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Why Walmart Just Bought This Tiny Brooklyn Startup

The world’s largest retailer has been ramping up its e-commerce arm, acquiring businesses including Bonobos, Modcloth and Moosejaw.

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BY Zoe Henry - 04 Oct 2017

PHOTO CREDIT: Getty Images

Jesse Kaplan, 25, is a precocious founder: He graduated from Harvard less than four years ago, and this week, he sold his logistics startup to the world's largest retailer.

On Tuesday, Walmart confirmed that it had agreed to acquire Parcel, a same-day delivery service based in the hip enclave of Bushwick, Brooklyn. Although both parties declined to comment on the size of the deal, sources told Recode that the acquisition is a relatively small one, saying that Walmart paid less than $10 million. "Delivery is increasingly one of the most important elements for today's online shoppers, as demands for speed, flexibility, and reliability continue to grow," Walmart said in a blog post. "Parcel is a proven leader in e-commerce package delivery, including taking fresh, frozen and perishable food the last mile--that is, the last step in the shipping process as products make their way from a fulfillment center to your door."

The price tag may be small, but the technical savvy could be invaluable. In Parcel, Walmart is getting a partner that can help eliminate the costs associated with delivery, particularly in urban markets where carriers struggle to access final destinations. "Delivering to residential buildings is a really different logistical challenge than delivering to commercial buildings," Kaplan tells Inc. in an interview. "Companies like UPS and FedEx were built before e-commerce [took off,] and as a result, the logistics that they've built aren't optimized for what today's online retailers are demanding."

Enter Parcel. The seven-person staff has developed a proprietary technology, allowing them to send order updates to merchant clients and customers via text message. Parcel has also created a database of every building it has delivered to in New York City, complete with photos and information on service entrances.

Parcel, which launched in 2014, will continue working with its existing corporate clients, including Martha Stewart's meal kit delivery service Martha & Marley Spoon, as well as more traditional retailers such as Bonobos and Casper. As part of the deal, Kaplan and his team will move under the Walmart umbrella, and begin working with the company as a delivery provider. At the same time, Kaplan says, his business will benefit from Walmart's resources (read: coffers) and expertise. Prior to the acquisition, Parcel had raised just under $2 million in venture capital, from investors including TechStars, Great Oaks, and Liberty City Ventures.

The acquisition is certainly a nod to the logistical prowess of Amazon, which--despite being smaller in size than Walmart--accounts for some 43 percent of all e-commerce sales in the U.S. The e-commerce titan already offers free, two-hour delivery on select products for Prime members, as well as free same-day-delivery on more than a million items. In recent months, Walmart has been ramping up its investment in e-commerce, with the acquisition of major online retailers such as Jet.com, Bonobos, Modcloth and Moosejaw. (Jet already delivers some orders on the same day for free.)

"Companies like Amazon are setting expectations at an all-time high," Kaplan says, adding that WalMart knows it needs to continue investing and innovating. "We definitely see ourselves at the forefront of that moving forward, especially insofar as same-day delivery in urban markets are concerned."