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This Is the Logistics Startup Every DTC Brand Will Be Talking About

There’s a reason why investors are showing a lot of love to logistics these days.

Much of the business of moving and managing goods is still conducted on software better suited to decades past. But Donny Salazar, the Stanford MBA who’s spearheaded CPG marketing for Revlon and acted as Gilt Groupe’s first head of operations, is trying to bring a fresh new perspective into an industry in want of innovation—especially as fast-growing digitally native brands expect their fulfillment partners to share in bearing the mantle of their carefully managed, service-centric customer experiences.

It was during his four-year tenure with Gilt, as he helped grow the brand from $8 million to $500 million in sales, that Salazar was “first exposed to the 3PL market and how horrible it was, but how critical it is to the success of any retail business,” he told Sourcing Journal. After implementing fulfillment technology at Gilt and then leaving to work with other DTC brands, Salazar encountered the same scenario time and again.

“Why is 3PL so horrible when it doesn’t need to be?” he said.

And like virtually every entrepreneur around, the answer Salazar found was: why don’t I fix this myself?

Salazar raised a $6.5 million seed round led by Canvas Ventures last August and got to work building the technology layer that powers MasonHub, the startup fulfillment provider that emerged from stealth mode in early spring and went live with nearly 100 percent inventory accuracy for its first client, activewear maven Carbon38, quickly followed by a second customer, the two-year-old plus-size luxury e-commerce firm 11 Honoré.

The rate at which DTC brands are scaling up blows other retail segments out of the water, and yet “there isn’t a provider serving the mid-tier DTC brands,” Salazar said of the impetus behind founding Southern California-based MasonHub. But the conversation doesn’t stop there because even digitally native brands are venturing into the real world by unveiling flagship stores in major urban centers or embracing the wholesale model and evolving into true omnichannel players, he added.

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But the real problem with the 3PL status quo is that the foundational technology at these companies is “really antiquated,” Salazar pointed out. “You’re lucky if a provider has a technology team on staff who understands APIs.” Most integrate their systems via flat files, a slower process and pain in the neck for all parties involved.

Functionality’s a challenge, too. “Good luck trying to pull data out of their systems,” Salazar continued. “You spent hours negotiating SLAs but when you ask them to report on those SLAs, it’s hard to get the data to assess that.”

Perhaps the real crux of the matter is that many, if not most, third-party logistics providers weren’t built to meets the needs of omnichannel’s anywhere-anyhow distribution reality. “Old-school people running these companies really don’t understand omnichannel and don’t even understand DTC,” Salazar explained, noting that most fulfillment centers really are good at only one thing. “They’ve grown up in a store-to-store distribution model. If someone says, ‘I want to insert this magazine into new customer orders,’ they say, ‘I don’t know how to do that.’ For all those reasons, we built MasonHub to fix that.”

New brands seemingly spring up daily online, energized by a barrier to entry in e-commerce that’s “never been lower,” Salazar acknowledged. But while these fledgling startups have platforms like Shopify to power their web stores, something like Stripe to manage payments, Google for simple search optimization and analytics, and Instagram for getting their concept in front of potential customers, “who does logistics?” Salazar said. “There’s no clear brand that you think about that can fill that space.”

And MasonHub, according to Salazar, mirrors the intuitive, user-friendly interface and integration that you get with a plug-and-play platform like Stripe, and now offers one-click integration with Shopify, thanks to yet another customer, Kusshi, which designs premium makeup bags.

Beyond the sleek customer portal where clients can view data on their goods and shipments with real-time updates—which 95 percent of competitors don’t provide, Salazar claims—MasonHub also built a proprietary, “kind of nerdy” double-entry ledger order management system called “omnichannel management” that feeds into an off-the-shelf warehouse management system and offers visibility into all of a customer’s inventory, no matter where it’s located: store or MasonHub’s Los Angeles e-commerce warehouse or anywhere in between.

11 Honoré: servicing all channels

Knowing where any product is at any given time is indispensable, said Patrick Herning, founder and CEO of 11 Honoré, whose luxury wares—like a $1,395 off-the-shoulder Naeem Khan blouse or a $2,455 embroidered cape dress by Huishan Zhang—might be stashed in the MasonHub warehouse, ensconced in the e-commerce firm’s offices, on consignment or lent out for a photoshoot.

“We need to be able to service all of these different channels because we’re the only ones who have this product,” he said of 11 Honoré’s designer dresses, gowns, separates, intimates and outerwear offered mainly in sizes 10-20, with some pieces carried in sizes as large as 24.

“Even though we’ve evolved past brick-and-mortar, you can still have a very high-touch luxury experience through e-commerce,” Herning explained. “We need that brand exposure to come through once that box is finally received, and the 3PL is intimately involved in that process. If we have a holiday catalog we want to include in a fall shipment, all of these things are customizable.”

Herning echoed what many brands and retailers are saying today about their service providers. “I’m a firm believer in key partnerships,” Herning said of MasonHub and Salazar, who previously consulted for both 11 Honoré and Carbon38. “I don’t shop around. I often expect a lot from my partners and as a result, we get a lot. Having an invested history with somebody always makes for a better relationship.”

What lies ahead

For MasonHub, managing multichannel retailers with tens of thousands of SKUs will require new resources—and expansion.

The six-person startup’s hiring engineers to bolster the tech platform and integrations, and is hard at work establishing a network of facilities across the country so clients can offer next-day and two-day shipping. In an Amazon world, Salazar said, everyone expects to get their goods in 48 hours or less but not have to pay a cent for it.

“We enable you to compete with Amazon on fulfillment speed,” he said.

Someday soon, robotics systems could supplement human warehouse workers and kick fulfillment into even higher gear.

“What I want to avoid is you have this sexy new technology and you’re trying to adapt your business to support this technology,” Salazar said of figuring out how best to work robotics into MasonHub’s operations. “That always gets you in trouble.”

A better alternative, he added, is identifying flexible solutions, pinpointing what you’re trying to accomplish, and honing in on which customers are a good fit for robotic fulfillment. “The technology has to match the business,” he said, “not the other way around.”

MasonHub customers, primarily young, growing brands, operate numerous and evolving businesses, nudging the 3PL to add relevant new functionality, such as a backorder feature so clients can presell their merchandise. And it’s working on onboarding a health and wellness brand whose business is based on subscriptions.

Though it uses a readily available WMS for now, MasonHub is working up the specs to build a proprietary platform to manage warehouse operations. “In order for us to be innovative in this space, and to bring in automation and robotics, we’re going to have to own that piece of the business,” Salazar explained. “That’s why we feel strongly about building our own WMS.”

Logistics may have lagged some other sectors in terms of innovation but given all of the investment in the category, it’s time has come at last. “People are realizing that infrastructure is extremely important,” Salazar explained. Many of the largest retailers today owe their success to logistics, he added.

“In today’s day and age, when people want instant gratification, they also want instant shipping. They don’t want to wait,” he said. “In order to achieve that end, it’s all about having your product in the right place at the right time.”

With its focus on speed, service and excellent, MasonHub just might become “your one-stop shop for all things logistics,” Salazar said.