"2-Day is Too Slow": How Darkstore's FastAF is Delivering on the New Customer Expectation

Brian: [00:01:31] Hello and welcome to Future Commerce, the podcast about next generation commerce. I'm Brian.

Phillip: [00:01:36] I'm Phillip and this is the first podcast of 2021.

Brian: [00:01:40] Whoa!

Phillip: [00:01:41] Welcome the 2021. We made it. We did it. I can't believe it. And to celebrate, we have the founder and CEO of FastAF, Lee Hnetinka. Welcome to the show, Lee.

Lee: [00:01:52] Hello. Thank you for having me.

Brian: [00:01:55] Yeah.

Phillip: [00:01:55] Thanks for coming. I mean, we got you on as fast AF we could. {laughter}

Lee: [00:02:01] That's how we roll.

Phillip: [00:02:02] Does that ever get old, Lee?

Lee: [00:02:05] In fact it doesn't.

Phillip: [00:02:09] I feel like some people might have seen a lot of social buzz around FastAF, but let's not take anything for granted. Tell us about what it is.

Lee: [00:02:16] Yeah, it is a new two hour delivery app to get premium essentials delivered. You know, we have folks like Aesop and Bala Bangles, which are an incredible ankle weight that was recently on Shark Tank, all the way down to CBD drinks like Vybes. Those are our top moving products. But we launched a few months ago and now we are in LA and New York.

Phillip: [00:02:45] That's awesome.

Brian: [00:02:45] Nice.

Phillip: [00:02:45] I've often as a customer of Aesop, I've often marveled at their ability to do next day for most orders and really, really blow it out of the park. Two hours is unheard of. Congratulations on the launch. How are things going? What are the plans on scaling the business up? Are you moving into broader New York metro? Tell me a little bit about what the 2021 rollout looks like.

Lee: [00:03:17] Yeah, so the way that we launch a city is we have a micro-fulfillment center that's in the middle of the metro. So in New York, it's in the middle of Manhattan on 25th and 5th. In Los Angeles, it's in Santa Monica. And that is where all of our inventory is. So we don't go to stores. The inventory that we have is in our facilities and that's where it is sent to customers within two hours. As we look to 2021, we look to expand cities. We look to expand geo coverage within our existing cities. So we're in Manhattan and parts of Brooklyn. So extending more out into Brooklyn. We're in Los Angeles, mainly on the west side, and we'll be expanding out to the east side. 2020 was just about like seeing like, do customers want this? And then I think, like you said, you saw a bunch of covers on social and customers have told us they love it. And so we're just going to step on the gas from here on out.

Phillip: [00:04:28] What's the relationship with Darkstore? Darkstore's come up over and over and over on the show in a bunch of different ways. Is it an imprint of Darkstore, FastAF?

Lee: [00:04:41] Yeah, so our whole thing has been to make accessible the premium products and brands that we want and need in our lives. So for us, we look at all the direct to consumer brands that have recently been launched over the past few years online. There's some classic premium brands like Aesop that have been around for a long, long time. And so for us, we felt that there wasn't this marketplace in order to get them quickly. You have a marketplace to get your basics. You have a marketplace to get your groceries. But you have no marketplace that you can get the brands that you have a high affinity for or you're not willing to switch out and get them delivered quickly. And so, Darkstore... We launched to do that. And one of our first customers was Nike. And we worked with them to get same day delivery live on Nike.com. But what we saw was a broader picture of the eCommerce infrastructure and how it was so fragmented and so constrained. If you're on Shopify, you can't have more than one fulfillment partner. And I mean that in the true sense of these platforms were built for two day delivery and not for two hour delivery. And so if you're on Shopify and you can only work with one fulfillment partner who does your two day stuff, well, then you're never going to be able to offer two hour. And so [00:06:17] we sat there and said our mission is to make these products and brands accessible and get them delivered in two hours. And we felt the way to do that was through a marketplace. [00:06:28] And so you asked if that "FastAF" ever gets old, it's just something we will live by ever since we started the company. And so when we thought about, hey, when we're going to put a consumer facing product out into the world, we thought FastAF is a perfect name for it. And so that's how FastAF came to be.

Brian: [00:06:48] That's amazing. You know, it's interesting, as you've talked about your product mix and sort of the the mission behind FastAF. We've seen sort of other entrants into the "DTC Mall" and on another show, we had Neighborhood Goods Matt Alexander on back in February. Is this almost like Ghost DTC mall? That's not really a fair comparison, is it? Where would you sort of put yourself in the market? And what do you think about direct to consumer and why is this important to sort of direct to consumer as it exists today? I think, as you mentioned, Shopify, it was really built for two day shipping, not two hour shipping... Kind of elaborate on that a little bit more.

Lee: [00:07:44] We think about the consumer and work backwards from there, and we are consumers of these brands, and if we are buying these brands and the only way to get them is in two days, well, then more and more people aren't going to be able to buy them because you start to kind of dabble in a different cohort after you've saturated the one that's willing to be that early adopter, willing to wait two days. [00:08:18] But two days is, not to be cliche, too old. But it is not what is the norm today. Consumers have higher expectations of two hour or faster with food, with movies, with renting a home, getting a car at the tap of a button.  [00:08:39]And if I kind of look at the direct to consumer landscape, there was a movement about five years ago where Bonobo's really started it and they were the ones who pioneered direct to consumer, or one of the brands. And it was, hey, we want to sell a better product at an historically impossible price. And I think that there are a large number of brands that have done that exceptionally well. But what starts to happen is you kind of saturate that early adopter market and then aren't able to really extend beyond that customer base. And so they aren't really able to kind of have that prevalence or ubiquity that you would expect. And so then things start to happen where, "Well do we launch more products? We have no other channel." And [00:09:34] that's where we came in and we said the brands of tomorrow are not going to sell on Amazon. They don't want to because of competitive reasons. They don't want to because they don't have a customer relationship with the customer. And we started to look at a lot of the landscape that exists and saw that it was not in line with the values of today's customer and today's brands. And so that's where FastAF came in. [00:09:59] And we said, how do we create a marketplace that has a very high bar for design that is mobile first, ApplePay only, that the brands have a relationship with the customer? So we give them the customer data where we will promise to never compete with your brand and not allow third party sellers. So the only person who can sell a brand on FastAF is either ourselves or the brand itself. There isn't a third party that the brand is going to be competing with. And these are these main pillars that we thought a lot about. And it's really resonated both with consumers and brands themselves.

Brian: [00:10:43] The gated aspect seems really important to me. How do you sort of make determinations about what you'll ultimately include? And are you picking winners sort of as a result of this? And maybe that's OK, maybe that's sort of the strategy.

Lee: [00:10:59] Yeah, we definitely do. We do have a hard line on who we work with and who we don't. We have a scorecard internally. It's something that we've built up. And it's a way that we feel we're able to score brands that align with our values and our customers' values. And not every brand is for FastAF. We feel that there are some brands that just are for a different platform or they just don't hold the same things sacred that we do. And so we do curate. We've been told we have an incredible curation. And I think that's just attributed to the customer. They don't want to go somewhere and have to sift through everything. They want to be told what is a great brand, what are the great brands. And I think that's where we've been able to break out and differentiate.

Phillip: [00:12:05] It's a recurring theme this year. I guess now we're in next year technically, but it's a recurring theme over the last four or five episodes, is discovery being paramount. And this idea that in the future, and we are now living in the future apparently, every brand becomes a marketplace unto itself to some degree, and cooperation through selling and curation will be a marketplace strategy for the future. If you can hang faster delivery on top of that, like instant gratification and high end and thoughtful curation, that sounds like a winning combination.

Lee: [00:12:51] Yeah, it's actually fun to talk in the future. For us, I think that's kind of how we think about it. We are really the superpower to all of the brands that we work with. And if you've been on FastAF or you look at it, there is no FastAF logo within the app. And that is on purpose. We highlight the brands. We spend an incredible amount of effort with the photography and in highlighting and accentuating the best features of a brand. So for us, we've thought a lot about what are the things that brands really want to be good at? And what are the things that they can leverage a partner to be good at? And we felt that we want to enable a brand to just be able to create a great product and leave that instant gratification piece, leave that marketing, leave that delivery FastAF to us. And that's why we've been able to create this great new platform.

Brian: [00:13:55] So cool. Yeah, I think it's something really interesting that we've been thinking about as well over the past few episodes here, this idea of the diminishing importance of place. The idea that physical locations are no longer as important as they once were for things like foot traffic. Instead the digital foot traffic allows operations to be anywhere. So as you think about FastAF and Darkstore and the sort of concept of like what place means to people, I just can't help but muse that this is sort of the next generation of if you can have anything in two hours anywhere at any time, place sort of changes. And it makes a lot of sense in cities, especially right now, where you can get something in two hours.

Phillip: [00:14:43] Thinking about the infrastructure roadmap, like how do you build this out to serve more people at once? Because it seems like it would be a resource intensive business that has moments of very intense scale needs and concerns.

Lee: [00:14:59] That assumption would definitely be correct if we had started this business five or so years ago. So my first company, WunWun, was one hour delivery from stores and restaurants. We competed head on with Postmates. That was started in 2012. And in that time there was no last mile network. There was no way to get things delivered within one hour. There was no infrastructure, and we were using stores as warehouses. And so fast forward to today, the world is very different. You know, there is a very matured last mile network. DoorDash, Uber, others like Roadie, some are consumer facing and some non consumer facing businesses. There is a very real last mile network that we're able to leverage on a per delivery basis. And what I mean by that is when Uber first launched their network, until they got a city to maturity, they had to pay a driver hourly until they were able to get enough rides that that would make that driver's day. And so this way you have a low supply until you're able to really get the demand. So for our business with FastAF, we don't have that capital intensity, because those last mile networks are already delivering food and people and other things. We're just adding on in a very small way to these networks. So one really great piece about the infrastructure on the delivery side is we don't have a really large startup cost there, in terms of maturing the network because it's already been matured by other companies. When we think about space, so where are these products are stored, that also has become readily available. And I think that we'll definitely attribute a large amount of that to the pandemic. And what I mean by that is the magic of two hour delivery is having a place in a location that you can reach a large amount of the population at the quickest amount of time for the lowest price. And so in order to do that, we built this tool. It's called the Happy Valley Tool. And we literally take like Google map data, Uber drive data. We have a number of things we kind of put into this fishbowl. And what it pops out is a gradient on a map where we know on a street level basis where we need to have a Darkstore. And so then we literally go walk up and down that street and procure a facility.

Phillip: [00:17:48] Wow.

Lee: [00:17:48] And that facility doesn't have to look like what you would imagine that facility to look like 10 years ago of what a "fulfillment center" is. Right? And our facility in Manhattan used to be a creative agency. We gutted it, and now it's our Darkstore. And we got it at a really great price. And so I think the thing that we're really lucky for is one, the types of things that I've just kind of went over. But where the world's going. The world is at a moment right now of transition and a moment of where we thought things that were going to happen five, 10 years from now are happening today and yesterday. And so I think the world is ready for it. And what I mean by that is because we've been able to get space so readily and cheaply available and because those last mile networks are matured, the economics for our type of business are drastically different than what you would imagine they would be, again, 10 or so years ago, five or so years ago. And I just think that that's because now the world is ready for it, where it likely wasn't in the past.

Phillip: [00:19:08] There's a challenge in that there's not very many, or at least there wasn't even four or five years ago. There weren't very many three sided marketplaces. And you have not only have to have adoption by a customer base that wants the products that you're selling and understands the value prop, but you have to have buy in from a Just-In-Time workforce. Right? And you have to have so adoption on that side as well. And then you have to form these partnerships and you have to have a wholesale side of your business as well. And this sounds like the three hardest things that you do in tech cobbled together into one solution. It's no wonder that very few are doing it. What are some of the learnings that you have from other successful ventures, like with Darkstore, that helped inform how you built this? And tell us a little bit about how you've gone to build those into the business.

Lee: [00:20:09] The big learning that I think we have I can extract from Darkstore. And really, what was the accelerant to FastAF. Not many people really understand why their customers will shop somewhere else versus with them. And I mean that on like the most qualitative level. But also on a level of like if you ask someone if they wanted, like the Henry Ford quote, they would have told you they wanted a faster horse, when in reality they want a car.

Phillip: [00:20:37] Yeah.

Lee: [00:20:37] You can ask customers, do you want more selection? Do you want to better buying experience? Or what if we got your delivery to you faster? And it's not really until you show them is when they really know, like, oh, that's it. That's why I shop with you. That's what I wanted. And so we started Darkstar a few years ago. 2017. And even over the last few years, people are like, "Well, do consumers... They don't really need anything within two hours. We're like, "You're totally right." No one needs anything in two hours. But Amazon has built a two trillion dollar business that gets people things within two hours and two days. And that is the beast that you're competing against. That is the thing that if you say, hey, well, two days is good enough. Well, there are going to be consumers that don't believe that. And it's not until you see the attrition and churn that you're like, "Oh." And so I think the big takeaway for us is with FastAF we really needed to show to both brands and consumers what it looks like in order to have them become believers. Because I'll tell you, we really pitched a lot of brands on Darkstore. Most would say, "No, this isn't a priority for us. This isn't something that we think our customers want or need." And after we launch FastAF it's really, really just kind of gratifying to see, "Oh, that's what that would look like." "Oh, yeah. No, we definitely want to be a part of this." And now, again, because of the pandemic, that is something that I think no one saw. And when you don't have that type of infrastructure, it's really hard for you to literally pivot your business. So I think that's the biggest learning that we kind of took away, which was you really have to build something to control your own destiny and you really have to build something to have people become believer's because it's not always obvious, even if it's something that you feel like in your own head, it's something you want. Not everyone feels that way. So that was the biggest takeaway, I would say.

Brian: [00:25:18] Ok, since you brought it up, you said that the big A word. Looking at...

Phillip: [00:25:26] This is my favorite. This is when the PR team tells us we have to cut this section out later on. Go ahead. Go ahead, Brian. Ask the question.

Brian: [00:25:30] I know. But I'm gonna ask it anyway. Phillip and I are going to be talking a little bit more going into February about what it means to be competitive with Amazon in this modern world of technology and how retailers are cobbling together these solutions that actually we used to always say, "Oh, don't compete with Amazon. Never compete with Amazon. You're in your own category." But actually now we've got solutions, a set of solutions, to sort of actually provide the type of experiences that Amazon provides at a rate that makes it somewhat achievable. Do you see yourself as part of that sort of new coalition of owned channel type solutions to help provide retailers with a way to combat what they're facing with Amazon? And I've got a follow up question of that, but I'll wait for you to answer that first.

Lee: [00:26:27] We don't think about Amazon day in and day out. It's not something or someone that makes us work harder. We just think about the customer and building for them. And I just want to say, I'm a huge Amazon customer. What they've built is incredible, but we just felt that there was a void in what else we thought needed to exist. So we're not necessarily looking at the world as an end state where it's competition. We're looking at a world where we're building something that we think customers want and need. And that's kind of what we're focused on. So I just want to say that's not what moves us or why we do what we do.

Phillip: [00:27:17] And there's something to be said too, Lee, just as an addendum of there was a time where eCommerce writ large, copied relentlessly what Amazon did. And it was sort of the digital version of why do research of where to put a Starbucks when you could look where there are McDonald's? Let's go and just look because someone has already done the work, and let's figure out how to just relentlessly copy that. And somehow in this world, we've moved away from that. We decided that we want to forge our own path forward. And the experiential commerce experiences have left behind whatever language of eCommerce that the Amazons of the world and the other behemoths of the world have developed. And they've created immersive experiences where Amazon now feels anemic by comparison because they serve very different purposes. You can't replicate the Amazon experience without billions of products. And so we have to forge our own path. And we've proven in eCommerce that there is an audience for the new world. There's an audience for that new language of eCommerce. So, Brian, with that as the addendum on what Lee said, go ahead and ask the other part of the question that he also won't be able to answer.

Brian: [00:28:33] My gosh, you already basically commented what I was going to say. I just read a tweet by Benedict Evans and he said, "If I worked at Amazon, I would be seriously worried about the effect that Marketplace has on the buying experience. Far too much now feels like eBay, a chaotic mess of random SKUs where you have no idea if that's the right product or what you're going to pay." I totally agree. I think that the beauty of this owned channel approach is that maybe we do need to create a new world. Maybe we don't need to think about Amazon anymore. Maybe the Amazon effect now isn't really the Amazon effect that it once was. And I loved your answer. And hopefully we can keep it, Lee, {laughter} about not thinking about Amazon, but really two hour delivery is something that people need and want and they want to be able to do with the products that they love. Or maybe that they just discovered as a result of a good discovery experience.

Phillip: [00:29:32] I think that's the key. Right? I want your take on that. They're willing. They want that service, but they want it for a certain type of product.

Lee: [00:29:41] Yeah, I mean, I think what has been fascinating for us is, as we have been curating all of the brands that are on FastAF, every day we learn about a new one. And it's not like one new one. We learn about a few new ones and a few good ones. And when we put them on the platform and choose to back them early on, our customers tell us, "Wow, there's so many brands on here that I've never heard of, but I want to try." And that's how they discover them. And so they do look to us as this discovery platform, in this curation, in this call it authority over what's hot and what's new. That was something I can't say we started FastAF for, but it's been something that has really given us a lot of tailwinds.

Phillip: [00:30:30] Merchandizing and assortment are everything in your space. Right?

Lee: [00:30:34] Yeah.

Phillip: [00:30:34] And then the next step down is fulfilling on the delivery promise, which is... How much is the word "fast" your mission statement? Like are there other parts of the business that you feel like are more slow and methodical, or are you just trying to like, fulfill fast on everything? Is the fast partner onboarding, fast delivery driver adoption? Give me some sense of like the culture and how you're building out the team and the culture.

Lee: [00:31:05] You're pre-empting my management off site.

Phillip: [00:31:11] {laughter} Oh sorry.

Lee: [00:31:11] No, no. You're good. It's something that's a topic of discussion. It's a meaty one. What you just mentioned are all things we think about. How fast can we get a brand from that we discover to being live on FastAF? How fast we call it doc to stock... Do we get new inventory in inventory? All of these metrics. How fast, of course, can we deliver an order? But like that's the table stakes one. And so I think for us, we more so look at the world as we're kind of enabling access to these brands. And we think a way to do that is by pairing them with fast and enabling you to get them fast. That is the differentiator that we think about. But there are some decisions that we don't move fast on. Those are the long term decisions that are really going to have a lasting effect on our business. But sometimes we do move on a decision and find out that was the wrong decision. And those types of decisions you can very easily reverse on. But the ones that you can't reverse on, those are the ones that were really, really, really, really thoughtful.

Phillip: [00:32:33] There's probably a way that you've thought about making a splash in the cities that you've launched. And tell us a little bit about that. What was your campaign to raise awareness of the app? Were you doing a lot of out of home? And how challenging was that in 2020?

Lee: [00:32:54] You know, I'm not a super social person, but the way that we've gone about launching cities is through influencers. Yeah, and that's not a world that I know very well. But what we have been able to do is identify some folks that are within a city that have a large following, large engagement, and we've partnered with them in a way that we're able to have them use FastAF, love it, speak to it, and give a $20 off your first order code to their followers for them to try it, love it and do the same thing. And we built this flywheel and network effect through that. And [00:33:41] I would tell you, if you had said to me again, maybe pre-pandemic or a few years ago, could you launch a city entirely virtual? And I would tell you no, but I would tell you we did. And we have. And we will continue to. It's been fascinating to watch the effects of influencers and how you can really get down to a micro level within a geo and an engagement level. [00:34:11] Who has followers, who buys followers, who has likes, who buys likes... It's fascinating. And I can tell you, it's a strategy that I didn't know much about. I backed, and it's been the right decision.

Brian: [00:34:28] That seems really interesting. Influencers are such a topic of debate as far as like how effective they are and if the influencers are the future that we thought that they were as opposed to maybe more of like the micro influencer culture versus sort of like the macro influencer culture. I am curious. As we look ahead to 2021 and we're maybe coming out of the pandemic, we're maybe going to sort of...

Lee: [00:34:55] We're coming out. Come on.

Brian: [00:34:55] OK. Whoa.

Lee: [00:34:55] We're coming out.

Phillip: [00:34:55] Speak it into existence, Brian.

Brian: [00:34:55] I love it. I love it.

Lee: [00:34:55] Manifests it.

Brian: [00:34:55] We're coming out of the pandemic and we're going to start to get back to in person shopping, hopefully a little bit more than we have been. Do you expect some of the behaviors that you saw this past year are going to be sticky in 2021?

Lee: [00:35:33] You know, I like to look a lot at other cultures to see what is possible and how other people live and how I and we could live. And the US is a place that is, especially in eCommerce, far behind where the rest of the world is. Two hour delivery in South Korea... I mean, that's been the norm for years. The infrastructure and things like Darkstores, those have existed in China and other parts of the world for years. We're just catching up. And so I kind of look at it as when you find a more convenient and efficient way to do something, you adopt it and you never look back. Right? If I had said to you, Brian or Phillip, "Hey today I can get you Netflix." Would you ever think to go back to using your VCR?

Phillip: [00:36:33] Yeah, exactly.

Lee: [00:36:35] Ok, like, [00:36:37] I grew up with a VCR and that's not a word that we hear at all often and anymore. But that's how I grew up. I grew up going to Blockbuster, and so I grew up going to a store to get my movie, walking up and down the aisles, remembering to bring it back, putting in the drop box. But now you tap a button and you get it digitally. And I get it within seconds. And so I think that's going to be if that is the way now you can get your groceries, of which I have gotten it that way for a while. Now my mom has adopted that way. And if that's the way you can get the rest of the brands that you need in your life and in your home, I don't see why you would change and revert back to a more inefficient way. That is not to say that people don't love to go walk up and down Fifth Avenue. That's not to say people don't love to go to the Grove in Los Angeles. I'm saying the primary way, I think, will be a way in which people have already adopted and it's more efficient. So it's again, it's the thing that will allow you to be able to do other things. So our two hour delivery, it may be stopping you from going to the store, but that's not such a bad thing because now you have more time to do whatever else it is you want to spend your time on doing. [00:37:57]

Phillip: [00:37:59] Well said. I think that's spot on. Probably a good place to start wrapping up. In my thinking, your example of the VCR there, Lee, I think has this really interesting parallel to a piece that we wrote recently called Freaky Friday back mid pandemic. It was in July. But the idea of like digital experiences being informed by physical experiences and how the stepping stone to streaming was the DVR, right? It was time displacement, but we still had to physically record something. It was just more convenient. And the true convenience is, well, anything that you want is infinitely available, pretty much anywhere that you want it, all the time, and it's in your pocket. But to get there, we had to go through a couple of evolutions of tech and customer expectation and adoption. And it feels to me like FastAF is not a stepping stone, but it's probably a hint of what the customer expectations of the future are going to be in curated marketplaces yes, but also in expectation for two hour delivery. And I think that that's really notable. And it's been an honor. We've mentioned Darkstore so much on the show over the last three years. It's an honor to have had you on. Thank you so much for coming and sharing your thoughts.

Brian: [00:39:26] Thanks, Lee.

Lee: [00:39:26] Well the honor is frankly all mine, I think. We've been at this for a few years now, and the Darkstore was our stepping stone to FastAF. I think we just work really hard at building something we think people are going to want and love in their lives. And so it's never an overnight success. It's always the journey that I kind of enjoy. So thank you for having me.

Phillip: [00:39:57] Yeah. And where can people go get the app?

Lee: [00:40:00] Right in the App Store. Or just type in FastAF, and it's on the top.

Phillip: [00:40:05] Nice. Appreciate it. Thank you for listening to Future Commerce and go right now. Go get FastAF in the App Store while you've got your phone in your hand, which you probably had anyway. Let's be honest. Head on over. Give us a five star on iTunes. It helps us get this in front of other folks. We are the number one business podcast in Latvia, Brian.

Lee: [00:40:27] Oh wow.

Phillip: [00:40:27] Chartable told me about that.

Brian: [00:40:28] What?

Phillip: [00:40:29] And of all places.

Brian: [00:40:31] What?

Phillip: [00:40:31] I know! So thank you to all of our Latvian friends who continue to rate the podcast, but if you are in anywhere else in the world, please share this with someone else. Go give us five star on iTunes and that's it. Thanks for listening to Future Commerce. And remember, we have the power to shape the future with commerce. Let's make a future we're all proud of.

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