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How Robots Make Hollar’s Online Dollar-Store Dream Possible

Just more than two years after its launch, online dollar store Hollar is deploying inVia Picker robots in its 180,000-square-foot Los Angeles warehouse to keep up with skyrocketing demand for low-priced products starting at just $1 and maxing out at $10.

Bucking the notion that the dollar-store concept doesn’t translate to e-commerce, Hollar has tapped into a market of Millennial moms that embraces its mobile-first mindset and Pinterest-like visual presence. COO Jonathan Um described Hollar as the “modern-day T.J. Maxx” for the web, serving customers who appreciate the treasure-hunt aspect of off-price retail. “We’re digitizing an experience that’s been part and parcel of American shopping for the past century,” he said.

Unlike many e-commerce startups that focus on coastal elites, Hollar “does very well in flyover country,” Um said. Though its average customer household income stands at around $75,000—a departure from the typical dollar-store customer—Hollar aims to expand the market of dollar-store shoppers, some of whom simply may not have a brick-and-mortar dollar-store nearby. “Just like Sam Walton did decades ago, bringing retail to small towns, we’re taking that a step further,” said Um of the Walmart founder.

Hollar, which carries 10,000 SKUs on its e-commerce site, offers the usual assortment of dollar-store gadgets and goods plus apparel that’s consigned from local merchants as well a selection of clothing on its marketplace, launched in Q4 2017. Um described apparel as “an incredible opportunity,” though one that comes with a challenging inventory risk.

Six months after its November 2015 launch, Hollar generated $1 million in revenue, a number that has only climbed since. As warehouse operations struggled to meet rising demand, Hollar, which employs just under 100 employees, including about 35 to 50 workers in the fulfillment center, began investigating opportunities for improvement.

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At company launch, the warehouse picked 70 orders manually on its first day, Um said, and Hollar subsequently hired 150-200 temporary workers, and installed a “rudimentary” warehouse management system (WMS), to meet demand during its busy season that begins with back to school and tapers off after the holidays. The “peaks and valleys” of demand have been a significant pain point for Hollar. Sixty-five percent of Hollar’s annual volume comes from August—back to school season—into the fourth quarter, which sees an average order size lift of 10 percent to 15 percent and higher purchase frequency. Back to school is especially critical for new customer acquisition, which Hollar then follows up with Halloween costumes and merchandise before launching into a holiday assortment.

Frustrated with its inefficient, non-scalable fulfillment process, Hollar got its “first big win” last year by deploying High Jump WMS, which enabled the company to reduce its seasonal headcount to just around 50, Um said.

Today, the warehouse processes 3,000 to 5,000 orders per day, which at an average order size of 10 units, translates to as many as 50,000 units daily. Average order value hovers around $30—there’s a $25 threshold for free shipping, which otherwise incurs a $5.95 charge—and the average item costs $3. Prior to deploying High Jump, the typical warehouse picker processed 90 lines per hour, a figure that jumped to about 200 post-deployment.

Sensing an opportunity to achieve even greater productivity and fulfillment efficiency, Um said that’s when automation emerged as the right solution. “The robotics gain is going to take that to a whole different level,” he said. “This is not just a step in right direction, it’s a leap of a generation.”

As a cash-conscious startup, Hollar found most of the warehouse robotics offerings on the market far too costly for consideration, typically requiring capital expenditure in the range of $5 million to $10 million. inVia’s Robotics-as-a-Service management system emerged as the clear solution—and its subscription-based, pay-as-you-go model is the “true innovation,” Um said, adding that Hollar negotiated a contract based on activity and picks.

[Read more on robots in the warehouse: Gap Advances Fulfillment Operations with Kindred Robots]

For this first-quarter pilot phase, Hollar added 100 robots to the fulfillment center. The inVia Picker works right alongside Hollar’s warehouse workers to pick and move items, automating storage and retrieval while decreasing employees’ risk of accident or injury. Hollar plans to scale up to 200 robots over the next two quarters and expects a 300 percent increase in order fulfillment.

Rather than a threat to jobs, the inVia robots are positioned as a crucial component of scalable warehouse operations. “Our physical labor is the core,” Um explained. “As we scale, the idea isn’t to scale with temporary labor for a few weeks. It’s to protect the core and supplement as necessary with the robots.”

Hollar is experimenting with ways to generate more consistent demand throughout the year. One of these has been its Club Orange, a new membership program launched just before the holidays that for $2 each month offers free shipping to loyalists “addicted” to the Hollar experience. Later this year the company is rolling out a number of Club Orange perks, ranging from sneak peaks and exclusive deals to preferential pricing, Um said.

With a heavily millennial workforce in addition to a millennial customer base, Hollar sees the use of robots as a natural extension of its tech-centric mentality. “The first time I saw [the robots] come to life—and I use those words carefully—I had no doubt there are ways we can personalize these bots,” Um said. Leveraging built-in voice capabilities, Hollar could program the robots to say “Hollar!—or some variation—upon successful completion of a task. At a time when consumers are accustomed to interacting with virtual assistants such as Alexa and Google Home, “it just makes sense,” he added.

And Hollar will have a little fun with its new robots, too. For the planned April launch party celebrating the bots fully coming online, Um said they’ll be the ones serving the cocktails.