Already partnering with major shopping centers like Simon, Tanger Outlets, Brookfield, Macerich and Taubman, Fillogic is a big believer in the future of physical retail, despite much of the doom and gloom that has pervaded headlines both prior to and throughout the Covid-19 pandemic.
The logistics-as-a-service platform provider, founded in 2018 by Rob Caucci and Bill Thayer, has an ambitious goal to help retailers and shopping centers by converting underutilized space at physical locations into tech-enabled, micro-distribution hubs. This can potentially unlock significant opportunities for brands looking to quickly “forward-stage” their fast-moving inventory by placing it in a more convenient location for pickup, better fulfill high-demand products, and create expedited shipping capabilities, even same-day, at traditional ground prices.
Fillogic has already jumped off to a hot start in 2021, seeing revenue gains that have already outpaced all of 2020. To kick off March, the platform provider raised $2.5 million in funding, bringing the company’s total raised to $3.5 million.
As is the case in many technological developments within retail, Amazon’s ability to shift consumer expectations on delivery times via its massive distributed logistics network played a huge role in inspiring Caucci and Thayer to figure out a way to position retailers’ inventory closer to the consumers who will buy those goods.
“Amazon reset the expectations, and everybody shifted their focus to distributed logistics networks,” co-CEO Caucci told Sourcing Journal. “Consequently, for the industrial real estate market, if you think about warehouse pricing, everybody is now in a race to buy the best warehouse space, closest to population centers. The unique nature of a mall is that it is aggregated retail. You’ve got 100 to 150 retail stores all under the same roof, and we felt there was no better place to build a distributed logistics network from than your local shopping malls.”
Caucci highlighted Target’s ability to fulfill 95 percent of orders through its brick-and-mortar stores as the ideal fulfillment scenario for the modern retailer, but notes that most mall-based merchants simply don’t have the back-of-house capabilities to make this a reality. To support this ambition, the Fillogic staff enters stores seven days a week, multiple times a day to aggregate the items necessary to ship out of its hub within the shopping center.
From there, the company sorts the aggregated items by freight delivery network and ZIP codes for convenient, consolidated pickup by local parcel carriers, all of which are part of the Fillogic’s delivery provider network (DPN). The DPN also includes various logistics providers such as Geodis and Sologistx to enable inbound merchandise receipt and returns/reverse logistics management.
The ship-from-store dynamic provided by Fillogic can alleviate the costs that would typically occur from shipping these items from a distribution center that is miles away from the end consumer.
“Innately, if a retailer is now able to increase the percentage of online orders being fulfilled out of their stores, you’re lowering fulfillment costs and the transportation cost because a smaller percent of your online orders are now coming from a distribution center in the middle of the country,” Caucci said. “They’re able to fulfill a larger percent of your online orders closest to that target consumer.”
Although the platform helps retailers optimize their existing assets, including their employees, a retailer can elect to offload the labor associated with picking and packing ship-from-store orders entirely onto the Fillogic team, which ideally can minimize associated labor costs as well.
Fillogic also aims to help carriers, which experienced challenges throughout the past year and into the holiday season as online orders increased to unprecedented levels.
While New York City-based Fillogic operates its own micro-distribution hubs across the U.S. Northeast, including eight in shopping centers in Connecticut, New York, New Jersey and Pennsylvania, the company expects to have 15 locations contracted by the March.
“It’s not one retailer needing to turn a store dark and convert that solely into a distribution or fulfillment operation, but really a shared amenity for all of the retailers under that same roof to democratize some of these processes, and, and really level the playing field for the broader retail ecosystem,” Caucci said.
The team expects a minimum of 30 hubs built by the end of the year, but it could be as many as 45, given the company’s aggressive growth plans. With more than 450 retail centers in its network as part of its collaborations with the major shopping centers, Fillogic sees significant potential for expansion.
With the funding, the company’s hub network will expand to more strategic markets in the Mid-Atlantic, as well as other major U.S. metropolitan areas, including Atlanta, Dallas, Los Angeles, Miami, Phoenix and San Francisco.
Despite its presence in major shopping centers, the company’s distribution hubs are designed to fulfill orders made at digitally native brands that lack a physical presence.
“When you think about it, e-commerce at scale is not cheap. If you’re going to go build more distribution centers in the middle of country, because you want to provide a wider assortment for your consumers, you’re only servicing off of one inventory in the middle of that country,” said Thayer. “Retailers need to reach their consumer from their most valuable assets, their existing stores, their inventory and the people that service them. We provide a transactional logistics service that makes that more efficient.”
Now that the company has its latest funding in hand, Fillogic can further support its next steps to grow the team and develop its platform, including its delivery partner network and proprietary routing technology.
The recent round was led by James McCann, chairman and CEO of Food Retail Ventures, who will be joining the Fillogic board. Additional investors include Jamestown LP, GroundBreak Ventures, Revelry Ventures Partners, XRC Labs, Green Egg Ventures, and other strategic angels including Sandy Sigal.