E-commerce fulfillment company Ohi announced on Wednesday the completion of a $19 million Series A funding round, which the company says it will use to begin offering delivery in under 20 minutes. The funding will also be used to support Ohi’s nationwide expansion into 25 cities by the end of 2022.
Ohi is an e-commerce company that uses a countrywide network of microfulfillment centers and smart warehouses to provide what it bills as “instant commerce” – deliveries in two hours or less. Ohi’s service is targeted toward mid-market direct-to-consumer and enterprise brands to enable deliveries at Amazon Prime-like speeds straight from their own websites. To use the service, brands pay a monthly flat fee and a fee per order, which covers warehousing and delivery costs.
“At Ohi, we believe that ‘instant’ is the future of commerce, and we are building a world in which consumers can get anything from their favorite brands in less than an hour,” Founder and CEO Ben Jones said in a press release. “COVID-19 has accelerated this shift in consumers’ expectations of immediacy to the point that many now view two-day delivery as unacceptably slow. We want to provide all brands, regardless of size, with a best-in-class instant commerce experience while selling through their own website, allowing them to retain control of their brand story, data and customer relationships.”
The funding round, which closed back in April, was led by New York-based venture capital and growth equity fund Palm Drive Capital, with participation from JAM Fund, a Los Angeles-based venture capital firm led by Tinder co-founder Justin Mateen. Another notable investor was Ryder Ventures (NYSE: R), the venture capital arm of transportation provider Ryder.
Ohi’s expanded offerings will now include a rush service for deliveries in 20 minutes or less. That’s comparable to the speed of third-party food delivery apps like Uber Eats and DoorDash, but brands using Ohi will be able to deliver much more than just food at the speed of Prime.
Currently in New York, Chicago, San Francisco and Los Angeles, Ohi is looking to be in 25 cities by the end of 2022, with the next target markets including Seattle, Portland, Oregon, Philadelphia, Boston, Miami and the District of Columbia, followed by Austin, Dallas and other markets in Texas and the Midwest.
“In the last year, the e-commerce market has seen significant growth driven mainly by small and medium-sized companies, despite them making up just 32% of the market,” said Nick Hsu, a partner at Palm Drive Capital. “We are starting to see a major shift towards instant delivery play out more broadly across the DTC market space, and Ohi has effectively captured the post-purchase customer experience the same way that Shopify has created a renowned prepurchase one.”
Hsu is right: E-commerce has taken off in 2021 to the tune of over $210 billion in sales in Q2, and it’s not slowing down. According to data from Influence Central, 55% of parents plan on shopping for their children’s 2021 Halloween costumes online, with a projected spend of nearly $3 billion through digital channels. For comparison, only 35% of respondents said they planned to shop for costumes online in the company’s 2020 Halloween survey.
People are buying more, which means there are more sales to be made, and Ohi can help brands capitalize on that high demand by enabling them to sell quickly and directly, the way consumers have been conditioned to expect shopping to be. That level of convenience is another trend that’s been stymying online sellers throughout 2021.
“We saw the trend when Amazon launched two-day delivery and everybody had to catch up,” Jones told Forbes. “That’s really the problem we’re solving for brands, it’s this level of convenience. If they don’t offer it, they’ll lose out to the marketplaces.”
To meet consumer demand before companies like Amazon can, brands need to be able to offer speed and convenience at an affordable price – Ohi can do both, and Jones says the company’s partner brands generally make its shipping service free to the end consumer.
Over 50 brands are active on the platform, including Health-Ade, SolaWave, Untuckit and a host of other CPG, beverage, beauty and DTC brands. According to the press release from Ohi, those brands saw an average increase of 28% in conversion and up to 120% in repeat purchase rates. The release also states that Ohi customers have up to 35% higher lifetime value than those that use “a UPS/FedEx shipping option.”
Ohi’s team has grown to over 55 people since it completed the funding round in April, many of them alumni of Amazon (NASDAQ: AMZN) and Uber (NYSE: UBER).
“Traditionally, logistics, shipping and warehousing has been seen as a cost base for brands,” Jones told Forbes. “What we’re doing is flipping it on its head and it’s becoming a revenue driver for brands.”