As direct-to-consumer (D2C) brands increasingly look for ways to cut costs amid ongoing economic challenges, Misfits Market is noting the opportunity to drive more revenue from its existing fulfillment capabilities.
In an interview with PYMNTS Monday (Feb. 12), Abhi Ramesh, founder and CEO at the D2C eGrocer, which just made its perishable fulfillment capabilities widely available as a B2B offering under the name Fulfilled by Misfits (FBM), spoke to the growing opportunity for these kinds of services.
“[In] grocery and food eCommerce, … everyone’s looking to consolidate operations. A ton of capacity was built post-2020, post-COVID, and now people are shrinking that capacity, trying to get rid of overhead and get more efficient,” Ramesh said. “Folks look at options like ours and say, if I can get out of my warehouse lease, and because I’m spending a ton on it, … and I can [use] Misfits to fulfill, it’s a win-win.”
For these brands, the pressure to offer competitive prices has led to a focus on value, and consequently the need to lower operating costs without compromising product quality.
Many D2C perishable brands have been looking for ways to cut costs in recent years. Take, for instance, Blue Apron’s decision last year to shift to an asset-light model, or multinational grocery giant Ahold Delhaize’s move to sell off D2C online grocery delivery subsidiary FreshDirect.
Small businesses are facing economic pressures. The National Federation of Independent Business shared last month in a survey of small business optimism that small businesses, in the words of NFIB Chief Economist Bill Dunkelberg, are “very pessimistic” about their prospects this year. Nearly a quarter of respondents said that inflation remains the most important problem when it comes to operating their businesses.
That being said, PYMNTS Intelligence research from the study “Main Street Health Survey Q4 2023: eCommerce Protects Main Street SMBs’ Bottom Line in a Cooling Market,” which drew from a survey of 540 small- to medium-sized businesses (SMBs), found that Main Street SMBs that rely heavily on eCommerce are more optimistic about top-line prospects.
The report revealed that while 38% of businesses surveyed that sell mostly in physical stores think their revenues will grow in 2024, that share rises to 57% for those who sell mostly online, and 61% that have an even split between eCommerce and physical locations.
When it comes to fulfillment for perishable brands, Ramesh explained, automation has not come as far as it has for shelf-stable goods, with the technology requirements of picking and packing temperature-controlled items being considerably more complex. As such, this creates an opportunity for companies such as Misfits that are willing to take on the labor-intensive work of fulfillment and that have the infrastructure built out to do so.
“The idea of maintaining these robots in 30-degree temperature with condensation, or even colder if you’re doing frozen, it’s really hard to do,” Ramesh explained, “and it’s not necessarily where the innovation has started.”
Overall, automation is becoming increasingly common in retail fulfillment. Walmart is integrating robotics into its fulfillment centers. Pet retailer Chewy is betting on automated fulfillment centers to curb rising labor costs by reducing the time its warehouse pickers and packers spend sorting and filling customer orders. Amazon is leveraging robotic fulfillment management solutions to boost efficiency.
Looking ahead, Ramesh said he believes that automation will eventually enter the perishables space, but it may take some time before it becomes widespread. In terms of emerging tech frontiers, Misfits Market is particularly excited about the potential of artificial intelligence (AI) in inventory management. They are exploring ways to leverage AI to improve inventory accuracy, which will have a positive impact on in-stock rates, spoilage rates and labor efficiency.
As D2C brands look for operational solutions to take the fulfillment work out for them, Misfits Market contends that there is high demand for end-to-end solutions that offer not only the logistical capabilities but also strategic insights and consulting.
“If you’re a D2C brand, you want you want a partner that is controlling the experience,” Ramesh said. “At least, that’s what we’ve seen when we’ve talked to brands … Quality control is really hard. Consistency and reliability are challenging, but with Misfits, … we’re the strategic provider. We’re also the operational provider under the hood, and I think that’s a really important gap in the market.”
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