Darkstore’s New Service Pitches Two-Hour Delivery for Consumer Goods

Darkstore Inc., a behind-the-scenes fulfillment company, has released its first consumer-facing app, promising two-hour delivery of products from sneakers to olive oil.

The app, called FastAF, lists goods from established companies such as

Nike Inc.

as well as startups that market directly to consumers through the web, like Parachute Home Inc., which offers linens and other household wares. Darkstore uses DoorDash Inc. to handle the actual deliveries.

Anything sold on FastAF comes from a Darkstore fulfillment center, but not every Darkstore client is available on the app.

FastAF arrives as consumers increasingly shift their shopping online, driven by social distancing and other measures to fight the coronavirus pandemic. U.S. e-commerce sales are expected to grow 18% to $709.8 billion this year, according to market research company eMarketer.

The trend has been a windfall for delivery giants including

FedEx Corp.

, whose FedEx Ground business handles deliveries for retailers such as Target Corp. FedEx posted the highest quarterly revenue in its history for the three months ended Aug. 31.

Darkstore, which caters mostly to e-commerce businesses in more than 238 cities, declined to discuss its revenue this year. The company has raised a total of $30.2 million from investors including EQT Ventures.

One challenge for Darkstore is that a growing number of companies large and small are trying to win consumer spending with a variety of services that take orders directly and deliver quickly.

ShopRunner Inc. charges a yearly membership fee of $79 for two-day shipping from more than 100 retailers. And Postmates, which

Uber Technologies Inc.

agreed to acquire in July, delivers online orders from nearby food and bricks-and-mortar stores within a few hours.

Amazon.com Inc.’s

Prime Now offers free two-hour delivery to the more than 100 million people who pay a yearly fee of $119 to be Amazon Prime members.

Not every effort succeeds.

Walmart Inc.’s

Jetblack for a time offered personal shopping by text and same-day or next-day delivery for $600 a year. Walmart shut it down in February.

Same-day delivery has a long history of attempts: Much earlier efforts that didn’t pan out include Kozmo.com Inc. in the late 1990s and LicketyShip Inc. in the mid-2000s.

A big question facing the newest competitors is how badly people want their wares right away.

It isn’t clear whether people need many products much faster than two-day shipping, said Jennifer Wise, principal analyst at

Forrester Research Inc.,

a market research firm. “Two-hour urgency is likely to be less important or less common among consumers,” she said.

FastAF is currently only available in Los Angeles, with plans to service New York by the end of 2020. Fees for the two-hour delivery service are currently waived, but will normally cost $9.99 per delivery. Free two-hour delivery will eventually become available on orders that meet a dollar minimum, the company said. Consumers can also use the service to return an order.

Darkstore executives hope FastAF can find a niche in the growing industry by focusing on the customer experience and compelling products, said Lee Hnetinka, founder and chief executive. FastAF is aiming to become similar to a store by creating brand pages in the app and mimicking an aisle-browsing experience on the home screen.

“If you look at other on-demand services, they’ve partnered with retailers to bring them online,” Mr. Hnetinka said. “We are creating our own version of a retailer.”

About 170 brands are on the platform with more than 1,200 products available. Customers are purchasing an average of four items per order, the company said.

This is not Mr. Hnetinka’s first venture into on-demand delivery. He previously founded WunWun Inc., an on-demand delivery company in which customers paid for the cost of the product and an optional tip to the delivery person. The company was sold to Alfred Club Inc. in 2015.

WunWun faced a series of challenges, such as a lack of insight into inventory at stores and creating a vast delivery network. Unlike WunWun, FastAF knows what products are in stock at its Darkstore fulfillment centers, Mr. Hnetinka said.

The service may face other headwinds, since two-hour delivery can be replicated, said Ms. Wise of Forrester Research. Two-day delivery was once a differentiator for online merchants, she noted, but it is now a service that many companies offer.

Write to Ann-Marie Alcántara at [email protected]

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