Jonathan Um, Cofounder, and COO of Holler.com, the world’s first online dollar store, recently spoke at Retail (R)Evolution 2018 about how important the supply chain and automation is to his young start-up.

We are on the extreme end of the online spectrum. For us, carrying about 10,000 SKU’s, providing the ultimate digital hunt to our 6 million users, the number one thing we focus on, first, second and third, is supply chain excellence. We take a holistic view of the supply chain, from the way we buy, what we buy, how we source, how we bring it in, how we pay, to the way we fulfill and ship. It was inevitable for a bunch of scrappy guys trying to squeeze every ounce of fat from that supply chain to turn to automation. Not just your run of the mill automation, but robotics.

Speed Isn’t Everything

I think with Amazon out there in the market there is a misconception that speed is everything. You have to deliver next-day, same day, and that’s simply not true. In fact, what rings the most true is free is king. And customers will do amazing things to try to get to free shipping. It is the end all, be all for the extreme value segment. For us, we are very focused on how to deliver free shipping and make our unit economics work. That’s number one. Number two is transparency. Customers want to know what’s going on with their order?

If it’s getting picked, packed–there are actually features in our WMS with HighJump Software where you get a Facebook notification if the order is being picked at that very instant. For the customer, it’s really about not worrying that you have our attention on your order because you receive regular updates. That whole stat about 8 contacts per package is a real cost and that is a reality that we’re living through. Every time we update and add transparency is a win for our business.

Same Day: The Exception for Delivery but Not for Notification

In terms of click to ship, it is same day, that is the expectation. When you place an order on Holler.com, the expectation is that you get a shipping notification the same day. The constraint is that we have a 5-day work schedule, we don’t have a 7-day work schedule, so we need to catch up on Monday and Tuesday very quickly. But that same day ship notification, that is the standard.

Small Start-Ups Must Outsource Automation to be Successful

We are a well-funded company, but we don’t have the capital to deploy traditional automation. You ask us to spend $2 million, $5 million we are just going to say no out of the gate. It’s a non-starter for us. There is no scenario that would payback for us, ever. I don’t know what my order volume is in Q4 five years from now. I can barely tell you five quarters from now. So I cannot put up $5 million, $10 million or $15 million.

We are working with a solution called Invia Robotics. It’s basically a little robot, costs no more than a couple thousand dollars to build, and it’s a pay as you go service. So in the day of Uber and Lyft and Airbnb, why would you pay for your own capX as a small company like us? We pay by the pick, the replenishment tasks, and the inventory tasks. This is a great solution for where we are as a business, doing about 3,000 orders a day and 30,000 lines.

If we were to scale up to 100,000 lines in a couple of years, I’d be totally open to insourcing.