With the holiday shopping season well underway and showing signs that it might not be as sluggish as some predicted, a startup out of Austin, Texas, is announcing funding to build out a new approach to shipping, to help retailers compete against the consumer pull of fast and free Amazon Prime delivery. Maergo — which has designed a platform to manage (and fill) excess capacity on commercial aircraft with parcels, to enable faster and cheaper shipping for the retailers selling those items — has picked up $20 million, a seed round that it’s using to expand its business.
The backers include fintech/commerce investor Deep Lake Capital, funds managed by investor and entrepreneur Neel Shah, ACR Strategic Credit and strategic participation from RyderVentures, the corporate venture capital arm of Ryder System, the transportation and logistics giant.
Maergo — which in November rebranded from X Delivery — has actually been quietly operating since 2019 and said that it has made 8 million shipments to date for its customers, which include a number of well-known brands and retailers. The list includes Saks Fifth Avenue, but also Allbirds, Chubbies and Buck Mason — a wide range of names that have one thing in common: they’re opting to build direct relationships with their customers rather than going the route of marketplaces like Amazon’s not just to sell goods, but to get them to people’s doors quickly and at a low cost.
“The standard for shipping has to be free and fast, and Amazon sets that standard,” said Mark Lavelle, Maergo’s CEO. “We are helping those brands provide faster shipping at scale.” Lavelle said that today when retailers want to provide two- or three-day shipping in the U.S. for parcels, that can cost up to $25 a package, or otherwise face a five to 11 business day delay for a lower cost service. Maergo’s basic service is two to three days, and that service is sold on to consumers, he said, “either for free or a low price that the brands can afford to offer.”
Lavelle is not the founder of Maergo but took on the role of CEO in November 2021. (Lavelle is also one of the key investors, as one of the co-founders of Deep Lake.) He is coming at the e-commerce logistics market having worked for years in other parts of the e-commerce industry. A company he co-founded, Bill Me Later (an early player in online buy-now, pay-later services) was acquired by PayPal, where he worked first for PayPal itself and then its then-parent, eBay. From there he moved internally to run Magento, the e-commerce software company that was also part of the eBay stable, and followed Magento to Adobe after the latter acquired the business.
As Lavelle sees it, while companies like Shopify and Commercetools have changed the game for retailers that want to build and run their own e-commerce storefronts, the field is still wide open when it comes to what happens to products at the back end, and in the middle and last miles of their journeys to customers, not least because the space is very fragmented, and because the biggest providers of fast long-haul delivery — FedEx and UPS — are too expensive. (For the record, I did ask him about the U.S. Postal Service and he dismissed it as not really fit for purpose: “It’s mostly ground service and goes too slow,” he said.)
Maergo’s focus is the “middle mile” and working with commercial airlines to create an efficient way to identify spare capacity in their holds, match it to where packages need to move and provide the services to get those parcels from warehouses to those aircraft to travel.
Lavelle said that typically 50-80% of “the bellies” of aircraft are empty these days even when flights are full because it’s become more onerous to check in baggage: not only are there extra charges associated with it, but then you have to spend extra time checking bags in and collecting them, and there are risks that items will get lost or damaged. That means there is an opportunity to fill that space with packages.
Of course, those spaces have been carrying packages for years at this point, but Lavelle said that the process has been an inefficient one, as fragmented as the rest of the logistics business. Maergo integrates data from “hundreds of partners,” he said, including major carriers like United, JetBlue and Southwest, to find efficient routes from A to B using that backbone that it’s visualized.
“We provide a tech forward approach to integrating spare capacity in the middle mile, from the distribution center to the final mile,” he said. Air cargo has done better internationally than it has domestically, he added, so “this is a refinement on that.” The end result is not just a faster service for getting parcels out to buyers, but one that works on a smaller carbon footprint, since the journeys are already in progress with or without the parcel cargo.
There are other companies that have identified the logistics gap in the market — a lot of them, in fact. They include companies like ShipBob, ClicOH in Latin America, Byrd in Europe, Shipium, Veho, Hive and many more. ShipBob and Veho are both now valued at $1 billion. Meanwhile, those helping build e-commerce storefronts are also now making deeper moves into logistics and fulfillment: Shopify in May acquired Deliverr for more than $2 billion in part to build out Shop Promise, a one- to two-day delivery service.
All of this speaks as much to the opportunity for Maergo as it does the fact that it’s a crowded space.
“The investment we’ve made in Maergo through RyderVentures is consistent with our strategy to bring to market new technology-driven solutions that are tackling disruptions in the supply chain, and the high-growth e-commerce business is a major focus area for us,” says Karen Jones, CMO and head of new product development at Ryder, in a statement. “With the growth of e-commerce and resulting capacity constraints, shippers are looking for more flexible parcel solutions. Through Maergo’s tech-first approach to parcel delivery, they’re able to leverage existing capacity in the marketplace to offer an end-to-end solution. That’s both compelling and an exciting opportunity for us and our customer base of high-growth brands.”