-Written by Ben Sun, GP at Primary Venture Partners
Tanya’s having a killer week at work, with back-to-back meetings, project deadlines, and out-of-town guests coming for the weekend. A well-timed delivery from FreshDirect eases the worry of stocking her fridge. But when the delivery truck is held up for over an hour in traffic, Tanya has to leave home for the office, cursing FreshDirect and frustrated that she has no available time to reschedule the delivery. Having dealt with similarly infuriating experiences with other providers, she swears off online shopping for life. It’s a losing situation for FreshDirect, too, which will now face diminished margins on goods and residual losses from a negative customer experience.
Consider these stats on today’s on-demand economy: 9 billion packages are sent every year; 18 million households receive grocery deliveries each year; there are 16.5 million pet-sitting visits per year; and 1.5 million households host on short-term rental sites. As the sharing economy continues to grow and evolve beyond traditional commerce models, service providers compete to win the hearts of consumers by offering the best selection, convenience, and prices. Needless to say, any friction in the customer experience can result in a zero sum game.
But while companies invest countless dollars into new service offerings, pricing models, and delivery methods - including purchasing their own fleet of airplanes and trucks, or offering expedited shipping - last-mile logistics is an area that’s seen regrettably little in the way of innovation. It’s precisely that last hump in the expediting process, which actually lands the package at the customer’s door, that is arguably the most critical component of the ecommerce experience. For one, it’s the only customer-facing part of the journey. If seamless delivery is not achieved, or if customers have to go out of their way to receive their package, it can impact their rate of repeat business with the merchant. Secondly, last-mile delivery is a very costly component of the shipping process; returned or re-delivered packages often result in zero or negative margins for merchants, especially when it comes to perishables. These pain points are particularly acute in dense, urban markets, where many buildings don’t have a doorman to accept packages.
Given the importance of seamless delivery, smart access has become mission-critical to the growth and success of NextGen Commerce businesses. Earlier this month, enterprise-grade smart access control platform Latch teamed up with Jet.com to make deliveries easier for customers in urban areas. Through this partnership, residents of 1,000 buildings in New York City will get free access to Latch, which enables them to use their phone as a key, grant access to guests, and have packages delivered securely without needing to be home.
We’d be remiss at this point not to mention that both Latch and Jet are Primary portfolio companies, and it’s a great source of pride for us that we were able to introduce the two companies at a Primary Expert Network event. But what’s more exciting are the broader implications of this strategic relationship, and what it means for the future of NextGen Commerce.
To date, Latch is the only enterprise-grade smart access platform on the market. The product, built by two talented ex-Apple employees who partnered with a decades-old lock manufacturer, is a hardware and subscription-based software system designed to benefit residents, building owners intent on providing valuable amenities to residents, and the increasing legions of service providers who want improved access to customers. The Jet.com partnership only heightens Latch’s value to all three of these stakeholders, perhaps most significantly to service providers, who are banking on the fact that customers without delivery constraints will buy more and be more willing to try new categories of products.
It’s notable, too, that the on-demand economy has expanded beyond emerging startups looking to bypass traditional models of commerce. Large corporations have been strong-arming their way into the game, as well. Over the last 12 months alone, corporations have been on a tech-driven shopping spree, including Unilever's acquisition of Dollar Shave Club; Mars’ purchase of Whistle; lingerie startup True & Co's acquisition by PVH; and, of course, Amazon’s acquisition of Whole Foods, which will bolster its entry into the prepared meal kit space. And after Walmart’s acquisition of Jet.com last summer, its pursuit of the Latch partnership is further evidence of the company’s tech focus and hunger for innovative approaches to acquire and retain an engaged customer base. As businesses continue to recognize smart access as a key to driving sustainable growth, we expect to see ongoing innovation in last-mile delivery.
“Improved access is absolutely fundamental to the customer experience,” Latch CEO Luke Schoenfelder told us, sharing his vision of having Latch on every door - be it a multi-family residence, office building, or single-family home. “Five to ten years from now, products like ours will be standard in every building because access has become so critical to the on-demand experience and invaluable to residents, providers, and building managers alike. We have seized the opportunity to deliver that experience today.”
The key to winning in today’s increasingly competitive on-demand economy is being able to offer an innovative delivery strategy that really solves for last-mile logistics. If Latch and Jet succeed in creating the consistently reliable, secure, and seamless access experience that they have set out to do - and we have no doubt that they will - they have the potential to create an entirely new customer experience paradigm that will set the standard for the ecommerce industry as a whole.