grocers, have already jumped on this trend, opening "dark stores" or dedicating more of their real estate to filling online orders. Whole Foods, Kroger, Stop & Shop, and HyVee each closed a handful of their stores to the public early on in the pandemic in an effort to focus on delivery and pickup orders.

Fabric is pitching retailers on the ability to dedicate just portions of their existing real estate to order fulfillment. The startup could install its systems in the back of a grocery store, for example. 

"They already have that footprint close to the customers," Hornyak said. 

Fabric is plotting its growth at a pivotal time for the warehousing sector. 

Demand for warehouse space has soared in recent months as online shopping has exploded during the COVID-19 pandemic. By shrinking the space required to power its fulfillment system and enabling partners to build it in their existing stores, Fabric aims to improve profitability and make same-day delivery more feasible for retailers. The closer a retailer can get to a customer, the less they will have to spend on last-mile delivery solutions. 

Solutions like Fabric's could also help smaller retailers compete with bigger players like Amazon, Walmart, and Target when it comes to speed. Hornyak said Fabric considers its biggest competitors to be established fulfillment companies like Dematic and Takeoff Technologies, as well as Alert Innovation, whose grocery-picking Alphabot system is used by Walmart.

Read more: Meet the 4 startups helping retailers compete with Amazon on shipping this holiday by tapping into micro-warehouses across the US

Last-mile delivery has been a hot topic as the USPS and other carriers have taken on a historic volume of packages during the current e-commerce surge. Customers have also developed high expectations for delivery speed as part of what Hornyak describes as a "click and have to have it now" society. 

Hornyak said that Fabric is working with all of the major carriers for delivery, but that who they partner with to send out orders after they are fulfilled will vary by location. 

"We'll be providing that as a turnkey service to our customers, but behind the scenes, we'll be managing whoever is the fastest, best, cheapest, last-mile service provider for the geography that we're covering," he said. 

Fabric, which recently moved its headquarters from Tel Aviv to New York, has raised $136 million in venture capital. 

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