We went inside a New York City ‘nano-warehouse’ that’s being pitched as a solution to e-commerce logistics nightmares — here’s what we saw
This story is available exclusively on Business Insider Prime.
Join BI Prime and start reading now.
- With rising demand for e-commerce, small warehouses near city centers are now highly sought after real estate.
- Bond, a logistics startup, has opened six “nano-warehouses” across New York City, turning vacant retail space into warehouses and making deliveries for direct-to-consumer brands.
- Bond has partnered with four real estate partners to fill vacant space for a flexible amount of time.
- The company has also partnered with SoftBank-backed parking-network Reef Technology to turn parking spaces into “nano-warehouses.”
- Bond plans to expand to two more cities this year, after raising $15 million in January from Lightspeed Venture Partners, MizMaa Ventures, and TLV Partners.
- Visit Business Insider’s homepage for more stories.
As the retail economy continues to shift towards e-commerce, the deficiencies of our pre-Amazon logistics system are being made clear.
The last-mile-problem, or the problem of quickly bringing goods from a warehouse to a consumer, has driven a huge increase in demand for light-industrial properties near city centers. These sorts of properties are more scarce — many were converted into lofts as the US economy moved away from manufacturing and toward a service economy—and are now being hit by steady rent increases as demand outstrips supply.
A New York by way of Tel Aviv startup, Bond, has developed one potential model to solve the problem. The company turns hard-to-rent real estate, and parking spaces owned by SoftBank-backed parking operator startup Reef Technology, into “nano-warehouses.”
Direct-to-consumer brands that partner with Bond ship their products to these warehouses, and Bond employees riding electric tricycles deliver the products to the consumer’s doorstep.
Bond, founded in 2019, raised $15 million in funding in January of this year from Lightspeed Venture Partners, MizMaa Ventures, and TLV Partners. Other than the partnership with Reef Technology, the company has also signed partnerships with four real estate partners and more than 25 direct-to-consumer brands including fresh dog-food delivery company Pet Plate and CBD-extract company RCVR.
Bond integrates into a brand’s e-commerce platform, and uses that information to calculate how many items they will hold in each warehouse, and where each warehouse should go.
Bond’s vision for e-commerce is that the company can become the Shopify of logistics: a light, easy-to-integrate platform that doesn’t directly compete with the brands they work with. Shopify, an e-commerce platform that provides back office and fulfillment support for online direct to consumer companies, allows brands to keep transactions on their own website, instead of on a marketplace like Amazon.
Asaf Hachmon, CEO and co-founder, compared Bond to Amazon as “democracy” versus “dictatorship,” a comparison he also extended to Shopify versus Amazon.
We toured a Bond micro warehouse, which used to be a barbershop, in Manhattan, one of five on the island and six in New York City. See the tour, and more about the company’s model, below.
Bond cofounders Asaf Hachmon and Michael Osadon got the idea for Bond from their previous startup, Shookit, a direct-to-consumer grocery company.
Hachmon, and his cofounder and CRO, Michael Osadon, first came up with the idea for Bond while operating their own direct-to-consumer startup, Shookit. The company delivered fresh produce and other groceries to consumers in Tel Aviv.
“Everything was really good besides one small thing… the moment we met our end consumers,” Hachmon said.
They dove into the data and saw that the company was spending 70% of their logistical costs on delivery issues like parking tickets and traffic jams. The company switched from delivery trucks to electric tricycles and from a centralized warehouse to a smaller distributed warehouse.
Hachmon and Osadon said that the business quickly grew after they made these changes, and became EBITDA positive. From Shookit’s success, they got the idea, and some funding, for their new business.
Bond’s pitch to brands is that the delivery experience is an essential part of customer retention. Here’s a Bond delivery person getting ready to deliver an order.
Central to Bond’s pitch to direct-to-consumer brands is the idea that a faster, schedulable delivery experience will help them retain customers. Bond’s employees delivers products in the same day, with the ability to schedule the time of delivery at the time of purchase.
Hachmon said that direct-to-consumer brands have grasped the importance of the delivery experience, but some of the more traditional retailers they speak to need some more convincing. He detailed a conversation with a Gucci brand executive that delivered their items through FedEx.
“Do you understand that the same delivery guy that delivers things from the grocery store delivers your $3,000 jacket?” Hachmon said.
Bond delivery staff are full-time employees, not contractors in the Uber model. Hachmon said that two of the company’s 55 employees have already expressed interest in franchising and running their own warehouses, something the company has not yet offered but may consider in the future. He hopes that the delivery team will become a fixture in their neighborhoods.
“We see it as the new age of the local milkman,” Hachmon said.
Bond is based on the server farm model, using algorithms to calculate the ideal capacity of each warehouse in the network. This screen displays upcoming deliveries that have been routed to this site.
One of Bond’s biggest influences was content distribution networks, the networks of server farms that provide the physical infrastructure for cloud-computing and your Netflix stream. The company uses their client’s complete order history to create a heat map of where they send the most orders, and then uses that information to map out the ideal location, and number, of nano-warehouses.
“You have the minimum capacity that it takes to break even and you have the optimum capacity that makes a lot of money and you have the maximum capacity, which you don’t want to get to,” Hachmon said.
It combines its integrated data with its own formulations, which it calls “Bondness.” The factors include the width of the road, demographics of the area, the number of universities, and the penchant for early-adopters to live in a neighborhood.
The network is made to be easily adaptable. With the flexible sorts of leases that it signs, it’s important that it can easily adjust.
“If we remove a central distribution center, the system automatically optimizes everything,” Hachmon said.
Bond’s founders say the company is not a real estate company, but it partners with landlords to operate out of hard-to-lease space. This location is based in an old barbershop.
The location that Business Insider toured was originally a barbershop. Bond doesn’t do much to change the look of their locations. This nano-warehouse still had the barber’s awning outside of the front door.
“It takes less than a week to open a new one and we want to make it three days by end of the quarter,” Hachmon said.
The company only brings in shelving, smart locks, a computer and display, and refrigeration into new locations. The proportion of shelving to refrigeration is contingent on the types of delivery that are most popular in the surrounding area.
This warehouse, on Manhattan’s Upper East Side, serviced a lot of subscription boxes, so it needed more shelving for the larger boxes. Bond’s West Village location, which used to be a wine shop, has more refrigeration because it has more grocery delivery customers there.
Bond’s pitch to potential real estate partners depends on the location they’re looking to fill, but it often targets long-vacant properties. Osadon gave an example of a pitch for a vacant property.
“Listen guys, you are not going to find yourself tenants in the upcoming months,” Osadon said. “So give us the option to rent it and we’ll leave if you find someone (to rent) for five to ten years.”
Bond typically signs leases that the landlord can terminate within 60 days if they’re able to find another tenant. Think of its locations like a pop-up warehouse that can monetize a landlord’s vacant space.
“We’re not a real estate company, we’re a distribution tech company,” Hachmon said, describing Bond instead as a “monetization solution” for landlords.
The company is also open to more non-traditional space, as it has partnered with SoftBank-backed REEF Technology, which is now the largest parking space network in the country.
Instead of delivering with trucks, Bond uses electric tricycles to deliver. They’re a key part of Bond’s money-saving strategy.
A key part of Bond’s strategy is replacing delivery vans with electric tricycles to cut down on the cost of delivery. This is only feasible because of the server-farm structure of the business, enabling quick trips between the warehouse and consumers’ homes.
The company will still rely on traditional logistics companies to make deliveries to the warehouses, but they will only happen “once a day or every few days,” according to Osadon.
“We want to reduce the number of trucks in the city,” said Osadon.
While widespread adoption is far off, Odason and Hachmon hope Bond’s success could also reduce the carbon footprint of the logistics business.
Bond says it can set up a new location in less than a week. The company has six New York City locations, and plans to expand this year.
The company is hoping to rapidly expand both its clients and its network this year. It hopes to expand to two cities on the eastern seaboard that are dense enough to support its model. It has a shortlist of cities which it did not disclose, and will base its choice on which cities are most popular with the brands it’s working with at the time.