Cloud-based e-commerce platform Logicbroker on Tuesday secured a massive $135 million funding raise led by K1 Investment Management. The Connecticut-based company plans to expand its full-function drop ship and marketplace services, which it offers to suppliers, retailers, brands and 3PLs alike.
Logistics is no longer just an expense for businesses — it’s a revenue driver. Whereas in the past companies viewed logistics simply as a tool for moving and delivering goods, they now see logistical innovations as a growth strategy that can help them handle the steadily increasing volume of packages flowing through the market.
One of those innovations is drop shipping. One of the many logistical headaches a company faces is the number of touchpoints a package must go through before it reaches the customer: It has to be shipped from the supplier (often across multiple modes), offloaded at the warehouse, stored and sent back out to the end consumer.
Drop shipping eliminates those touchpoints by cutting the retailer out of the fulfillment process entirely. The retailer never sees or touches the product — instead, it purchases the item from a supplier and has it shipped directly to the customer, reducing the burden placed on the retailer’s supply chain.
Logicbroker makes its payday off of automating that process for businesses. The company is growing its revenue by 80% year over year and manages $5 billion worth of gross annual merchandise for over 4,000 brands, including Mars Wrigley, Samsung and Coca-Cola (NYSE: KO), across five global regions. Logicbroker’s platform connects those companies to retailers such as Amazon (NASDAQ: AMZN), Walmart (NYSE: WMT), Walgreens (NASDAQ: WBA) and Kroger (NYSE: KR).
Last year, the company closed with $2 billion in gross merchandise value (GMV), and it is currently on pace to end 2021 with nearly $6 billion in GMV.
“Partnering with K1, a team that shares our passion for modernizing digital commerce, allows Logicbroker to scale globally,” said Logicbroker CEO Peyman Zamani. “With K1, we will continue to deliver the latest technology and solutions to our customers and help them succeed wherever they choose to sell and however they choose to ship.”
Jennifer Raber, director of retail digital business enablement at Walgreens, explained her company’s decision to switch to Logicbroker: “Walgreens moved to Logicbroker due to its modern technology, ability to support enterprise compliance requirements, and the fact that our suppliers would not have to incur any costs to participate in the Walgreens drop ship program.”
The popularity of drop shipping continues to grow rapidly. Valued at just over $160 billion in 2019, the global market for drop shipping is projected to reach nearly $600 billion by 2027 at a compound annual growth rate of over 18%. And in a 2019 survey of over 180 retail and manufacturing executives, vice presidents and senior managers, 88% of respondents recognized drop shipping as “being inevitable for their long-term success.”
“Considering the tremendous growth in global e-commerce, K1 sought to invest in a category-leading software platform that was fueling digital transformation in the industry,” said Simon Yu, senior vice president at K1.
Of course, like any method of shipping, drop shipping has its drawbacks. One challenge drop shippers face is overcoming poor communication among supply chain partners, which can happen if a company is outsourcing its fulfillment process to suppliers, as one would when drop shipping.
Another is gaining visibility. Without the product making its way through the drop shipper’s supply chain, it can be challenging to maintain visibility over the entire process, which can lead to delays and inefficiencies.
That said, drop shipping can also be a major boon for omnichannel sales. According to Customer Think, two-thirds of retailers report that drop shipping boosted revenue by 14% or more, depending on industry and sector.
It can also improve customer service — Total Retail notes that 84% of retailers reported better customer service after deploying drop shipping in their omnichannel operations.