Amazon one day shipping lifts startups serving Walmart

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Amazon.com Inc.’s pledge last month to pump $800 million into making next-day delivery the new standard upped the pressure on its brick-and-mortar rivals to spend more trying to catch up all over again.

That’s good news for logistics startups helping Walmart Inc., Best Buy Co., Macy’s Inc. and other retailers compete online. These upstarts, often led by Amazon alumni, say their phones are ringing with new inquiries and that venture capitalists are keen to pony up.

Seattle startup Flexe, which operates a marketplace for warehouse space and online order fulfillment, on Tuesday announced a $43 million investment led by New York firm Tiger Global. Dolly, another Seattle startup, recently announced $7.5 million in fresh funding to expand to new cities and start delivering televisions, sofas, appliances and other big items for the likes of Lowe’s Cos. and Costco Wholesale Corp. Dolly was originally a marketplace for movers.

Retailers that struggled to match Amazon on two-day deliveries have to spend big yet again to further cut delivery times. Amazon will capture almost half of the $600 billion U.S. shoppers will spend online this year, according to EMarketer Inc., and retailers have to match its delivery speed to keep that dominance from growing.

“Interest in logistics investments has picked up, and we’ll see even more of that this year,” says Julian Counihan, a partner at Schematic Ventures in New York. “Retailers traditionally invested in physical stores to increase sales. Amazon flipped that on its head and made logistics the driver of customer experience.”

Flexe, which counts Walmart among its customers, aims to double in size to more than 160 people this year to keep up with demand. It hired former Amazon transportation vice president David Glick as chief technology officer to expand its e-commerce fulfillment business, which now accounts for three-fourths of all sales.

Flexe rents out space and services in more than 1,000 warehouses, providing an alternative to Amazon’s logistics services. Flexe helps warehouse owners and operators utilize empty space and idle workers by connecting them with retailers requiring flexibility to manage seasonal demand. Ace Hardware, for instance, used an organic tomato farm’s warehouse in the winter to stockpile imports since weather delayed the usual start of the spring home improvement season.

“Having big customers like Walmart known for high standards brings legitimacy to our business,” Flexe CEO Karl Siebrecht says.

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