Online shopping and fast delivery through services like Instacart and Amazon Prime are the pinnacle of modern convenience, but for many consumers who care about the sustainability and environmental impact of e-commerce, every box and plastic bag left at their door comes with a sense of guilt. . Is there a better way to buy, we collectively asked ourselves as we clicked “Add to cart” once more. Well, maybe there is.
A startup called The Rounds believes it has found a solution to making online commerce more efficient, greener and—as its recently announced $38 million Series A funding suggests—potentially profitable.
Investors Annie Kadavy of Redpoint Ventures and Andrew Chen of Andreessen Horowitz led the latest seed round, which included seed investors Construct Capital and First Round Capital. To date, The Rounds has grossed $42 million.
The model applied by The Rounds involves what it calls reverse logistics – a system where online products are not only delivered to the consumer, but their empty containers are also picked up at the same time. In addition, there are regular deliveries designed to complement household essentials, from cleaning products to toiletries, shelf foods and more.
Rounds co-founder and CEO, Alex Torrey, came up with the idea as a means of solving his own personal problem as a ten-year-old high-rise apartment dweller without a car. Like many city dwellers, he found himself carrying large, bulky products back to his apartment after going to the local grocery store, or feeling like a waste of time restocking smaller household items through online ordering because things ran out.
“I remember ordering hand soap … and having to choose from thousands of options on Amazon,” Torrey recalls, discussing the difficulties of using traditional e-commerce websites for everyday needs. So when his package arrived, Torrey realized how futile Amazon’s shipping was.
“I have a box in a box with a plastic soap bottle – identical to the bottle on my sink. Now I’m holding two identical plastic bottles, [but] one of them is empty. Plastics are designed to last for hundreds of years – mine didn’t even last 100 days,” he says.
This system just didn’t make sense, he says.
Combined with the fact that he lived in a building with 500 other apartments where probably many other people regularly ordered soap and other items, it also didn’t seem like the most efficient way to restock. After all, a hotel of this size would only order in bulk, without excess packaging destined for retail shelves. So why shouldn’t consumers be able to order this way too?
As it turns out, they can.
Launched in 2019 in Philadelphia and still flying under the radar, The Rounds today operates by allowing consumers to shop around 150 individual products (SKUs) in categories such as Household, Personal Care, Pantry Essentials and Dry Goods, with items from selected local vendors such as bakeries or coffee roasters or others you may find at your local market, depending on your location.
Consumers sign up for the service, which has no annual fee, then create a refill schedule for weekly deliveries.
But unlike many subscription-based delivery services, The Rounds allows users to continuously customize which items are delivered and when. Your system will send you a text message prior to delivery to remind you to check the order board where you can add or remove items. You can also text back to make changes, similar to texting a customer on Instacart.
This is a big improvement over more basic replenishment systems like Amazon’s “Subscribe and Save,” which asks the consumer to predict the expected pace of reorders, often resulting in over- or under-stocking. .
And while it shares some similarities with something like monthly subscription deliveries from sustainable goods seller Grove Co. future deliveries. (after cleaning, of course!)
This is not an unknown model – milk came in glass bottles, returned on the next delivery, for example. It simply fell out of fashion with the rise of supermarkets for those who moved to more spacious suburbs after World War II. And now everyday e-commerce is a competitor to this model. But traditional e-commerce is particularly bad for the environment, despite improvements in last-mile logistics and recyclable cardboard. Items still come with excess packaging – plastic fillers and extra packaging – things that are usually thrown away rather than recycled.
Furthermore, Torrey recalls, “it’sreduce, reuse, recycle. It’s recycling worst option,” he says.
“With The Rounds, we’ve built a way for you to come [items] without any packaging remains. You can deliver it without cardboard, without disposable plastic. We are building what we believe is the future of last mile logistics,” he says.
The startup’s e-commerce site also uses technology to help consumers better assess their replenishment needs.
Using the online dashboard, customers move items between columns labeled “now,” “soon,” and “later.” Deliveries “now” are those that arrive this week and can be adjusted by the consumer or by the system’s own algorithms based on information from scheduled pickups. As the QR codes on your returned containers are scanned, The Rounds learns how often you actually walk past a particular product.
Members pay $10 per month, but there are no additional fees or tips for delivery. Costs for individual items are comparable to those at Costco or other warehouse stores, the company claims, but are broken down into smaller sizes.
However, this can be an obstacle for some. Warehouse Club customers would get at least a full box of produce, unlike The Rounds where you might only get, say, half a box of cereal or pasta delivered in a refillable jar. This can be more difficult for larger families, where ordering the quantities needed to feed parents and children can leave customers with many empty jars at the end of the week.
It also may not deliver savings at that level.
“It’s not the cheapest option,” admits Torrey. “We’re not saying we’re cheaper than anything else you can get. That is not our value proposition.”
After launching in Philadelphia, The Rounds expanded to DC, Miami, and Atlanta throughout 2021 and 2022. It now has over 10,000 active members and claims 10x growth. While Torrey doesn’t disclose annual revenue for The Rounds, he notes that it’s already profitable on a per-shipment unit economics basis.
To help on that front, the company has several residential partners that have allowed it to quickly gain density as it enters new markets.
“There is no secret. Just because our model is so much more efficient in delivery because we aggregate the demand,” explains Torrey. “We don’t send a DoorDash delivery person to your building and then they have to go to another restaurant and deliver something else to another building. This is extremely expensive. There are very few deliveries per hour,” he says. “We’re sending ‘Rounder’ with a big trailer behind his e-bike full of deliveries.”
The ’rounder’ can also deliver directly to customers’ doors in many buildings thanks to their partnerships.
Now the company is also testing deliveries with GM-owned electric van maker BrightDrop to see if it can become even more efficient by using vans designed for last-mile delivery.
Torrey himself has had an interesting journey into entrepreneurship, after being recruited into the CIA out of college, where he worked as an analyst and spent time in Afghanistan—an experience he credits with teaching him what it’s like to have a sense of mission and work. with a small group of people. He later launched a consumer startup, Umano, all the way to Shark Tank, which he says was a learning experience where he made a lot of mistakes. He then entered the world of marketing agencies, leading the branding strategy of large companies such as McDonald’s, but could not get rid of entrepreneurship.
Thanks to a supportive partner, Torrey decided to try again and enrolled in Wharton’s business school, where he met his co-founder Byungwoo Ko. Ko’s background is useful for The Rounds, having previously worked at Uber and Uber Eats on the operations and strategy side.
During his first year in business school, Torrey was also the managing partner of the Dorm Room Fund. But in order to pursue The Rounds full time, Torrey left Wharton and left the fund to focus on this new venture.
The founders have now expanded The Rounds to four cities and 10,000 customers with just 100 full-time employees, which includes their delivery staff (all W-2 employees, not temps, we’re told).
With its new funding, The Rounds is now looking to grow its team, particularly on the technology side, as well as its market penetration, including deepening existing markets and expanding into new geographies. In the long term, it intends to be present in major US cities as well as suburban markets.
While the startup’s mission is admirable, The Rounds will still have to contend with a tough economy where not being the cheapest option could hurt its ability to grow, and where much of its current user base of urban dwellers is already committed to convenience. one-click ordering with Amazon Prime. It may also be difficult to convince families to participate, given that the current product size seems more designed for a family of 1-2. And since it’s not a full grocery delivery service, people would rather place their entire weekly order with a larger supplier like Shipt, Walmart, or Instacart, rather than have a separate service for staples and packaged foods and another for produce. fresh, dairy products, meat and frozen food.
Furthermore, rounds will need to convince more than just eco-friendliness of its value, which comes down to product quality and variety – something that could be enhanced over time with more local business partnerships, potentially including those with local agricultural suppliers. some point further down the road.
(Also, consumers will have to trust that the startup isn’t just rushing to Costco and then putting the products in jars for an upsell! name, like other grocery delivery services do.)
Torrey is aware that the battle ahead will involve convincing these customers of his value proposition while simultaneously reaching more people than he does today.
“That’s our mission: to make sustainable choices every day without effort – it’s because we’re more practical and waste-free and the way we deliver and packaging. And for ‘everyone’, this does not only mean that we must be physically able to serve him, but also the idea that the value of the offer should be really high,” he says. “This is not a premium service; this is just a high value service.”
Now it’s time to see if more consumers agree.