Ecommerce supply chain transformation for online retailers
The Pandemic accelerated the use of backend logistics by online retailers. But, until recently, social media influencers, boutiques, and sidepreneurs needed money and skills to take advantage of this trend.
Trendsi provides turnkey ecommerce supply chain SaaS platform to source products, manage inventory with no minimums, and fulfill orders. The platform uses just-in-time manufacturing, aided by AI and machine learning, to predict sales and guide product manufacturing. This technology reduces excess inventory, which accounts for 20% to 30% of the stock and can cost businesses 11% of revenues.
The startup raised a $25 million Series A round in October of 2022, bringing its total capital raised to $30 million.
Trendsi is the brainchild of Ella Zhang, cofounder and CEO of the startup. She grew up in China where her career began in e-commerce as a manager at Google and Tencent. She became an investment principal at Investment Principal Kleiner Perkins Caufield & Byers (KPCB), where she invested in JD, the Amazon equivalent in China. Zhang came to the U.S. to establish Binance Labs, the venture arm of Binance, a cryptocurrency exchange.
“When I came to the U.S., I was naturally curious about the e-commerce space,” said Zhang. “I learned that the top sellers on Amazon—over 70% to 80% of them are from China—had solved the supply chain problem. However, tens of millions of small-and medium-business owners were missing out.”
They are often sidepreneurs—stay-at-home moms and homemakers who want to contribute income to the family or women who have day jobs like teaching and want to earn more. “There are tens of thousands of them,” she said.
Zhang visited a friend who was one of these sidepreneurs. The friend had turned her basement and garage into a warehouse. “What a mess!” Zhang thought. “Why don’t you use a dropship service?” she asked her friend. Drop shipping is an essential layer of China’s e-commerce infrastructure. The friend told her there are no good dropship services in the U.S.
As it turned out in the U.S., small boutique businesses managed inventory the old-fashioned way through offline wholesale marketplaces or, more recently, online ones. Boutiques buy bulk from wholesalers, hold the merchandise, and pack and ship orders themselves. There must be a way to compete with e-commerce players who leverage data to predict the market demand, match the supply to it, and automate other processes along their supply chain.
“I felt there were so many opportunities to help them, and that’s meaningful to me,” exclaimed Zhang. She was joined on her quest by two cofounders.
- Sherwin Xia is on the Forbes30 Under 30 2023 in Retail and E-commerce list for lowering the barriers for entrepreneurs launching online businesses by eliminating the risk of holding inventory. The two were postgraduates at Stanford and participated in the Stanford Startup Garage incubator. Xia was one of the first employees at e-scooter startup Lime and previously worked as an analyst at a16z (Andreessen Horowitz).
- Maddie Davidson was a top seller on Amazon, who at her peak reached $5 million a year in sales. According to TechCrunch, she seeks to build a service that applies AI and machine learning to streamline tasks like inventory and sales forecasting to reduce excess inventory and prevent being out-of-stock on popular items.
“One of the predictors that we’ve noticed of success with entrepreneurs is the pace of learning,” said Ilana Stern, general partner at Peterson Ventures. “The speed at which she [Ella Zhang] and her team learn is incredible.”
When the Pandemic hit, many retailers closed their doors for good. Others thrived by moving online. Trendsi was born during the Pandemic to make it easy for retailers to sell online.
The company has raised a total of $30 million to help even the smallest boutiques deliver the latest styles, usually in less than a week, without the retailer holding inventory. Lightspeed Venture Partners led the recent Series A round of $25 million, with participation from Basis Set Ventures, Footwork VC, Peterson Ventures, Sierra Ventures, Liquid 2 Ventures, and individual investors, including Zoom CEO Eric Yuan and Zola CEO Shan-Lyn Ma.
“[For small retailers,] there’s a perennial conflict between offering the best new products and managing increases in working capital requirements,” writes Arsham Memarzadeh, partner at Lightspeed Venture Partners on Medium. “Constraints around working capital made way for a stratospheric rise in dropshipping, which is projected to hit nearly $500 billion in global revenue by 2026.”
But many small businesses had concerns about the quality of goods, the availability of inventory, and shipping goods in consistent timeframes, so they were reluctant to give control to drop shippers. “Trendsi relieves merchants of inventory risk, supply chain overhead, and the resulting limitations in product selection,” Memarzadeh continued to write.
For the model to be profitable, fulfillment has to be cost-efficient, especially at:
- the first mile—shipping from overseas.
- the last mile—shipping from the Los Angeles warehouse throughout the U.S.
“Fulfillment costs in China are normally under 5%,” said Zhang.” However, in the U.S., it’s 40%.” It’s an industry-wide problem.
“As our volume gets bigger and bigger, shipping rates get lower and lower,” Zhang said. “We’re navigating direct partnership with the major carriers—DHL, USPS, and UPS. We’re also building our very own kind of intelligent warehouse management system (WMS). Gradually, the cost of fulfillment will come down.” Amazon’s logistics cost structure works for them, and Zhang believes it will also work for Trendsi.
Trendsi retailers have branded websites or apps and drive traffic through their social following directly there. Amazon sellers need to drive traffic to their listing on Amazon.
Another challenge has been managing non-standard products, like apparel. The platform was built to be flexible enough to handle many variations in sizes, colors, and other characteristics. Based on customer feedback, Trendsi is adding new merchandise categories like accessories, including jewelry, home decor, and makeup.
Small retailers often need help to identify reliable, high-quality suppliers in China. Trendsi takes the guesswork out of that. It has a business development team in China to identify the manufacturers and a strict screening process to separate the wheat from the chaff. “For example, for apparel manufacturers, we screened thousands of manufacturers, visited about 400 to 500 manufacturers, and picked the top 50 to 60,” said Zhang. “We have a quality inspection team in China to ensure the deficit product rate is lower than 2%. This is how we keep our return rate low.”
Trendsi uses just-in-time manufacturing. “We use data to identify the bestsellers early on, so we can quickly restock,” said Zhang. “Because of the variance in size and color, this is very difficult to do in apparel.” But they are doing it.
Trendsi wants to help small to medium businesses grow faster and easier and help suppliers move their inventory more quickly and efficiently. The startup is doing this by matching the demand and supply of the market.
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